Article by listed Attorney: Nanika Prinsloo
Under Roman Law, if a person could not pay his/her debts, the creditors could seize the person and sell him/her into slavery. Even worse, the person’s body could be cut into pieces and each creditor could get a piece. Each creditor were to get an equal piece, so that one is not prejudiced over the other! Fortunately the law has changed a lot, otherwise a lot of us would have had a problem!
Eventually society became more civilized and it was decreed that debtors cannot be sold into slavery to satisfy debts any longer. Now debtors were imprisoned for not paying their debt. Not as bad as being cut to pieces, but not much better either. Fortunately, when the ANC government was elected, one of the first Acts that was changed was the Magistrate’s Court Act to put a stop to debtors’ being imprisoned for debt. So currently in South Africa a debtor cannot be sent to jail for not paying his/her debt.
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During the 2nd Century, it was decreed that creditors can take possession of all of the assets of a debtor and sell it. This is the basis on which execution sales are based – where a modern creditor can obtain judgment and then attach the assets of a debtor and sell it on an execution sale, but also the insolvency auction of an insolvent person. Creditors could also appoint a “manager” to supervise the sale of the assets – this would be the Sheriff of the Court where it is an execution sale and the curator where it is an insolvency auction.
When there was a sale of the debtors’ assets, the person who made an offer for the largest dividend on the creditors’ claims, could buy all the assets. In later times a curator was appointed by the creditors to attend to the sale of the property.
About 48 BC, it was decreed that a debtor can surrender his estate to his creditors to be sold. If a debtor surrendered his estate, he would not be arrested, or imprisoned or sold in slavery. All of his assets could rather be sold to pay his debts. A debtor could however keep as much of the proceeds of the sale of his assets as was necessary for his maintenance.
Under Roman-Dutch law, and about during the 15th century, a person could declare himself insolvent only if his financial problems were due to circumstances beyond his control. The local Magistrate normally administered the debtor’s estate, but eventually the “Desolate Boedelkamers” were established to administer insolvent estates. In South Africa the “Desolate Boedelkamers” were established in the Cape in 1803. Eventually this was abolished and a sequestrator was appointed instead.
The Insolvency Act which was passed in 1936, replaced all existing law on Insolvency and to this day, our insolvency laws are regulated by the aforementioned Act.
Article written by Nanika Prinsloo of Prinsloo & Associates