Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following requires court approval before the appointment of an administrator?

1. Creditor's appointment

2. Director's appointment

3. Shareholder's appointment

4. Voluntary administrator

The correct answer is: Creditor's appointment

In the context of appointing an administrator, a creditor's appointment is the correct answer because it is an action that reaches into the authority and management of the company and its assets. When creditors seek to appoint an administrator, they must demonstrate a legitimate interest and just cause for their request, which for some countries includes needing court validation. This ensures that the decision to appoint an administrator is legally sound and considers the rights and claims of various stakeholders. The other options, such as director's appointment and shareholder's appointment, typically do not require court approval. These appointments are generally matters of internal governance within the company and can be handled according to the company’s articles of association or shareholder agreements. A voluntary administrator is appointed by directors or creditors under specific circumstances, but this appointment also often doesn't necessitate prior court approval, as the process is designed to be more straightforward to prevent a company’s financial distress from worsening due to delays in getting court consent.