DISPOSITIONS WITHOUT VALUE

DISPOSITIONS WITHOUT VALUE – INSOLVENCY ACT – DOES AN ASSET DISPOSAL FOR INSUFFICIENT VALUE ALLOW A LIQUIDATOR TO HAVE THE SALE SET ASIDE?

The Insolvency Act allows a court, in certain circumstances, to set aside an asset sale made by an insolvent seller if it is not made for value.

The effect of such setting aside is that the buyer must return the asset to the seller’s liquidator and having done so, the buyer has no claim against the seller’s liquidator for the repayment of his purchase consideration.

Until recently, it has remained unclear whether a sale below market value or for insufficient consideration, as opposed to a sale for no value at all, could be set aside.

The Supreme Court of Appeal in Strydom N.O v Snowball Wealth (Pty) Ltd & Others found for the first time that the terms “not made for value” mean that the sale must have been made for no value at all.

Therefore, buyers of assets at discounted or non-market related prices are no longer at risk of having their acquisitions set aside consequent upon the seller being wound up or sequestrated.

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