Association of Chartered Certified Accountants (ACCA) Certification Practice Test

In a creditors voluntary liquidation, who has the authority to name an insolvency practitioner?

1. The directors

2. The creditors

3. The shareholders

4. The liquidator

The correct answer is: The creditors

In a creditors' voluntary liquidation, it is the creditors who have the authority to appoint an insolvency practitioner. This process is initiated when the company is unable to pay its debts, and the directors will convene a general meeting to propose the liquidation. Once the creditors are informed and the meeting is held, they vote on the appointment of an insolvency practitioner. The creditors have a vested interest in the outcome, as their ability to recover debts is dependent on the decisions made during the liquidation process. Therefore, it makes sense that they hold the power to choose the insolvency practitioner who will oversee the liquidation, ensuring their interests are represented effectively. While directors play a crucial role in the initial steps of the liquidation process, including calling the meeting, they do not have the final say in appointing the insolvency practitioner. Shareholders may participate in the process, but their influence diminishes once the decision has shifted to the creditors in the liquidation context. The liquidator, once appointed, will manage the process but does not possess the authority to determine their own appointment.