Association of Chartered Certified Accountants (ACCA) Certification Practice Test

How is an administrator defined in relation to the company?

1. The company's marketing agent

2. The company's legal representative

3. The company’s agent acting in the interest of creditors

4. The company's financial advisor

The correct answer is: The company’s agent acting in the interest of creditors

An administrator is primarily defined as an individual appointed to manage a company's affairs, particularly when the company is in financial distress. Their main responsibility is to act in the best interests of the company’s creditors, ensuring that all financial obligations are managed and met to the greatest extent possible. This role is crucial during insolvency proceedings where the administrator steps in to try to rescue the business or ensure an orderly liquidation of its assets. The focus on acting in the interest of creditors is what differentiates an administrator from other roles. While a company's legal representative may deal with legal matters broadly, and a financial advisor may provide guidance on financial decisions, the administrator has a specific mandate to prioritize creditor interests and navigate the complexities of insolvency law. Similarly, the role of a marketing agent usually revolves around promoting products or services rather than overseeing a company's financial recovery or restructuring process. Thus, the definition of an administrator encapsulates the unique duties and responsibilities tied to safeguarding creditor rights during challenging financial times.