• 1 Marks

BL – May 2017 – L1 – SA – Q6 – Company Law

Identifying non-inclusion in the tests for insolvency under Companies and Allied Matters Act.

Under the Companies and Allied Matters Act, the tests for insolvency do NOT include
A. Inability of a company to pay a debt exceeding ₦2,000 three weeks after demand
B. The existence of court process issued in respect of a judgment debt
C. A court ruling that the company is unable to pay its debts
D. The existence of company’s liability in excess of its assets
E. Outstanding debts owed by the company in excess of one billion naira

Answer: E

Explanation:
Option E is the correct answer because the test for insolvency under the Companies and Allied Matters Act is based on the inability of the company to pay debts when they are due, not on the absolute amount of outstanding debt. The other options relate directly to legal definitions of insolvency.

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