Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Why might a winding up petition be filed due to the failure to obtain a trading certificate?

1. The company is considered dormant

2. The company is presumed to be insolvent

3. The company poses a risk to creditors

4. The company will not receive government support

The correct answer is: The company is presumed to be insolvent

The reason for filing a winding-up petition due to the failure to obtain a trading certificate is primarily linked to the presumption of insolvency. If a company has not obtained a trading certificate, it may not be legally allowed to conduct business. This situation can signal to creditors that the company is in financial distress, leading to the presumption that the company may be unable to meet its obligations. Insolvency is a critical factor in assessing a company's viability and ability to continue operations. The absence of a trading certificate implies that the company might not have the necessary legal standing to engage in trading activities, which raises concerns about its financial health. Consequently, creditors may pursue a winding-up petition as a means to protect their interests, indicating that the company is unable to pay its debts and is likely insolvent. The context surrounding the other options highlights that they do not address the core reason behind the filing of the petition as directly as the notion of presumed insolvency does. For instance, while a company that hasn’t obtained a trading certificate might be considered dormant, this does not automatically imply insolvency. Similarly, the risk to creditors does exist, but it stems directly from the inability to trade rather than explicitly being a reason for a winding-up petition.