Julius Malema’s hopes of becoming an MP for the Economic Freedom Fighters are fading – unless a benefactor can bail him out and pay his R16.5 million tax bill to stop him from being sequestrated.
But his impending sequestration would not necessarily preclude him from leading a political party.
Malema suffered a double blow on Monday when Pretoria High Court Judge Bill Prinsloo refused to postpone a sequestration application by Sars and granted a provisional order declaring him insolvent. Interested parties have until May 26 to provide reasons why the order should not be made final.
If the order is confirmed, Malema will not be able to represent his party in Parliament as article 47 (1) (c) of the Constitution declares that an unrehabilitated, insolvent person is not eligible to be elected as an MP.
A senior advocate said a person could not appeal against an interim order, so Malema’s only option was to apply for an earlier return date and convince the court not to confirm the order.
Malema’s lawyer, Tumi Mokwena, said he had instructions possibly to appeal. Malema might appeal against the judge’s not granting a postponement.
“That he has been provisionally sequestrated means nothing when it comes to his political career, because it is a provisional – not a final – order.”
Sars was ready to argue for a provisional sequestration order on Monday, but counsel for Malema, Thekiso Mosome, wanted a postponement until Malema’s criminal trial was concluded. In September, Malema is to face charges that include racketeering and money-laundering.
Mosome said the charges and the facts in the sequestration application were entwined. His client would be prejudiced in the criminal trial if the sequestration application proceeded.
He said Malema also wanted to bring an application asking the court to set aside the agreement he had reached with Sars conceding he was liable for the tax. He would argue that he was “lured” into conceding he owed Sars millions.
Opposing the postponement, Sars advocate Nic Maritz said Malema had submitted no reasons why the sequestration application would prejudice him in his trial.
He’d had a long time to appeal against the court finding that he owed Sars R16m. “It was never his case that he did not owe the taxman, only he did not owe so much. People who stand for public office must pay their dues.”
Malema was insolvent and held no security for the tax claim.
Turning down the application for postponement, Judge Prinsloo found Malema could have appealed long ago against the finding that he owed Sars. He also found Malema’s criminal trial would not be prejudiced if the application went ahead.
Ordering Malema’s provisional sequestration, he said “the horse has bolted” as the court had earlier ordered he was liable to pay Sars R16.5m for the 2005 to 2011 tax years. Malema placed a value of about R5.5m on his assets and disclosed liabilities of about R4.1m, excluding his tax bill. The net value of his estate was R1 356 861.
“Accordingly, his tax liability in excess of R16m renders him insolvent in the amount of more than R14m.”
What sequestration means:
A person is sequestrated and declared insolvent when he cannot pay his creditors and his assets are less than his liabilities. The estate of an insolvent person gets frozen.
When sequestrated, a liquidator takes control of the estate and shares the assets among all the creditors who placed claims against the estate.
The sequestrated person thus loses the legal capacity to deal with his own estate. A sequestrated person will receive living expenses as per the discretion of the liquidator.
Being sequestrated means that the person cannot be a director of a company or a trustee of a trust, nor can he enter into any contracts without the go-ahead of the liquidator.
A sequestrated person may apply to be rehabilitated – the sequestration lifted – but this can only be done following a report by the Master of the High Court whether all the liabilities have been met and whether it was advisable to rehabilitate a person.
A sequestration order is automatically lifted after 10 years.