ExpertThis question is part of a case study — click to read the full scenario(Case 58)
SCENARIO: Titanium Structures plc is a construction firm. In January, the directors realized the company was hopelessly insolvent due to a supply chain crisis and could not avoid liquidation. However, hoping for a 'miracle contract', they continued trading, ordering £500,000 of steel on credit in February. They had no intention of defrauding the supplier, they were just overly optimistic. In March, the company collapsed into insolvent liquidation.
Based on the directors' actions, which provision of the Insolvency Act 1986 are they most likely to have breached?
ACCA · Question 60 · Corporate and Business Law
SCENARIO: Titanium Structures plc is a construction firm. In January, the directors realized the company was hopelessly insolvent due to a supply chain crisis and could not avoid liquidation. However, hoping for a 'miracle contract', they continued trading, ordering £500,000 of steel on credit in February. They had no intention of defrauding the supplier, they were just overly optimistic. In March, the company collapsed into insolvent liquidation.
During the liquidation, it is discovered that Titanium Structures plc had granted a floating charge to Bank A in 2020, and a fixed charge over its main warehouse to Bank B in 2021. Both were properly registered. Who has priority over the warehouse?
SCENARIO: Titanium Structures plc is a construction firm. In January, the directors realized the company was hopelessly insolvent due to a supply chain crisis and could not avoid liquidation. However, hoping for a 'miracle contract', they continued trading, ordering £500,000 of steel on credit in February. They had no intention of defrauding the supplier, they were just overly optimistic. In March, the company collapsed into insolvent liquidation.
During the liquidation, it is discovered that Titanium Structures plc had granted a floating charge to Bank A in 2020, and a fixed charge over its main warehouse to Bank B in 2021. Both were properly registered. Who has priority over the warehouse?
Answer options:
Bank A, because their charge was created first in time.
Bank B, because a fixed charge generally takes priority over a floating charge.
The liquidator, who will sell the warehouse to pay unsecured creditors first.
They rank equally and will share the proceeds of the warehouse.
How to approach this question
Full Answer
Common mistakes
Practice the full ACCA LW — Corporate and Business Law Practice Exam 1
60 questions · hints · full answers · grading