Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Typically, how long does the administration process last?

1. 6 months

2. 12 months

3. 18 months

4. 24 months

The correct answer is: 12 months

The administration process in the context of corporate insolvency typically lasts around 12 months. This duration is generally established to provide administrators sufficient time to assess a company's situation, devise a plan, and seek to maximize returns for creditors. The 12-month timeframe allows for critical activities such as evaluating the financial status of the business, restructuring operations if viable, or preparing the company for sale. While the administration can sometimes be extended beyond 12 months if necessary—for instance, if complications arise or further negotiations with creditors are required—12 months serves as a standard benchmark in many jurisdictions. This period ensures that the process remains efficient and focused, ultimately aimed at restoring viability or concluding the administration with as much value as possible for stakeholders. Longer timeframes, such as 18 or 24 months, might lead to increased costs without clear benefits, which is why the administration process is usually designed to aim for the 12-month mark.