Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Under which condition can a dissatisfied member petition for winding up the business?

1. When there is a lack of new investment

2. When company regulations are not followed

3. When majority shareholders completely ignore the minority

4. When the company posts a profit

The correct answer is: When majority shareholders completely ignore the minority

A dissatisfied member can petition for the winding up of the business when majority shareholders completely ignore the minority. This condition highlights a fundamental principle within corporate governance regarding the treatment of all shareholders. Minority shareholders have rights that need to be recognized, and if the majority consistently disregards these rights, it creates an equitable concern. The ability for a minority shareholder to influence the decision-making process and protect their interests is crucial, and ignoring them can lead to significant unfairness, prompting a legal pathway such as winding up. The other conditions may present scenarios that are less likely to warrant such drastic measures. For instance, a lack of new investment reflects a possible issue but does not automatically indicate a violation of shareholders' rights. Similarly, company regulations not being followed can raise concerns but may not justify a winding-up petition unless they directly affect the treatment of shareholders. Lastly, a company posting a profit suggests a functioning enterprise, which generally wouldn't support a petition for winding up unless there are overriding concerns regarding governance or equity among shareholders.