Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What power does an administrator have over company directors and employees?

1. To amend company bylaws

2. To dissolve the company

3. To remove and replace directors and employees

4. To freeze company assets

The correct answer is: To remove and replace directors and employees

An administrator's primary role in a company undergoing administration is to manage the company's affairs with the goal of rescuing it as a going concern or achieving a better outcome for creditors than would be possible through an immediate liquidation. One significant power that an administrator possesses is the authority to remove and replace directors and employees. This power is essential because it allows the administrator to restructure the management of the company effectively. In situations where directors or employees may not be acting in the company’s best interests, whether due to mismanagement or lack of capability, the administrator can step in to install individuals who are better suited to guide the company toward recovery. This ability to make necessary changes in leadership can help streamline operations, enhance decision-making, and restore confidence among stakeholders, which are crucial factors in the administration process. In contrast to this power, options such as amending company bylaws, dissolving the company, or freezing assets do not directly relate to the administrator's responsibilities to stabilize and manage the company. While dissolving the company might be a final step if other avenues fail, it is not typically a proactive role for the administrator, who focuses on rehabilitation rather than dissolution. Similarly, while freezing assets may occur under certain conditions, it is not a general power granted to administrators