Association of Chartered Certified Accountants (ACCA) Certification Practice Test

During a creditors voluntary winding up, how many members and creditors are appointed to the liquidation committee?

1. 3

2. 5

3. 7

4. 10

The correct answer is: 5

In a creditors' voluntary winding up, the formation of a liquidation committee is an essential part of the process to oversee the work of the appointed liquidator. This committee comprises both members and creditors of the company. The correct answer indicates that five members and creditors are appointed to the liquidation committee. This is based on regulations that stipulate that the committee should consist of five individuals to ensure a balance of representation. Including both creditors and members allows for a collaborative approach that considers the interests of all stakeholders involved in the winding-up process. This structure helps facilitate effective decision-making and oversight of the liquidation process, which is crucial to ensure an orderly resolution of the company's obligations. Conversely, the other options indicate fewer or greater numbers than what is legally required or standard practice, which may lead to ineffective representation or governance within the committee. For instance, having too few members might not adequately represent the interests of all creditors, while a larger committee could complicate decision-making and create unwieldy dynamics in managing the liquidation. Thus, five is the optimal and correct number for a balanced and functional liquidation committee in a creditors' voluntary winding up.