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ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration

Brightwell Ltd's directors did not make a declaration of solvency, and the company's members passed a resolution to wind up voluntarily because it cannot pay its debts. Which statement is correct?

This is a creditors' voluntary winding up, because the directors made no declaration of solvency. The creditors are brought in, with a creditors' meeting and a say in choosing the liquidator. It is not compulsory, which requires a court order, and it is not administration.

  1. AIt is a members' voluntary winding up and members alone choose the liquidator
  2. BIt is a creditors' voluntary winding up and the creditors are given the opportunity to participate, including in the appointment of the liquidatorCorrect
  3. CIt is a compulsory winding up supervised by the court
  4. DIt is an administration led by an administrator

Explanation

Without a declaration of solvency, a voluntary winding up is a creditors' voluntary winding up. Creditors are involved, so a creditors' meeting is held and they can influence or decide who acts as liquidator. It is not court-ordered, so it is not compulsory. Administration is a separate rescue procedure.

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