Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following is not an automatic consequence of a compulsory winding up order against a public limited company?

1. Liquidation is deemed to start on the date of the issuing order

2. The company ceases to trade

3. The appointment of an official receiver

4. The assets are frozen

The correct answer is: Liquidation is deemed to start on the date of the issuing order

The correct answer is that liquidation is deemed to start on the date of the issuing order. This statement is not an automatic consequence of a compulsory winding up order against a public limited company. In many jurisdictions, the actual commencement of liquidation proceedings is typically when the order is received and acted upon by the liquidator, not merely the date it is issued. While the issuing order initiates the formal process, it does not necessarily mean that liquidation is deemed to start immediately on that date as operational actions leading to actual liquidation can occur later. In contrast, the other outcomes mentioned are automatic consequences of a compulsory winding up. When a winding up order is made, the company indeed ceases to trade immediately as the focus shifts to managing the company's assets under the supervision of the court. The appointment of an official receiver is also a standard procedure that follows the order, as they are responsible for managing the winding up process. Lastly, the assets of the company typically are frozen immediately upon the order to protect them during the winding up process, preventing any unauthorized disposal or reduction in value.