Medium2 marksMultiple Choice
ACCA · Question 22 · Corporate and Business Law
Under Schedule B1 of the Insolvency Act 1986, an administrator must perform their functions with the objective of rescuing the company as a going concern. If this primary objective is not reasonably practicable, what is the administrator's secondary objective?
Under Schedule B1 of the Insolvency Act 1986, an administrator must perform their functions with the objective of rescuing the company as a going concern. If this primary objective is not reasonably practicable, what is the administrator's secondary objective?
Answer options:
A.
Realising property in order to make a distribution to one or more secured or preferential creditors.
B.
Achieving a better result for the company's creditors as a whole than would be likely if the company were wound up.
C.
Investigating the conduct of the directors for fraudulent trading.
D.
Immediately selling the company's assets to the highest bidder.
How to approach this question
Recall the hierarchy of objectives for an administrator set out in Schedule B1 of the Insolvency Act 1986.
Full Answer
B.Achieving a better result for the company's creditors as a whole than would be likely if the company were wound up.✓ Correct
Paragraph 3 of Schedule B1 to the Insolvency Act 1986 sets out a strict hierarchy of objectives for an administrator: 1) Rescue the company as a going concern. 2) If that is not reasonably practicable, achieve a better result for the company's creditors as a whole than would be likely in a winding up. 3) If that is not practicable, realise property to make a distribution to secured or preferential creditors.
Common mistakes
Confusing the secondary objective (better result for all creditors) with the tertiary objective (paying secured/preferential creditors).
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