Part VII of the Insolvency Act (Chapter 253) brings the insolvency to an end and releases the debtor.
Section 130 — close of the insolvency
(1) Where (a) all of the property, or so much of it as can, in the joint opinion of the trustee and the committee of inspection, be realized without needlessly protracting the insolvency, has been realized, or (b) a composition or arrangement has been completed, the trustee shall make a report to the Court.
(2) If satisfied, the Court shall make an order that the insolvency is closed.
(3) and (4) A copy is published in the National Gazette, and production of the Gazette is conclusive evidence of the order, its date and its contents.
Closing the insolvency is not the same as discharging the insolvent. The estate is finished with; the debtor’s release is a separate step under Division 2.
Section 131 — the four routes to a certificate
| Section | When | What must be shown |
|---|---|---|
| 132 | Any time after the last examination — or earlier with a special resolution of creditors | The insolvency arose from circumstances for which the insolvent cannot justly be held responsible; or a special resolution of creditors says so and that they desire a certificate; or the gross amount realized equals the total debts proved |
| 133(1)(a) | 12 months after adjudication | Written consent of a majority in number of creditors who have proved and whose debts are K20.00 or more each |
| 133(1)(b) | Two years after adjudication | No creditor consent required — the Court may grant |
| 134 | Three years after adjudication | Written consent of a majority of creditors as above — and on proof the consent was obtained without fraud or collusion, the Court shall grant |
| 140(3) | See undischarged insolvents | — |
Under sections 132 and 133 the Court may grant a certificate and may withhold or suspend it. Under section 134, once three years have passed and the consent of the required majority is proved to have been obtained without fraud or collusion, the Court shall grant the certificate.
Note the K20.00 qualification for counting creditors in sections 133 and 134 — consistent with section 3, under which a creditor owed K20 or less is not counted in reckoning a majority in number.
The insolvent shall swear that (a) he has made a full and fair discovery of his estate; (b) he has not granted or promised any payment or security for the purpose of obtaining the consent of his creditors; and (c) he has not entered into any collusive agreement for that purpose.
Buying consent is separately an offence: under section 139, payments made to influence creditors are struck at.
Section 132(3) — when a certificate may be withheld
If (a) the insolvent has made default in giving up to his creditors the property he is required to give up, or (b) a prosecution has been commenced against him under any law relating to the punishment of fraudulent debtors, the Court may suspend the certificate for such time as it thinks just, or withhold it.
The same power appears in section 133(3). Together with the Court’s power to adjourn the last examination under section 129(3) where the accounts are unsatisfactory through neglect or default, it makes cooperation the price of release.
Sections 135 and 136 — conditional certificates and timing
Where the Court is of opinion that a certificate ought not to be granted unconditionally, it may grant it subject to any condition concerning any salary, pension, emolument, profit, wages, earnings or income that may afterwards become due to or be earned by the insolvent, and generally concerning property acquired at a later date.
A certificate (a) shall be in the prescribed form; (b) under the hand of the Registrar and the seal of the Court; (c) shall not be drawn up or take effect until after the time for appeal has expired, or, if an appeal is brought, after the decision on the appeal; and (d) shall be dated the day after the expiration of the appeal period, or the day of the decision on the appeal.
Section 135 is the counterpart of section 74, under which the Court may order part of an insolvent’s salary or income to be paid to the trustee, or after the close of the insolvency to the Registrar. A conditional certificate lets the Court continue that arrangement past discharge.
Section 137 — the effect of discharge
A certificate of discharge releases the insolvent from all debts provable under the insolvency, with the exception of debts (a) due to the State; or (b) with which he stands charged at the suit of (i) the State or any other person for an offence against a law relating to any branch of the public revenue, or (ii) the Sheriff or other public officer on a bail bond entered into for the appearance of a person prosecuted for such an offence.
(2) He shall not be discharged from those debts unless the Secretary for Finance, with the approval of the Minister, consents in writing.
A certificate does not release the insolvent from any debt or liability —
(a) incurred by means of fraud or breach of trust;
(b) that has not been enforced as a result of fraud;
(c) due by him as trustee of an insolvent estate in respect of any sum improperly retained or employed by him as trustee.
And it does not release any person who at the date of adjudication was a partner, was jointly bound, or had made a joint contract with the insolvent.
Guarantors and co-debtors are unaffected. Subsection (4) preserves the creditor’s rights against anyone jointly liable. A creditor whose debtor is discharged may still pursue the co-obligor — and in a partnership insolvency that matters a great deal.
Fraud survives. Paragraphs (a) to (c) mean that discharge is a release for honest failure, not for dishonesty. That is the same policy that runs through sections 77 to 79, and through section 423 of the Companies Act on the corporate side.
Under section 138, in any proceedings against a discharged insolvent for a released debt, the certificate is sufficient evidence of the insolvency and of the validity of the proceedings, and the insolvent may plead that the cause of action occurred before his discharge and give this Act and the special matter in evidence.
Sources
- Insolvency Act (Chapter 253) — ss 3, 74, 77–79, 129–140
- Companies Act 1997 — s 423
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.