Chapter 23 Self-test questions

. What is the difference between a members' voluntary winding up and a creditors' voluntary winding up?

If the directors make a declaration of solvency, the winding up will be a members' voluntary winding up. If no declaration is made, it will be a creditors' voluntary winding up.

If the company is solvent, it will be a members' voluntary winding up. If the company is insolvent, it will be a creditors' voluntary winding up.

A creditors' voluntary winding up is initiated by the creditors, whereas a members' voluntary winding up is initiated by the members.

A members' voluntary winding up is commenced by passing a special resolution, whereas no resolution is required to commence a creditors' voluntary winding up.

. Who can petition the court for a winding up order?

The company

The directors of the company

Any creditor of the company

The company's auditor

A contributory of the company

A liquidator

The Secretary of State

The Financial Conduct Authority

. Most compulsory winding up orders are made on the basis of which ground?

That it is just and equitable to wind up the company

The company is unable to pay its debts

The company has been dormant for one year

The company has resolved to wind itself up

. Identify which of the following assets are outside the liquidator's control.

Assets subject to a floating charge

Assets subject to a fixed charge

Assets subject to a retention of title clause

Assets acquired after the company entered into liquidation

. Which one of the following sets out the correct order of distribution of assets upon liquidation?

Debts secured by floating charge, moratorium debts etc, liquidation expenses, preferential debts, unsecured debts, deferred debts

Preferential debts, liquidation expenses, debts secured by floating charge, unsecured debts, moratorium debts etc, deferred debts

Moratorium debts etc, liquidation expenses, preferential debts, debts secured by floating charge, unsecured debts, deferred debts

Liquidation expenses, debts secured by floating charge, preferential debts, moratorium debts etc, unsecured debts, deferred debts

. Dragon Tools goes into liquidation. Once higher-ranking debts have been paid off, there is £25,000 available to pay off the debts secured by floating charge. How much of this must be set aside to pay off unsecured creditors?

£5,000

£8,000

£10,000

£12,000

. How does fraudulent trading under the Companies Act 2006 differ to fraudulent trading under the Insolvency Act 1986?

Fraudulent trading under the Companies Act 2006 can apply at any time, whereas fraudulent trading under the Insolvency Act 1986 can only apply during the course of a winding up.

Fraudulent trading under the Companies Act 2006 imposes civil liability only, whereas fraudulent trading under the Insolvency Act 1986 imposes criminal liability also.

There is no difference - both provisions are identical.

Fraudulent trading under the Companies Act 2006 only applies to registered companies, whereas fraudulent trading under the Insolvency Act can also apply to partnerships and sole proprietorships.

. Wrongful trading will only occur where, prior to the commencement of a winding up, the director knew that there was no reasonable prospect of the company avoiding insolvent liquidation.

True

False

. In October 2017, the directors of Dragon plc cause the company to grant a floating charge to Nikki, a shadow director of Dragon plc. In March 2019, the company enters insolvent liquidation. Can the floating charge be avoided?

Yes

No

. The process by which a company's existence is brought to an end is known as?

Liquidation

Termination

D-incorporation

Dissolution

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