Which of the following is a valid ground for a creditor to petition for the compulsory winding up of a company?

Answer options:

The company has failed to pay a statutory demand exceeding £750 within 21 days.

The company's liabilities exceed its assets, but it is still paying debts as they fall due.

The directors have failed to hold an Annual General Meeting.

The company has changed its main business activity.

How to approach this question

Identify the statutory criteria that prove a company is unable to pay its debts.

Full Answer

A.The company has failed to pay a statutory demand exceeding £750 within 21 days.✓ Correct

Under section 123 of the Insolvency Act 1986, a company is deemed unable to pay its debts if a creditor to whom the company owes more than £750 serves a written statutory demand, and the company fails to pay, secure, or compound the debt within 21 days.

Common mistakes

Not knowing the exact figures (£750 and 21 days) for a statutory demand.

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Practice the full ACCA LW — Corporate and Business Law Practice Exam 3

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