LW G Insolvency law

Written by Saad Rahman (ACCA)

ACCA · Corporate and Business Law · 7 questions

Name: ____________________ Date: ____________

In a members' voluntary liquidation, the directors must make:
- A A declaration of solvency
- B A debenture
- C A statutory demand
- D A petition to the court
Who controls a creditors' voluntary liquidation?
- A The company secretary
- B The directors alone
- C The tax authority
- D The creditors
Compulsory liquidation is ordered by:
- A The court
- B The auditor
- C The members by resolution
- D The directors
On liquidation, which are paid first?
- A The costs of the liquidation
- B Members
- C Unsecured creditors
- D Floating charge holders
What is the correct order of payment after secured fixed charge assets are dealt with?
- A Floating charge holders, members, unsecured creditors
- B Preferential creditors, floating charge holders, unsecured creditors, then members
- C Members, preferential creditors, unsecured creditors
- D Unsecured creditors, preferential creditors, members
What is the main purpose of administration?
- A To dissolve the company at once
- B To rescue the company or achieve a better result for creditors than liquidation
- C To pay dividends to members
- D To remove the directors permanently
What does the moratorium in administration do?
- A It removes the creditors' security
- B It appoints new directors
- C It stops legal action against the company without consent
- D It cancels the company's debts

Answer key

1. A, 2. D, 3. A, 4. A, 5. B, 6. B, 7. C

The declaration states that the company can pay its debts in full within a stated period.
The company is insolvent, so the creditors choose the liquidator.
It follows a petition to the court.
Costs of the winding up come first.
Members receive only what is left after all creditors are paid.
It is an alternative to liquidation.
It gives the administrator time to deal with the business.