ExpertMedium2 marksMultiple Choice
ACCA · Question 58 · Syllabus G: Insolvency law
Scenario: Global Logistics Ltd is facing financial difficulties. It has a fixed charge over its warehouse in favour of Alpha Bank, and a floating charge over its fleet of trucks in favour of Beta Bank. The company owes £50,000 to its employees for unpaid wages. The directors are considering putting the company into administration to rescue it as a going concern.
Who has the power to appoint an administrator out of court?
Scenario: Global Logistics Ltd is facing financial difficulties. It has a fixed charge over its warehouse in favour of Alpha Bank, and a floating charge over its fleet of trucks in favour of Beta Bank. The company owes £50,000 to its employees for unpaid wages. The directors are considering putting the company into administration to rescue it as a going concern.
Who has the power to appoint an administrator out of court?
Answer options:
A.
Only the company or its directors.
B.
Only a qualifying floating charge holder (e.g., Beta Bank).
C.
The company, its directors, or a qualifying floating charge holder.
D.
Unsecured creditors owed more than £750.
How to approach this question
Recall the parties who are legally permitted to use the streamlined 'out of court' administration process.
Full Answer
C.The company, its directors, or a qualifying floating charge holder.✓ Correct
The Enterprise Act 2002 streamlined the administration process. An administrator can be appointed out of court by the company itself (via a shareholder resolution), by the directors (via a board resolution), or by a Qualifying Floating Charge Holder (QFCH) - a lender holding a floating charge over the whole or substantially the whole of the company's property.
Common mistakes
Assuming only a court can appoint an administrator.
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