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Ponzi Schemes: Can Liquidators Claw Back 600% of Payouts?

“MTl’s business clearly amounted to an unlawful ponzi-scheme, i.e. a fraudulent investing scam promising high rates of return to investors and generating returns for earlier investors with investments taken from later investors.” (Extract from the MTI judgment) Recent media reports of the MTI (Mirror Trading International) liquidators making repayment demands of investors highlight once again the dangers of falling for “too good to be true” investment schemes. The problem is that by their very nature, all pyramid schemes (including “ponzi” schemes) eventually

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Creditors: How to Secure Your Claim with a Notarial Bond

You should always take as much security for your claims as you possibly can before advancing credit or lending money to a debtor. That’s because if your debtor fails and is “liquidated” (if a corporate) or “sequestrated” (if an individual), without security you will have only a concurrent claim in the estate. And with a concurrent claim, you will be lucky to get back more than a few cents in the Rand, because you will rank right at the bottom of

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Debtor Not Paying? Consider a Liquidation Application

“When debtors once have borrowed all we have to lend, they are very apt to grow shy of their creditors’ company” (John Vanbrugh) Bad debt is a major issue for many businesses in these hard economic times – not taking robust steps to collect it could be fatal to your own financial position. So if you are being given the run-around by a recalcitrant corporate debtor, take advice on whether an appropriate and cost-effective remedy for you might be an application for

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Buying a Business? Make Sure the Seller Publishes Notice of the Sale

“The purpose of the legislature in enacting s 34(1) is to protect creditors by preventing traders who are in financial difficulty from disposing of their business assets to third parties who are not liable for the debts of the business, without due advertisement to all the creditors of the business.” (Extract from judgement below) With our economy in trouble and the ongoing pandemic and lockdown damaging more and more businesses by the day, sales by distressed companies and traders are likely

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Directors at War and the Liquidation Option – A Tale of Sibling Rivalry

“Family quarrels are bitter things. They don’t go according to any rules” (F. Scott Fitzgerald) A company’s directors have both the power and the duty to manage the company’s affairs for its benefit. When two or more directors are in place, it’s perhaps natural for the occasional disagreement to arise between them. Indeed, regular expression of a variety of different viewpoints and ideas can make for a strong, dynamic board and business. Provided, that is, that the directors are in the end

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Business Rescue: Are Your Suretyships Enforceable? A R5.5m Lesson for Directors and Creditors

“Some people use one-half their ingenuity to get into debt, and the other half to avoid paying it” (George Prentice, newspaper editor and author) You are owed a lot of money by a company that goes into business rescue. The business rescue plan provides for creditors like you to accept a dividend of only a few cents in the Rand in settlement of your debt. You stand to lose heavily. But perhaps there’s hope yet – a director with assets has signed

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Proving Your Claim in a Liquidation or Sequestration – When You Should, and When You Shouldn’t

“A small debt produces a debtor; a large one, an enemy” (Publilius Syrus, Roman writer) You are owed money by a debtor, whose “insolvent estate” is “sequestrated” (in the case of an individual or trust) or “liquidated” (in the case of a company or other corporate). The Master of the High Court appoints a “trustee” (in the case of a sequestration), or a “liquidator” (in the case of a liquidation) to sell all the debtor’s assets and to distribute the sale proceeds

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