Administration is designed to do what primary objective?

Administration is designed to do what primary objective?

• A. To liquidate the company immediately
• B. To rescue a company in financial difficulty
• C. To create a restructuring plan that does not involve creditors
• D. To appoint a new board of directors

Answer: (B)

The main aim of administration is to rescue a company in financial difficulty, giving it breathing space to restructure and continue trading. The process provides a formal moratorium that stops creditors taking action while a plan is developed to save the business as a going concern. If rescue isn’t possible, the next objective is to achieve a better outcome for creditors as a whole than liquidation would deliver. This is achieved by proposing a rescue plan or arranging a sale of the business as a going concern. So, the focus is on keeping the business alive and preserving value, rather than liquidating immediately or changing governance without regard to creditors.

The main aim of administration is to rescue a company in financial difficulty, giving it breathing space to restructure and continue trading. The process provides a formal moratorium that stops creditors taking action while a plan is developed to save the business as a going concern. If rescue isn’t possible, the next objective is to achieve a better outcome for creditors as a whole than liquidation would deliver. This is achieved by proposing a rescue plan or arranging a sale of the business as a going concern. So, the focus is on keeping the business alive and preserving value, rather than liquidating immediately or changing governance without regard to creditors.