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ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration

Nila Ltd owes a supplier an undisputed debt, and the supplier has served a formal written demand for payment. The demand is not met within the statutory period. What is the usual legal significance of this?

An unmet statutory demand for an undisputed debt is evidence that the company cannot pay its debts. A creditor may rely on it to support a petition to wind the company up. It does not automatically start administration or make directors personally liable.

  1. AThe company is automatically placed into administration
  2. BThe failure to pay is evidence that the company cannot pay its debts, which may support a winding-up petitionCorrect
  3. CThe directors become personally liable for the debt

Explanation

Under the typical statutory rule, an unsatisfied formal demand for an undisputed debt over a threshold is treated as evidence of inability to pay debts. A creditor can rely on this to petition for winding up. No automatic administration or personal director liability follows.

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