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ACCA F4: Understanding Insolvency and Liquidation Procedures

ACCA F4: Understanding Insolvency And Liquidation Procedures

Explore the critical aspects of insolvency under the ACCA F4 curriculum, focusing on legal principles, debtor and creditor rights, and insolvency procedures. This assessment is designed to enhance your understanding and...

Questions: 12 | Attempts: 10 | Last updated: Aug 4, 2025

Sample Question 1
If a company finds itself in financial difficulty, what are the two main options available?

1 Voluntary liquidation: s84 Insolvency Act (IA 1986) 1) Administration. This aims to rescue the company so that it may continue trading as a going concern. 2) Liquidation. This winds up the company, thus bringing its life to an end.

1) Merger. This involves combining the company with another entity to improve financial stability.

2) Bankruptcy. This involves declaring the company financially insolvent and unable to pay debts.

3) Acquisition. This involves one company purchasing another to resolve financial issues.

Sample Question 2
What triggers a voluntary liquidation according to s84 of the Insolvency Act (IA 1986)? What type of resolution is required for a voluntary liquidation?

A voluntary liquidation occurs automatically after a certain timeframe without any resolution needed.

A voluntary liquidation can only occur if all creditors agree to the liquidation.

1 Voluntary liquidation: s84 Insolvency Act (IA 1986) A voluntary liquidation occurs where the members pass a resolution to go into liquidation. - Where the period fixed for the duration of the company expires or an event occurs upon which the articles provide that a company should be wound up, an ordinary resolution must be passed.- A special resolution must be passed if the company is being wound up for any other reason.

A voluntary liquidation requires a simple majority vote of the board of directors.

Sample Question 3
What are the two types of voluntary liquidation according to s84 of the Insolvency Act (IA 1986)?

1) Administration is used where the company is solvent 2) Company Administration is used where the company is insolvent.

1) Receivership is used where the company is solvent 2) Liquidation by the court is used where the company is insolvent.

1 Voluntary liquidation: s84 Insolvency Act (IA 1986) 1) A members' voluntary liquidation is used where the company is solvent 2) A creditors' voluntary liquidation is used where the company is insolvent

1) Compulsory liquidation is used where the company is solvent 2) Members' voluntary arrangement is used where the company is insolvent.