Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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What is one of the primary interests that the administrator must act in?

  1. The interests of the shareholders

  2. The interests of the company's market position

  3. The interests of the company's creditors

  4. The interests of the employees

The correct answer is: The interests of the company's creditors

The administrator's primary interest is to act in the best interests of the company's creditors. When a company enters administration, it typically does so due to financial distress, and the primary goal of the administrator is to manage the company's assets to maximize returns for creditors. This may involve restructuring the company, selling off assets, or negotiating settlements. Creditor interests take precedence in administration because they have a legal claim to the company's assets. The administrator must carefully assess the company's financial situation and ensure that any actions taken can ultimately serve to settle outstanding debts. Unlike shareholders, who may have interests aligned with the growth and profitability of the company, creditors prioritize recovering owed amounts, making their interests a central concern during the administration process. In contrast to actions focused on shareholders, the market position of the company, or employees, the administrator's role is distinctly centered around satisfying creditors' stakes and obligations during a challenging financial period.