Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What type of resolution is needed for voluntary liquidation when the company's fixed duration expires?

1. Special resolution (>75%)

2. Ordinary resolution (>50%)

3. Unanimous consent

4. Majority affirmative resolution

The correct answer is: Ordinary resolution (>50%)

In the context of voluntary liquidation of a company when its fixed duration expires, an ordinary resolution is essential to initiate the process. This type of resolution requires more than 50% of the votes from shareholders present at the meeting to pass. The rationale behind this requirement is to ensure that a majority of the shareholders agree to the dissolution and winding up of the company, considering that the expiration of the company's fixed duration signals that it has fulfilled its primary purpose. Ordinary resolutions are generally easier to pass compared to special resolutions, which typically require a supermajority (more than 75%). Involuntary liquidation scenarios and situations requiring substantial changes to company structure may demand a special resolution instead. Similarly, unanimous consent would indicate that all shareholders are in agreement, which is not a practical necessity in this situation. Alternatively, a majority affirmative resolution aligns more closely with discussions surrounding board decisions rather than shareholder voting for liquidation. Understanding these distinctions is critical for managing the company’s affairs legally and efficiently, ensuring that all shareholders have a fair opportunity to express their opinions on the company's future once its established term has ended.