ACCA LW · Chapter 11 · Question 8 of 10
Which of the following is an effect of a company entering administration?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A moratorium arises, so that creditors generally cannot enforce security or begin legal proceedings against the company without consent of the administrator or the court
Explanation
A key feature of administration is the statutory moratorium, which protects the company from creditor action while the administrator pursues the statutory purpose. The administrator takes over management and the directors' powers can be exercised only with the administrator's consent. Contracts and employment are not automatically terminated by entering administration.
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