Business decisions are often accompanied by risk. This risk element is a particularly live reality when a businessman’s liabilities are calculated to exceed his assets by over R3.14bn – as is the case for Michael Georgiou in the matter of Investec Bank Ltd v Georgiou and Another.
Georgiou, a self-described wealthy businessman, guaranteed and stood surety for enormous debts owed to Investec Bank Limited by the Michael Family Trust (MFT) and Anchor Park Investments. These debts arise from various loan facilities concluded between 2016 and 2020.
In 2023, Georgiou and MFT signed an Acknowledgement of Debt (AOD), an agreement where a debtor admits that they owe a specific amount of money to a creditor and which sets out how and when the debt will be repaid, in which indebtedness to Investec of approximately R327.5m was recorded.
Despite extensions to the due date, no payment was made and Investec then formally demanded payment. Investec also enforced the security by appropriating shares and sale proceeds. After the enforcement of the security, the outstanding balance still exceeds R315m. Georgiou also owes, which he failed to disclose, R1bn to Rand Merchant Bank (RMB).
Investec moves for sequestration
An application was brought in the High Court in Bloemfontein for the provisional sequestration of the estate of Georgiou, the respondent, in terms of the Insolvency Act 24 of 1936.
The applicant, Investec, sought a rule nisi placing the estate of the respondent under provisional sequestration and calling upon interested parties to show cause on the return day why a final order of sequestration should not be granted. RMB sought to intervene in case Investec’s application was unsuccessful.
Bridget Letsholo 13 May 2026 Sequestration is a legal process by which a person is declared insolvent by an order in the High Court.
The person’s assets are then handed over to a trustee appointed by Master of the High Court who sells the assets in line with the Insolvency Act. The proceeds of the sale of the assets are then divided amongst the person’s creditors in terms of the relevant law.
In this matter, the question before the court was whether the applicants have established, on a prima facie constitutional basis, the requirements contemplated in s10 of the Insolvency Act to justify a provisional sequestration order.
Insolvency law: Balancing competing interests
The court highlighted some important observations regarding the law of insolvency. Insolvency law ensures the orderly and equitable distribution of a debtor’s estate among creditors.
A collective process prevents creditors from resorting to individual enforcement in which the most expedient or powerful creditors are disproportionately advantaged. Insolvency law offers a structured and fair system of distribution.
Insolvency law further prevents abuse by placing the debtor’s estate under the control of an independent functionary – the appointed trustee. This prevents piecemeal attachments and preserves the estate to benefit the creditors as a whole.
Insolvency law balances the competing interests of creditors and debtors, because it serves to protect creditors’ rights, but it also recognises that financial failure is not necessarily the product of misconduct. It grants an unfortunate debtor an opportunity for relief.
Mole Tshikare 24 Mar 2026 The court further pointed out that a coherent insolvency regime encourages economic stability and fosters confidence in the credit market by providing predictability in the recovery process in the event of default.
It also discourages fraud by providing for the interrogation of the debtor’s conduct prior to insolvency and it “serves the public interest by reinforcing commercial morality”.
The court considered the fact that Investec and RMB are substantial commercial financial institutions and that Georgiou is an individual who created a highly successful business enterprise, and on the facts, there is no indication of reckless credit or exploitation.
The court held that the parties entered into their financial arrangements fully aware of all the associated risks.
Meeting the sequestration test
Under section 10, read with section 9, of the Insolvency Act, a court may grant provisional sequestration order if it is at first glance convinced of the following:
1) the petitioning creditor has a valid liquidated claim against the debtor for at least R100; and
2) the debtor has either committed an act of insolvency or is factually insolvent; and
3) there is a reasonable belief that sequestrating the estate will be to the advantage of the creditors.
The court held that where an application for provisional sequestration is opposed, the applicant must establish on a prima facie basis that it is entitled to such an order. However, the court will refuse the application if the claim is bona fide (in good faith) disputed on reasonable grounds.
Winding-up proceedings may not be used to enforce payment of a debt if its existence is reasonably disputed, as this would amount to abuse of the court’s processes. However, if the applicant can show that a debt prima facie exists, the onus rests on the company to show the debt is bona fide disputed on reasonable grounds.
Charlise Finch and Werner Lotter 5 Aug 2025 Dispute regarding the debt
Investec set out the history of the debt in detail and established prima facie that Georgiou’s total indebtedness to it exceeds his assets by more than R474m, and their position is that sequestration will be to the advantage of creditors as Georgiou’s estate includes realisable assets and warrants investigation.
Georgiou never disputed his indebtedness until he filed an answering affidavit in opposition to the sequestration application.
With a hint of disdain, the court noted that there was no full and frank disclosure by Georgiou of his debtors and assets, and that his answering affidavit is an entirely different story to his letters.
The court quoted two letters to Investec, written and signed by Georgiou, in which he acknowledges his debt and his commitment to settle it. However, in his answering affidavit he alleged that Investec instituted the application on “pure speculation” and that it amounts to “an abusive attempt” to force him to pay debts he allegedly does not owe.
The inconsistency between Georgiou’s letters and his answering affidavit caused concern. A debtor who resists sequestration on the basis of solvency must give the court a complete and transparent account of his assets and liabilities, which Georgiou has not done.
The defences that failed
Georgiou disputed that Investec has a liquidated claim against him. However, Investec issued and filed certificates of balance, which amount to prima facie proof of the outstanding amount.
The jurisdictional threshold prescribed by law is that a liquidated claim of not less than R100 must be established, which threshold Investec met and exceeded significantly.
Lara Horne and Werner Lotter 3 Jun 2025 Georgiou further argued that provisional sequestration is invasive and is inappropriate where the alleged debt is disputed in good faith.
However, the court highlighted Georgiou did not provide reliable financial statements, and he did not disclose material liabilities in his answering affidavit. The court held that, on the evidence in totality, Investec has established a prima facie case for provisional sequestration.
Georgiou also argued that Investec’s case is procedurally unfair, but the court did not agree.
In fact, the court turned its focus to Georgiou’s own conduct in the litigation, including the filing of a further affidavit and the raising of prescription for the first time in the answering affidavit.
The court expressed further concern about new information Georgiou disclosed at a very late stage, which actually confirms his factual insolvency.
Considering prescription, even if it were to be found that some parts of the debt had prescribed, Georgiou remains indebted in an amount exceeding R100. He failed to deal with residual capital amounts that are due under various loan agreements and that had definitely not been prescribed when the AOD was executed.
The court held that this omission was fatal to the prescription defence.
The court further held that the letters by Georgiou as well as the AOD constitute acknowledgments of indebtedness, the amount due and the due date for payment, which illustrates no genuine dispute as to liability and which have interrupted prescription.
Georgiou raised further defences, none of which were entertained by the court, regarding his alleged lack of authority to have bound MFT, technical issues that the court only briefly mentioned, and that sequestration is unnecessary as he can sell assets and negotiate with his creditors.
The high cost of a written admission
The court found that a provisional sequestration order was warranted because the jurisdictional requirements had been established, no special circumstances justified departing from the ordinary result, and Georgiou’s defences lacked genuine merit.
The case demonstrates that an AOD—and even less formal correspondence, such as letters—may have consequences far beyond merely appeasing a creditor.
Written admissions can help establish prima facie insolvency, interrupt prescription and decisively undermine a debtor’s credibility.
The lesson is clear: a debtor’s written word may ultimately provide the very evidence that opens the door to sequestration.
