Section A

What is the primary purpose of an Administration order under the Insolvency Act 1986?

Answer options:

To immediately liquidate the company's assets and distribute the proceeds to creditors.

To rescue the company as a going concern.

To investigate the conduct of the directors for fraudulent trading.

To allow secured creditors to seize their specific assets without court interference.

How to approach this question

Identify the statutory hierarchy of objectives for an administrator as set out in Schedule B1 of the Insolvency Act 1986.

Full Answer

B.To rescue the company as a going concern.✓ Correct

The primary objective of administration is to rescue the company as a going concern. If that is not reasonably practicable, the secondary objective is to achieve a better result for the company's creditors as a whole than would be likely if the company were wound up.

Common mistakes

Confusing administration with liquidation (winding up).

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Practice the full ACCA LW — Corporate and Business Law Practice Exam 6

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