Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Who has the authority to appoint an administrator in a company?

1. Shareholders

2. Directors or the company itself

3. Creditors

4. Employees

The correct answer is: Directors or the company itself

The authority to appoint an administrator in a company primarily lies with the directors or the company itself. This is typically part of the legal framework governing corporate insolvency, where the company, through its board of directors, recognizes that it is in financial distress and takes proactive steps to seek administration. This process can help protect the company's assets while it seeks to restructure or find a way to return to profitability. While shareholders may have a say in significant corporate decisions, including changes to the board or management, their role in direct administration appointments is limited unless specific bylaws or agreements provide otherwise. Creditors do have certain rights and may influence the appointment of an administrator, especially if they are pushing for insolvency proceedings due to unpaid debts, but they do not have the statutory power to unilaterally appoint. Employees, while essential to the company and often affected by its financial state, do not have the authority to appoint an administrator. Their protection and interests are considered during the administration process, but they do not participate in the decision-making regarding appointments. Thus, the directors or the company, through proper governance structures, hold the necessary authority to initiate the administration process.