ExpertEasy2 marksMultiple Choice
ACCA · Question 21 · Insolvency law
A struggling retail chain is placed into administration.
Under the Insolvency Act 1986, what is the primary hierarchical objective of an administrator?
A struggling retail chain is placed into administration.
Under the Insolvency Act 1986, what is the primary hierarchical objective of an administrator?
Answer options:
A.
To immediately liquidate all assets and pay secured creditors.
B.
To rescue the company as a going concern.
C.
To investigate the directors for fraudulent trading.
D.
To ensure unsecured creditors are paid in full.
How to approach this question
Recall the three hierarchical objectives of administration in Schedule B1. The first and primary objective is always company rescue.
Full Answer
B.To rescue the company as a going concern.✓ Correct
Under Schedule B1 of the Insolvency Act 1986, the administrator must perform their functions with the objective of: (a) rescuing the company as a going concern (the primary objective). If that is not reasonably practicable, they move to objective (b) achieving a better result for the company's creditors as a whole than would be likely if the company were wound up.
Common mistakes
Confusing administration with liquidation. Liquidation is the end of the company; administration aims to save it.
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