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

Kappa Ltd is in liquidation. Its assets are enough to pay secured creditors, costs, preferential creditors and floating charge holders in full, leaving 60,000 for unsecured creditors who are owed 240,000 in total. Creditor Mia is owed 40,000 and is unsecured. What does Mia receive, assuming no other claims rank equally or after the unsecured creditors?

Mia receives 10,000. Unsecured creditors share the remaining 60,000 equally in proportion to what they are owed, which is 25% of 240,000. Her 40,000 claim therefore yields 10,000. Full payment of 40,000 is impossible because funds are insufficient for the class.

  1. A10,000Correct
  2. B40,000
  3. C60,000

Explanation

Unsecured creditors rank equally (pari passu) and share in proportion to their debts. The dividend is 60,000 / 240,000 = 25 cents per 1 owed. Mia receives 40,000 x 25% = 10,000. Paying 40,000 in full wrongly ignores the shortfall.

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