Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What is the purpose of the liquidation committee?

1. To reduce the overall debt of the company

2. To act as intermediaries between the creditors, members and liquidator

3. To make investment decisions on behalf of the company

4. To oversee the day-to-day operations of the liquidation process

The correct answer is: To act as intermediaries between the creditors, members and liquidator

The purpose of the liquidation committee is to act as intermediaries between the creditors, members, and the liquidator. This committee plays a crucial role in representing the interests of various stakeholders during the liquidation process. By facilitating communication between creditors and the liquidator, the committee helps ensure that the liquidation is conducted fairly and transparently, addressing concerns and questions that may arise from all parties involved. The responsibilities of the liquidation committee often include reviewing the liquidator's actions, providing guidance on significant decisions, and making recommendations to the liquidator. This structure helps maintain a level of oversight and input from creditors and members, which is essential for building trust and ensuring that the liquidation process aligns with legal requirements and best practices. Other choices do not accurately reflect the committee's core function. While reducing debt may be an overall goal of liquidation, it is not the direct purpose of the committee. Making investment decisions falls outside the scope of liquidating assets or managing the company’s affairs during this time. Additionally, overseeing day-to-day operations is generally the role of the liquidator, not the liquidation committee, which focuses more on strategic oversight and stakeholder communication instead.