SECTION 34 PUBLICATION AND VOIDABLE SALES

• South Africa

• Other

24-08-2020

Section 34 of the Insolvency Act provides that if parties enter into a sale of business agreement, a sale of goodwill of a business, or an agreement whereby any goods or property forming part of the business is sold (except for the ordinary course of that business or for securing the payment of a debt) a notice must be published in:

- the Government Gazette; and

- two English newspapers and two Afrikaans newspapers, circulating in the district in which that business is carried on.

The publication must be made not less than 30 days and not more than 60 days before the transfer. If no publication has occurred, the transfer can be void (ie as if it was never entered into) against the creditors of the business for a period of six months after such transfer.

There are instances in which a purchaser and seller agree to waive the requirement of a section 34 publication, however, in that situation we suggest that the seller indemnifies the purchaser against any loss, liability, damage or expense which the purchaser may suffer as a result of such notice not being published.

If a publication of the transfer has been made, and a creditor of the seller demands payment of a liquidated amount (which would only fall due at a future date), such amount shall be due and payable immediately.

In the event that a person has a claim against the seller relating to a disposal, and court proceedings have been instituted prior to the transfer date (and the purchaser is aware at the transfer date that proceedings have been instituted), the transfer shall be void for the purposes of such enforcement. This means that the creditor who instituted proceedings will still be able to claim against the seller.