Settlement Agreements in Insolvency Contexts
There is a certain relief in reaching a settlement. The dispute is resolved, terms are agreed and payment is on the horizon.
But where the counterparty is financially distressed, that sense of closure can be misleading. A settlement reached at the wrong time, or structured in the wrong way, may later be challenged by a liquidator. In some cases, the very act of “getting paid” can create exposure rather than eliminate it.
When a settlement is not the end of the matter
South African insolvency law allows a liquidator to revisit transactions concluded before liquidation. The purpose is to ensure fairness between creditors and to prevent one party from being preferred over others in the period leading up to insolvency.
