ExpertMedium2 marksMultiple Choice
ACCA · Question 21 · Insolvency law
Section A
When a company enters administration, the administrator must perform their functions with a specific statutory objective in mind. What is the primary (first tier) objective of administration under Schedule B1 of the Insolvency Act 1986?
Section A
When a company enters administration, the administrator must perform their functions with a specific statutory objective in mind. What is the primary (first tier) objective of administration under Schedule B1 of the Insolvency Act 1986?
Answer options:
A.
To achieve a better result for the company's creditors as a whole than would be likely if the company were wound up.
B.
To realize property in order to make a distribution to one or more secured or preferential creditors.
C.
To rescue the company as a going concern.
D.
To investigate and penalize directors for wrongful trading.
How to approach this question
Recall the hierarchy of objectives for an administrator under the Insolvency Act 1986.
Full Answer
C.To rescue the company as a going concern.✓ Correct
Schedule B1 of the Insolvency Act 1986 sets out a hierarchy of objectives. The administrator must aim for the first objective: rescuing the company as a going concern. Only if this is not reasonably practicable (or if the second objective would achieve a better result for creditors without harming the rescue) can they move to the second objective (better result for creditors than winding up).
Common mistakes
Confusing the primary objective (rescuing the *company*) with the secondary objective (getting a better result for *creditors*).
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