Acca aaa s21 Notes

September 2021 to June 2022 exams
Watch free ACCA AAA lectures 
150

---

Only on 
OpenTuition
you can find: Free ACCA notes 
•
Free ACCA lectures 
•
Free ACCA tests 
•
Free ACCA tutor support 
•
The largest ACCA community
๏
Member’s voluntary (‘solvent’) liquidation – can only take place when the directors have made 
a declaration of solvency. Creditors have no involvement in the process as the declaration 
means they will be paid in full and therefore have no risk exposure. Shareholders pass a special 
resolution (i.e. 75% majority) to wind up the company within five weeks of the declaration of 
solvency and appoint a liquidator. The surplus after assets are realised and debts cleared is 
returned to the members.
๏
Creditors’ voluntary (‘insolvent’) liquidation – shareholders must pass a special resolution to 
start the process but the creditors get to choose the liquidator. Both members and creditors 
appoint representatives to a liquidation committee which supports the liquidator.
5. Priority for allocating company assets 
This is especially important for creditors and shareholders because, by definition, an insolvent 
company cannot pay everything that is owed. The amounts that will be paid on liquidation depend 
on:
๏
whether debts are secured or unsecured
๏
whether charges over assets are fixed or floating
๏
whether shareholders own preference or equity shares
๏
the costs suffered by the liquidator (generally paid first) 
๏
the amount of preferential creditors (including employees’ salaries and other benefits in arrears). 
Equity shareholders may receive very little, if anything, as they rank last. The auditor of an insolvent or 
potentially insolvent company may be asked to advise on the allocation of company assets.
See Chapter 14 of our ACCA LW (ENG) notes for the sequence of distribution.