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

Sigma Ltd is in liquidation and all creditors have been paid in full, with a surplus remaining. Which of the following is correct about the surplus?

Any surplus after all creditors are paid in full goes to the members, according to their rights under the articles and the terms of their shares. Members rank last in the order of payment, and neither directors nor the liquidator can claim the surplus.

  1. AIt is distributed to the members according to their rights under the articles and share termsCorrect
  2. BIt is paid to the directors as compensation for the company's failure
  3. CIt is retained by the liquidator as additional remuneration

Explanation

Members rank last in a liquidation. Only after all creditors and costs are paid in full is any surplus distributed to members in accordance with their rights attached to shares. Directors and the liquidator have no entitlement to the surplus as such.

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