CIMA Exam CIMAPRA17-BA4-1 Topic 4 Question 104 Discussion

Actual exam question for CIMA's CIMAPRA17-BA4-1 exam

Question #: 104
Topic #: 4

X Ltd has entered into a number of contracts with Y Ltd. In which of the following situations could the directors be held personally liable for the debts contracted with Y Ltd?

(i) X Ltd has continued to trade at a time when insolvency appeared inevitable

(ii) X Ltd has become insolvent and is unable to pay its debts to Y Ltd

(iii) X Ltd has contracted for a purpose not specified in its articles of association

A(i) only

B(i) and (ii) only

C(ii) only

D(iii) only

Show Suggested Answer

Suggested Answer: B

by Judy at Dec 07, 2024, 01:13 PM

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Weldon

4 days ago

Hmm, I'm not sure. If the directors have been engaging in some shady activities, like contracting for a purpose not specified in the articles, that could also make them personally liable, right? I'll have to think this one through.

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Cristy

6 days ago

I think the correct answer is B. The directors can be held personally liable if the company has continued to trade when insolvency was inevitable, or if the company has become insolvent and is unable to pay its debts.

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