Investigating The Liquidation Of ABC Learning, HIH Insurance, And One.Tel

ASX Corporate Governance Principles and Rules

Liquidation is a process by which the company brought to an end. Usually the liquidation occurs when a company becomes insolvent. Insolvency refers to the situation, when the company cannot pay its obligation and also unable to meet its day to day requirements. At the end of the company’s operations, the distribution of assets made among the interested parties on the basis of the priority of their claims. This is an initial stage of ending of the company which becomes the winding up and the process of liquidation is not a single day process that goes through the various procedures and events.  These companies went into liquidation as it failed to comply the code of ethics and principles of corporate governance.

• Board of directors and managers are collectively responsible for any legal issues and transparency of the business.
• Company should comply with the all the applicable listing rules and regulation.
• Transparency and ethical code of ethics should be complied to strengthen the busienss functioning.
• Company should follow formal transparency process while appointing and re-appointing the directors in organization.
• Every listed company needs to define clear and concise all the terms, busienss objectives and policies.
• As per the ASX corporate governance principles, company needs to establish the effective corporate governance program
• Management of listed company should perform ethically and align the interest of the society with the organization development (ASX, 2018).

In 1988, ABC learning founded as a childcare centre. At that time the children care centres were considered as an organisation supported by the government subsidies. In 2001, it was listed on Australian Stock Exchange with a market capitalization of A$25 million. By November 2005, ABC had 697 centres throughout the Australia and New Zealand. After that ABC purchased the third largest childcare centre in the United States and had mergers with some other childcare centres, which results into a considerable increase in number of ABC centres (Code of ethics, 2018).

ABC was the listed Organizaiton which was offering the best quality services to client and having market capitalization of AUD $2.5 billion in 2006. Company has increased its debt payment and its entire UK subsidiary and 60 per cent of its US subsidiary. Although the company was famous for its childcare policies but being the monopolist, it started avoiding the safety policies and safety and alleged for the false behaviour and the company found guilty when the allegations got proved.  This resulted to failure of the ASX corporate disclosure listing rules and principles  (ASX, 2018).

HIH Insurance was one of the biggest insurance companies in Australia with the assets of $8 billion. But due to the mismanagement of the company the company has suffered from an adverse series of downfall. However, after the repayment of the debts of the company out of its assets, the company left with the net assets of $133 million. The company was suffering from cost of marginal solvency cost be results into assets deficiency after a small movement in asset value. However, the company has a stable financial condition with $133 million of assets against its entire liabilities, even when it sold its assets. Hence the company couldn’t help itself to protect its existence and it resulted into provisional liquidation. As per the ASX corporate governance principles, company needs to establish the effective corporate governance program. The major reason behind the liquidation of the company was the breaches of civil and criminal laws by the company’s management. It concluded in the provisional liquidation of the company (ASX, 2018).

One Tel was an Australian company and was incorporated in1995. It was the fourth largest telecommunication company in Australia. Company has been serving to more than 2 million customers and operations in eight countries. The company was much focused on youth and had very clear market strategies. The qualitative and quantitative data analysis from various sources shows that One-Tel’s collapse is very significant case of failed expectations, false pricing policies and strategic mistakes. As per the corporate governance ASX principles, company should have given followed equal pricing policies and program.  The failure to the same was even led to the ultimate winding up of the company (Kant, 2017).

Code of ethics	ABC Learning	HIH Insurance	One. Tel
Integrity	ABC learning failed to pay off its debts	It failed to meet its obligation towards its stakeholder.	One Tel and other companies have gone into liquidation as they have failed to pay off its short term and long term debts.
Governance	Failed to meet its applicable liabilities and corporate governance program.	Legal compliance issues.	Failed to establish harmonization in its domestic and international legal compliance.
Transparency	Failed to file its annual report with the reporting authority (Code of ethics, 2018).	The collapse happened due to the management fraud instead of insolvency or bankruptcy. Personnel of company’s management have made manipulations the books of account for their personal benefits. At the result of which, company lost the transparency and ended its business relationships with its business colleagues.	The company was suffering from cost of marginal solvency cost be results into assets deficiency after a small movement in asset value. It hides it from(Code of ethics, 2018). its stakeholders.
Safety and compliance standards	Failure to meet the compliance program.	All the incidents influenced the share prices adversely and after that it all went negative. As the result of this, company was delisted from Australian stock exchange (ASX, 2018).	After failure to comply with the applicable laws,  company was voluntarily liquidated and acquired by the Good Start limited in 2009.
Professionalism	Apart from the bankruptcy, the inadequate working capital, lack of planning, poor marketing and weak financial skills are also the reasons of the liquidation	As per the corporate governance and ethic policies, the management of company should perform ethically and for the interest of the society	The unethical behavior of management brought the One Tel Company to its end

ABC Learning

 There may be several reasons behind liquidation of a business but these two reasons are no more interested and want to leave the business. These reasons are very common in case of bankruptcy and the situation where the business has no enough earning to support itself. The court takes the control over the assets of the company in order to sell them at auction in case of bankruptcy. With the ramified economic changes, there are several companies such as HIH Insurance, One Tel and other companies which have gone into liquidation as they have failed to pay off its short term and long term debts (ASX, 2018).

Sometimes a running business entity decides to close its business or merge its business with other entity. Also the company goes into liquidation on the completion of its objective. The reasons mentioned here above can also be the reasons for the liquidation.

In order to get the clear view and concepts of liquidation, it would be better to study some significant cases. The cases we will discuss further in the report are well known corporate entities, which had an excellent goodwill before its winding up.

Does bad ethics and governance lead to financial stress?

Businesses do not only functions for profit earning but also performs in social and public connection. A company cannot think of its own profit without considering the good faith of society (Babich, Hodyayev, & Uleksin, 2016). As per the corporate governance and ethic policies, the management of company should perform ethically and for the interest of the society. It is deemed for a company that it works adequately for log run without having any closure plan. If a company has done anything inappropriate for profit at the cost of ethics, it would be considered unethical and may results into an end of whole empire (Kant, 2018).

In case of ABC, the company liquidated due to the avoidance of policies and misuse of financial status by its management. The use of cheap techniques, low cost labour and the misuse of government subsidies were the reasons behind the end of the company (Kelly, Brien, & Stuart, 2015).

The unethical behavior of management brought the HIH Insurance to its end. The management of HIH Insurance has performed for their personal benefits and presented the wrong and false data to mislead the investors (Brahmaiah, 2018).

In case of One-Tel’s liquidation, it was an un-expected event for the entire management of the company. It was the result of management fraud. In that case the management of the company misled the shareholders of the company (Khan, & Williamson, 2016).

To meet the day to day requirements, the company needs an adequate finance. During the course of business various liabilities and obligations arise against a business, whether for short term and for long term period (Brahmaiah, 2018). A Company should always possess adequate financial sources to meet its liabilities. When the debts of a company exceeds to its assets, it becomes unable to pay its liabilities. The situation can be called as financial stress or a prior-condition of liquidation. In this kind of situation the interested parties of company i.e. shareholders and creditors want their money back due to the falling down of business (Smith, 2016).

Conclusion

This brings a company to an end. It shows that liabilities have a vital and significant role in the liquidation of the company. The liquidation process of a company ends with the payment to all interested parties of the company. After liquidation the existence of the company ends with the process of winding up. In above discussed case studies, the important factors which influenced the liquidation of the companies were manipulation, greediness, avoidance and carelessness.

References

ASX, (2018), Code of ethics, retrieved from., https://www.asx.com.au/documents/asx-compliance.

/cg_principles_recommendations_with_2010_amendments.pdf

ASX, (2018), Principles and code of ethics, retrieved from https://collegetrack.org/principles-and-code-of-ethics/

Babich, A. S., Hodyayev, S. G., & Uleksin, V. O. (2016). An increase of efficiency of disinfestation is at liquidation of consequences of emergencies by application of bottle aerosol generators. Construction, materials science, mechanical engineering, (93), 151-156.

Brahmaiah, B. (2018). ADR on Unauthorized Liquidation of Futures Positions at the Stock Exchange in India: An Empirical Study. Theoretical Economics Letters, 8(11), 2409.

Brahmaiah, B. (2018). Arbitration on Margin Positions Liquidation at Stock Exchange in India. Theoretical Economics Letters, 8(10), 1701.

Code of ethics, (2018) ASX listing rules, retrieved from https://www.asx.com.au/regulation/rules/asx-listing-rules.htm

Kant, R. (2017). Retrospective Effect of Order of the Winding-Up. Journal for Studies in Management and Planning, 3(13), 482-486.

Kant, R. (2018). A Comparative and Relevant Study Of Circumstances For Winding Up Of Companies Between The Companies Act 1956 & 2013. Journal for Studies in Management and Planning, 4(3), 190-198.

Kelly, R., Brien, E. O., & Stuart, R. (2015). A long-run survival analysis of corporate liquidations in Ireland. Small Business Economics, 44(3), 671-683.

Khan, A., & Williamson, S. (2016). The liquidation of foreign companies in Australia. Australian Restructuring Insolvency & Turnaround Association Journal, 28(2), 38.

Smith, A. D. (2016). A targeted outsider’s right to challenge local winding-up proceedings PricewaterhouseCoopers v Saad Investments Co Ltd 2014 UKPC 35 (10 November 2014), 2014 1 WLR 4482 (PC). Potchefstroom Electronic Law Journal/Potchefstroomse Elektroniese Regsblad, 19(1).