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

Liquidator Kwame is winding up Delta Ltd and has a personal opportunity to buy one of its machines at a price he believes is fair. Which statement best reflects his position?

Kwame owes fiduciary duties to the company's creditors and must avoid conflicts of interest and secret profits. He should not buy the company's assets for himself unless there is full disclosure and proper approval, so a merely fair price does not make the purchase acceptable.

  1. AHe may buy it freely, because a fair price is all that matters
  2. BHe owes fiduciary duties and must avoid conflicts of interest, so he should not purchase company assets for himself without proper disclosure and approvalCorrect
  3. CHe may buy it provided he keeps any profit on resale secret from creditors

Explanation

A liquidator is in a fiduciary position and must not put himself in a conflict between duty and personal interest or make a secret profit. Purchase of assets would require full disclosure and proper approval, such as by the court or creditors. Keeping profit secret would worsen the breach.

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