Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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Which of the following can the administrator not do?

Remove directors
Replace employees
Formulate a new business strategy
Act against the creditors' interests

The correct answer is: Act against the creditors' interests

The administrator's primary role is to manage the affairs of a company that is in financial distress, with the key objective of maximizing returns to creditors. Acting against the creditors' interests would directly oppose this mandate. Administrators are legally bound to prioritize the stakeholders who are owed money, making it essential for them to act in a way that aligns with the financial recovery of the business and the obligations to its creditors. In contrast, the administrator has the authority to remove directors and replace employees as part of restructuring efforts. Additionally, formulating a new business strategy falls within their purview to stabilize the company and ensure its potential recovery. Each of these actions is aimed at either improving the company's situation or helping secure the best possible outcome for creditors, which underscores why the correct answer pertains to actions detrimental to creditors' interests.