Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Who has the authority to appoint an administrator?

1. Only the creditors

2. Only the directors

3. The court after a petition

4. Floating charge holders alone

The correct answer is: The court after a petition

The correct response, which indicates that the court has the authority to appoint an administrator, reflects the legal framework surrounding insolvency and administration procedures. When a company is facing financial difficulties, particularly when it is deemed to be insolvent, the process can become complex. The court's role in appointing an administrator is crucial because it ensures that the process adheres to legal standards and provides a level of protection for both the creditors and the company itself. This judicial oversight helps to maintain the integrity of the administration process, allowing for a more impartial evaluation of the company's circumstances and potentially facilitating a more structured recovery plan. While creditors, directors, and floating charge holders have roles in the insolvency process, their powers are limited compared to that of the court. Creditors can file a petition for administration, and directors can also initiate the process, but the ultimate authority lies with the court to formally appoint an administrator. This appointment can also include considerations for broader issues, such as ensuring that the interests of all parties involved are weighed and managed appropriately.