Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which petitions are dismissed during the administration process?

1. Petitions for compensation

2. Petitions for winding up

3. Petitions for restructuring

4. Petitions for creditor recovery

The correct answer is: Petitions for winding up

In the context of the administration process, petitions for winding up are dismissed because the administration is aimed at rescuing a company, rather than liquidating it. When a company is placed into administration, it is under the control of an appointed administrator, whose primary goal is to achieve the best possible outcome for creditors. Winding up, or liquidation, seeks to dissolve the company and distribute its assets to creditors, which contradicts the purpose of administration that seeks to stabilize the business and potentially return it to profitability. Petitions for compensation, restructuring, and creditor recovery may involve processes that align with the objectives of administration, such as negotiating with stakeholders or evaluating potential recovery plans, but the winding up process is distinct in its focus on the absolute cessation of company operations. This focus makes winding-up petitions unsuitable during the administration phase, bracketing them as petitions that should not proceed while an administration order is in effect.