Alienation of Assets

Insolvency is the process in which your entire patrimony, ie all of your assets, gets liquidated in order to pay total debts that have grown beyond your ability to pay. Insolvency procedures are difficult as  that they involve liquidation of personal assets such as home, car, and golf clubs.  Insolvency typically happens due to poor judgement or 'bad luck'. Luckily there are numerous ways in which the potential damage of insolvency procedures can be minimised to prevent loss of assets. To the layman debtor, this can mean minor legal procedures which ultimately save a fortune. For creditors, this can be truly bad news. This article describes  legal ways to prevent loss of assets in insolvency cases.

If you are run a small business, or will in ten years time, you should act on the following now to protect your assets. Equally if you expect  significant unsecured debt in the coming years, you might act similarly. Allowing a ten year margin will prevent any challenges on sequestration and ensure that the assets you have 'alienated' are not seen as part of your estate. The successful  alienation ensures that the assets, from which you will still benefit, cannot be received by your creditors in payment of any debts you accrue.

First of all consider incorporating one or more limited liability companies to host your business operations. Conducting business through a company increases paperwork, but  removes you personally from any liability. Although the company can still be liquidated, we will also look at ways to avoid losing the business assets . If you decide not to go through a corporate body, there remain methods to reduce the risk of losing assets.

Your home is your most valuable asset, and the main target for hungry creditors.  If you are married or live with a partner, you should never lose your house in insolvency proceedings. With sufficient time and faith in your partner (10 years), you can transfer ownership to your partner, so the asset is no longer yours. You can then by agreement negotiate with your partner to continue living in the house, which for most will be a mere formality but may involve housework agreements.  You no longer legally own the house, but on the ground nothing has changed. Alternatively, you have the option to assign your property to  a trust you create in which you and your partner are the trust's beneficiaries. What you need is to involve a third party (potentially even your partner) as trustee, before you treat the asset as alientated.  Functionally, you continue living in the house as your home. The only difference is creditors can't touch it should the worst happen to you, assuming you ensure the trust itself remains solvent.

If you operate via a limited company, first step you establish at least one other company, which will serve as a holding company. The holding company  then takes ownership of  all business assets, then in effect leases them bacl to the other company. The effect of is theoretical: you own both companies, and the assets, but if creditors go after your primary trading company, there will be no chance of losing the actual  business assets. The leasing agreement between the two companies will also be theoretical, only requiring minor accounting procedures to achieve legal validity. entire business patrimony.  In this way you can "alienate" your entire business patrimony as long as you make sure your holding company avoids debt and disruption.

For detailed and specific advice you should consult a professional specialist on  company and legal matters.