Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following cannot appoint an administrator directly?

1. A creditor who is owed £800

2. The company directors

3. Secured creditors

4. Shareholders of the company

The correct answer is: A creditor who is owed £800

The option indicating a creditor who is owed £800 cannot appoint an administrator directly is accurate because of the legal framework surrounding the appointment of administrators in insolvency proceedings. In the context of corporate insolvency, certain stakeholders have specific rights under legislation like the Insolvency Act. Generally, the power to appoint an administrator is typically reserved for certain parties, particularly those with a significant interest in the company's financial affairs. Company directors have the authority to initiate the administration process as it is typically a strategic decision to help rescue a company facing financial difficulties. Secured creditors, who have a legal claim over specific assets of the company, may also have the right to appoint an administrator when a company is in distress to protect their interests. Shareholders can also exercise influence in certain situations regarding the appointment of administrators, especially if they hold a significant interest in the decision-making process. In contrast, a creditor owed £800 does not possess sufficient authority or a significant stake in the company to directly appoint an administrator. The threshold for direct appointment typically requires either a higher level of claim or the rights afforded to secured creditors or stakeholders like directors and shareholders. Thus, the nature and amount of the debt owed to this creditor render them without the requisite power to initiate an administrator's