ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Delmar Ltd is wound up with insufficient assets. It has a debenture holder secured by a fixed charge over its building, and ordinary shareholders. Which statement correctly describes their positions?
The debenture holder, as a secured creditor, is repaid from the charged building before shareholders. Shareholders rank last in a winding up and receive something only if a surplus remains after all creditors have been paid.
- AThe secured debenture holder is repaid from the building's proceeds before shareholders receive anything, and shareholders are repaid last from any surplusCorrect
- BShareholders and the debenture holder share the remaining assets equally in proportion to their investment
- CShareholders are repaid first because their capital was paid in before the loan was advanced
Explanation
A secured creditor with a fixed charge can look to the charged asset for repayment ahead of other claims. Shareholders rank last, receiving only any surplus after all creditors. The other options ignore the priority of creditors over members.
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