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Saturday, November 1, 2008
Controlled sell off

Section 34 of the Insolvency Act on Commercial Transfers deals with situations whereby a trader transfers, in terms of the contract of sale, any business belonging to him, or any goods or property forming part of such business, outside the ordinary course of that business.
Explains by Simphiwe Maphumulo, director at Garlicke & Bousfield Inc., “In terms of Section 34 (1) of the Act such sale or intended sale has to be published in the Government Gazette, and in two issues of Afrikaans and in two issues of English newspapers circulating in the district in which that business is carried on.”  Such advertisement has to be made within a period not less than 30 days and not more than 60 days before the date of transfer.
Should the seller transfer his business without having complied with the provisions of the Act, such transfer will be invalid as against creditors for a period of six months after such transfer, and shall be invalid against the Trustee of his estate, if his estate happens to be sequestrated at any time within the said period of (six) months.
The object of this Section is to protect all the creditors of the business against the owner selling out and not paying his bills.  A period between 30 and 60 days is to allow time to lodge any claims against such businesses before being sold.  In most instances, banks that are financing a purchaser would insist the abovementioned Section be complied with before they finance the purchase.

Copyright © Insurance Times and Investments® Vol:21.10 1st November, 2008
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