Insolvency – Page 2

AAA – Nov 2012 – L3 – AII – Q12 – Auditor’s Legal Liability

Identifies the type of creditors given priority in payment during a liquidation process.

Question

The creditors given priority payment during a liquidation process are known as …………………. creditors.

Answer

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Tags: Creditors, Insolvency, Legal Liability, Liquidation, Priority Payment
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

Question

The following categories of debtors may be declared bankrupt (according to Bankruptcy Law in Nigeria) EXCEPT:

A. A debtor owing a liquidated sum of at least N2,000 (Two Thousand Naira only).
B. A debtor who has committed an act of bankruptcy within 3 months before presentation of bankruptcy petition.
C. Any debtor domiciled in Nigeria or who has carried on business in Nigeria by means of an agent or a manager.
D. A debtor that makes any conveyance or transfer of his property or any part thereof if he were adjudged bankrupt.
E. A debtor who transacts business in Nigeria and is able to meet his obligation as at when they fall due.

Answer

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Tags: Bankruptcy Law, Debtors, Insolvency, Legal Liability, Nigeria Law
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – Nov 2011 – L3 – SAII – Q17 – Review of Subsequent Events and Going Concern Assumptions

Definition of a company's inability to meet financial obligations on time.

Question

The inability of a company to meet its financial obligations as and when due is called……………..

Answer

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Tags: Company Obligations, Financial obligations, Insolvency, Liquidity
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2011

BL – Nov 2020 – L1 – SB – Q2c – Company Law

Differentiate insolvency from bankruptcy and outline consequences of insolvency.

Question

Insolvency occurs when a company is unable to pay its debts.

Required:
i. Distinguish insolvency from bankruptcy.
ii. Explain briefly the consequences of insolvency on a company.

Answer

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Tags: Bankruptcy, Corporate Consequences, Financial Distress, Insolvency
Level: Level 1

Topic: Company Law
Series: NOV 2020

BL – Nov 2020 – L1 – SA – Q5 – Company Law

Objective question testing knowledge on company financial status related to solvency.

Question

5. A company whose liabilities exceed its assets is said to be
A. Buoyant
B. Broke
C. Rich
D. Insolvent
E. Pauperised

Answer

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Tags: Company Liabilities, Financial Terms, Insolvency, Solvency
Level: Level 1

Topic: Company Law
Series: NOV 2020

BL – May 2013 – L1 – SA – Q20 – Law of Trusts

This question tests knowledge of which entities cannot be declared bankrupt.

Question

Which of the following CANNOT be made a bankrupt?

A. A company
B. A Nigerian
C. A partnership
D. A foreigner who lives in Nigeria
E. A foreigner who has a place of business in Nigeria

Answer

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Tags: Bankruptcy, Insolvency, Legal Status
Level: Level 1

Topic: Law of Trusts
Series: MAY 2013

BL – May 2013 – L1 – SA – Q11 – Law Relating to Banking

This question tests the knowledge of the official responsible for administering a debtor's estate in bankruptcy.

Question

The person charged with the duty of administering a debtor’s estate in a bankruptcy proceeding is known as the:

A. Liquidator
B. Official Receiver
C. Registrar of the Supreme Court
D. Auctioneer
E. Executor

Answer

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Tags: Bankruptcy, Insolvency, Official Receiver
Level: Level 1

Topic: Law Relating to Banking
Series: MAY 2013

BL – May 2014 – L1 – SA – Q19 – Law Relating to Banking

Identifying the term for a bankruptcy petition against a common debtor.

Question

Bankruptcy petition by a group of creditors who acts together against a common debtor who is known to be insolvent is a ____________.

Answer

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Tags: Bankruptcy, Creditors, Insolvency
Level: Level 1

Topic: Law Relating to Banking
Series: MAY 2014

BL – May 2014 – L1 – SA – Q12 – Company Law

Identifying what is not a ground for winding up a company.

Question

Which of the following is NOT a ground for winding up of a company?
A. Fraudulent trading
B. Resolution by members to wind up
C. Reduction of membership below minimum number
D. Court Order
E. Possibility of abuse of limited liability system

Answer

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Tags: Grounds for Winding Up, Insolvency, Winding-up
Level: Level 1

Topic: Company Law
Series: MAY 2014

BL – Nov 2013 – L1 – SB – Q6b – Agency Law

Stating three acts of bankruptcy for which proceedings may be instituted.

Question

A debtor who could not pay his debts or meet his legal financial obligations may be insolvent.

You are required to:
State THREE acts of bankruptcy for which bankruptcy proceedings may be instituted against a debtor.

Answer

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Tags: Bankruptcy, Insolvency, Legal Financial Obligations
Level: Level 1

Topic: Agency Law
Series: NOV 2013

BL – Nov 2013 – L1 – SB – Q5a – Company Law

Stating reasons for which a court may order a company to be wound up.

Question

When a company is not well managed, it may need to be wound up either voluntarily or by court order.

You are required to:
State FIVE reasons for which a court may order that a company be wound up.

Answer

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Tags: Company Law, Corporate Affairs, Insolvency, Winding-up
Level: Level 1

Topic: Company Law
Series: NOV 2013

BL – May 2018 – L1 – SB – Q3 – Company Law

Discuss the tests for insolvency, types of debentures, and implications of misuse of company resources by a secretary.

Question

a. There are various tests of determining if a company is insolvent.
Required:
List and explain briefly THREE of these tests specified by the Companies and Allied Matters Act (CAMA 1990). (6 Marks)

b. Company indebtedness could be by way of debentures.
Required:
State THREE types of debentures. (3 Marks)

c. Adex Plc employed ‘A’ as a Company Secretary. ‘A’ hired luxury cars from Bee Enterprises, giving the impression that they were for the use of Adex Plc, but he used the cars for his own purpose. Bee Enterprises has sued Adex Plc.
Required:
(i) Advise Adex Plc. (5 Marks)
(ii) Assuming that the Board of Directors of Adex Plc intends to remove ‘A’ as the Company Secretary, state THREE matters which the notice of removal must contain. (3 Marks)

d. By S.401 of CAMA, the legal way to terminate the life of a company is by winding up.
Required:
State THREE ways by which a company may be wound up. (3 Marks)

Answer

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Tags: Company Law, Debentures, Insolvency
Level: Level 1

Topic: Company Law
Series: MAY 2018

BL – May 2018 – L1 – SA – Q6 – Company Law

Identify the condition when a company is unable to pay its debts.

Question

A company that is unable to pay its debts is
A. Fluid
B. Floating
C. Bankrupt
D. Insolvent
E. Distressed

Answer

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Tags: Company Law, Insolvency
Level: Level 1

Topic: Company Law
Series: MAY 2018

BL – Nov 2014 – L1 – SA – Q8 – Company Law

Identifying a situation where a company is not considered insolvent

Question

A company may be declared insolvent in any of the following situations EXCEPT if it:
A. Fails to file annual returns
B. Has been wound-up
C. Is a judgment debtor
D. Is not a judgment creditor
E. Is incapable of meeting its financial obligations

Answer

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Tags: Company Law, Insolvency, Legal Status
Level: Level 1

Topic: Company Law
Series: NOV 2014

BL – May 2022 – L1 – SA – Q6 – Company Law

Define when a company is said to be insolvent.

Question

A company is said to be insolvent when the
A. Company is in a financial distress and it is unable to pay its debt
B. Board of directors has refused to act
C. Managing Director of the company dies
D. Articles of association of the company is altered
E. Business of the company is to solve financial crisis

Answer

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Tags: Company Law, Debt Payment, Insolvency
Level: Level 1

Topic: Company Law
Series: MAY 2022

BL – May 2021 – L1 – SB – Q2c – Company Law

Explanation of receivership as an alternative to company liquidation.

Question

Receivership is an alternative to company liquidation.

Required:
Explain receivership.

Answer

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Tags: Insolvency, Liquidation, Receivership
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – May 2021 – L1 – SB – Q2b – Company Law

Explanation of creditor claims against a majority shareholder when a company is insolvent.

Question

Adigwe and his two sons caused Adigwe and Sons Limited to be incorporated and became the first directors of the company. The company traded profitably for five years after it was incorporated, but it is about to be wound up because it owes trade creditors a huge amount of money. Adigwe holds 95% of the issued shares of the company while each of his two sons holds 2½%. The creditors of Adigwe and Sons Limited have discovered that the assets of the company are insufficient to satisfy their claims and have filed an action to recover the money from Adigwe who holds most of the shares of the company.
Required:
Explain to the creditors of Adigwe and Sons Limited their chance of succeeding in their claim against Adigwe.

Answer

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Tags: Company Law, Corporate Personality, Creditor Claims, Insolvency
Level: Level 1

Topic: Company Law
Series: MAY 2021

BL – Nov 2023 – L1 – SB – Q5d – Company Law

Discusses the types of insolvency practitioners and the qualifications required to practice in Nigeria.

Question

Corporate insolvency occurs when a company is unable to meet its financial obligations.

Required:
i. State TWO insolvency practitioners. (2 Marks)
ii. State THREE qualifications that an insolvency practitioner must possess. (3 Marks)

Answer

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Tags: Corporate Law, Insolvency, Liquidation, Practitioners
Level: Level 1

Topic: Company Law
Series: NOV 2023

BL – Nov 2023 – L1 – SA – Q9 – Business Ethics and Corporate Governance

This question asks who secured creditors have the right to appoint when a company is in financial difficulty.

Question

As an alternative to liquidation, where a company is in financial difficulty the secured creditors have a right to appoint a
A. Director to manage the assets
B. Banker to manage the assets
C. Chairman to manage the assets
D. Receiver/manager to manage the assets
E. Stockbroker to manage the assets

Answer

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Tags: Corporate Law, Insolvency, Receivership
Level: Level 1

Topic: Business Ethics and Corporate Governance
Series: NOV 2023

BL – Nov 2019 – L1 – SB – Q4a Contract Law

Conditions under which a company may be placed in receivership.

Question

An insolvent company has several alternatives to liquidation.
Required:
State FOUR conditions under which a company may be placed in receivership. (4 Marks)

Answer

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Tags: Company Law, Insolvency, Liquidation, Receivership
Level: Level 1

Topic: Contract Law
Series: NOV 2019

Question Tag: Insolvency

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AAA – Nov 2012 – L3 – AII – Q12 – Auditor’s Legal Liability

Identifies the type of creditors given priority in payment during a liquidation process.

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AAA – Nov 2012 – L3 – SA – Q18 – Auditor’s Legal Liability

Identifying debtor categories exempt from bankruptcy declaration under Nigerian law.

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AAA – Nov 2011 – L3 – SAII – Q17 – Review of Subsequent Events and Going Concern Assumptions

Definition of a company's inability to meet financial obligations on time.

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BL – Nov 2020 – L1 – SB – Q2c – Company Law

Differentiate insolvency from bankruptcy and outline consequences of insolvency.

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BL – Nov 2020 – L1 – SA – Q5 – Company Law

Objective question testing knowledge on company financial status related to solvency.

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BL – May 2013 – L1 – SA – Q20 – Law of Trusts

This question tests knowledge of which entities cannot be declared bankrupt.

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BL – May 2013 – L1 – SA – Q11 – Law Relating to Banking

This question tests the knowledge of the official responsible for administering a debtor's estate in bankruptcy.

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BL – May 2014 – L1 – SA – Q19 – Law Relating to Banking

Identifying the term for a bankruptcy petition against a common debtor.

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BL – May 2014 – L1 – SA – Q12 – Company Law

Identifying what is not a ground for winding up a company.

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BL – Nov 2013 – L1 – SB – Q6b – Agency Law

Stating three acts of bankruptcy for which proceedings may be instituted.

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BL – Nov 2013 – L1 – SB – Q5a – Company Law

Stating reasons for which a court may order a company to be wound up.

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BL – May 2018 – L1 – SB – Q3 – Company Law

Discuss the tests for insolvency, types of debentures, and implications of misuse of company resources by a secretary.

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BL – May 2018 – L1 – SA – Q6 – Company Law

Identify the condition when a company is unable to pay its debts.

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BL – Nov 2014 – L1 – SA – Q8 – Company Law

Identifying a situation where a company is not considered insolvent

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BL – May 2022 – L1 – SA – Q6 – Company Law

Define when a company is said to be insolvent.

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BL – May 2021 – L1 – SB – Q2c – Company Law

Explanation of receivership as an alternative to company liquidation.

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BL – May 2021 – L1 – SB – Q2b – Company Law

Explanation of creditor claims against a majority shareholder when a company is insolvent.

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BL – Nov 2023 – L1 – SB – Q5d – Company Law

Discusses the types of insolvency practitioners and the qualifications required to practice in Nigeria.

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BL – Nov 2023 – L1 – SA – Q9 – Business Ethics and Corporate Governance

This question asks who secured creditors have the right to appoint when a company is in financial difficulty.

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BL – Nov 2019 – L1 – SB – Q4a Contract Law

Conditions under which a company may be placed in receivership.

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