Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which statements regarding an administrator are correct?

1. An administrator is the company's agent

2. An administrator must act in the best interests of all the company's creditors

3. Both of the above

4. None of the above

The correct answer is: Both of the above

An administrator has specific roles and responsibilities, particularly in the context of corporate insolvency. When evaluating the accuracy of the statements regarding the administrator's role, it's crucial to recognize the nature of their position. An administrator indeed acts as the company's agent—this means they have the authority to manage the company’s affairs, business, and property, usually in a situation where the company is facing financial difficulties. As the company's agent, the administrator has a fiduciary duty to act within the scope of their authority, facilitating the company's rescue if possible or ensuring a fair process if the company's assets need to be liquidated. Furthermore, an administrator is legally required to act in the best interests of all the company's creditors as they oversee the restructuring or liquidation process. Their purpose is to maximize creditor return, considering the interests of all parties involved. This dual focus helps maintain creditor confidence and provides a structured approach to the company's financial distress. Consequently, both statements are correct: the administrator serves as the company's agent and must prioritize the interests of all creditors. This dual commitment establishes the framework within which administrators operate, making the option that includes both assertions the best choice.