Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which party can petition for compulsory liquidation if they are owed at least £750?

1. Member of the company

2. Supplier of goods

3. Creditor

4. Administrator

The correct answer is: Creditor

The rationale behind why a creditor can petition for compulsory liquidation when they are owed at least £750 lies in their legal rights and the circumstances concerning debt recovery. Creditors are individuals or entities to whom a company owes money. When a creditor finds that a company is unable to pay its debts, they have the right to seek legal remedies, one of which is to initiate a compulsory liquidation process. In this context, the threshold of £750 is set as a minimum amount owed for a creditor to file a petition for compulsory liquidation. This minimum reflects a recognition that pursuing formal bankruptcy procedures requires a significant enough debt to justify the legal costs and proceedings involved. Members of the company, suppliers of goods, and administrators do have their roles and responsibilities within the framework of corporate insolvency, but they do not directly possess the same rights to trigger compulsory liquidation based solely on being owed a debt. Members typically represent shareholders, who might not have a direct claim like creditors do. Suppliers, while they can also be creditors, may not initiate the petition unless they meet the conditions set forth for creditors. Administrators act on behalf of the company during insolvency procedures and do not petition for liquidation as an independent party. Therefore, the correct answer is that a creditor is the party