Reasons for Liquidation of Companies-Free-Samples for Students

The three Australian organizations that are focused on this paper and they enjoy the advantage of being increasingly valued organizations of their times. This is because of their insolvency because of which liquidation of their assets took place on poor governance along ith ethical grounds. The Australian company’s incudes HIH Learnings, ABC Learnings and OneTel Company that paid the expenses of following a wrong path for maximizing value (Anderson 2016).

Liquidation of ABC Learning

ABC Learning has its business operation within Australia along with other
parts of the world with a service of early childhood education. Eddy Groves is observed to be the founder of the company who started it with opening few business units and went for strategic acquisition quest. This is for the reason that the founder believed in following aggressive growth strategy that can decreased the intense competition from the industry. For this reason, the management’s important motive was focused on acquiring most of the rival organizations that caused threat to the ABC Learnings. At the time of quest to acquire companies, the organization considered registering decline in its profits at the end of mid-2017 (Bartlett 2015). It was eventually clarified that the organization was not in a better position to adhere with the liabilities and went into the situation of receivership.

The management of the organization was dragged into certain legal proceedings in the court because of the fact that it was alleged with tampering management of its earnings that indicates positive image of the company through hiding the actual value. The management of ABC Learning Company was alleged to overstate their profitability on order to indicate the bright side of the organizations financial position (Betta 2016). This can persuade the investors to increase investment within the organization. It was also observed that the owner of the company was held responsible for its failure who was the suspect who was involved in misguiding the company’s shareholders through not indicating the real situation of its financial situation. The finance team also are the owners of the company regarding the consequences that was neglected by them (Saravanan and Thakkar 2018). The debt of the company drastically increased through its constant acquisition strategy and the financial statements also encompass government subsidy that was considered within future profit. This served as an aspect that overstated company profits in the viewpoint of shareholders. In addition, the owner considered implementation of their ideas within their business decisions that not just liquidated the organization but also impacted confidence of shareholders (Bhadily and Hosie 2016).

Liquidation of HIH Insurance

Ray Williams and Michael Payne are observed to be the founders of HIH Insurance company in the year 1968 and at that time it was referred as M W Payne Underwriting Agency Pty Ltd. Conversely, the company was also acquired by other organization referred as CE Health PLC with Ray Williams got appointed as one of the board members. In the later years, the name of the company was changed into HIH Winterthur. Same as the previous company, HIH Insurance also believed in the company growth by means of aggressive acquisition and acquired a lot of its business rivals in Australia as well as all over the world (Doyle 2017). One of the major competitor of HIH Insurance was FAI Insurance that was acquired by the company in the year 1999. Another partner of the organization Winterthur Swiss sold most of their shares to public that gave the organization its name HIH Insurance.

As the company is considered as one of the most renowned and reliable organization, HIH Insurance failed in the year 2011 in March. The organization has a large asset base and an increased focus indicated that the company’s liabilities were increasing than its assets that led to its insolvency. The company is indicated to acquire several failed businesses at prices higher in comparison to its real worth (Jackson 2015). In addition, it is also indicated that HIH Insurance served its consumers at lower prices than its competitors that finally indicated that it tapped within a market that was not totally understood by it. It was clarified that the company compromised its ethics and governance for attaining business growth and hid its deficits through managing its earnings. It was involved in assets overstatement along with liabilities understatement along with several other debts which deceived the company’s stakeholders (Kumar 2017).

Liquidation of OneTel Company

OneTel was positioned as an organization of high values that initiated its business operations in the year 1995 within Australia through entering into an agreement with Optus. As per such agreement, the company was involved in using the network services offered by Optus in order to serve its consumers in a better manner (Keay 2015). Conversely, in order to enhance the existing base of consumers, OneTel Company started providing services at a cheaper price than its competitors. Such act of the company has resulted to cause a dispute with the service provider of the company that is Optus. After the end of the agreement with Optus, OneTel got involved in an agreement with the company GlobalOne and resumed its spare on the company growth. The company also launched an international growth strategy for expanding its business outside the Australian as well as making an international presence (Foreman 2014). In order to maintain a competitive position over its major business rivals, OneTel acquired a lot of spectrums within Australia in order to enhance the network of the company. Considering the same, the company raised fund from few of its investors as they expect to attain advantages from the same.

In such scenario, it can also be evidenced that OneTel spend a large sum of money in its acquisition strategy and went into an agreement in order to offer consumer services at a cheaper cost than its business rivals with an intention of attracting a huge consumer base. It was also evidenced that OneTel paid ten times fir its license and also got involved in several other similar agreements (Foreman 2014). In consequence of the same, it started observing losses from the year 2000 and even reported availability of low cost. Considerably in the year 1991 the creditors along with the shareholders voted in the favor to liquidate the organization.

Financial Stress Explained through Ethics and Governance

Among the most important aspects of the company is deemed to be its business ethics that centers on normal along with the guidelines that is required to be followed by the organization. This is actually the code of conduct that is required by an organization in dealing with all its stakeholders. This is also deemed as among the major support of the company’s governance process that also ensured about the stability of the company in the long term. This gradually facilitates in enhancing the transparency in the system along with supervising the financial movement (Doyle 2017).

The personal opinion of any individual can be deemed as individual ethics but the ethics of the companies such as ABC Learning, HIH Insurance and OneTel Company is guided by the views of people that holds importance within the company and all the members of the organization are bound to follow the same. Ethical considerations liable to be followed by these three companies observed to be different based on organization that might also get indulge in certain illegal practices in case the corporate governance is weak. The ethical morals of an accountant are of great importance when it comes to financial reporting of these companies. They are anticipated to reveal the fair value of these companies of its stakeholders (Damiani, Bourne and Foo 2015). The financial situation of the organization serves as a factor on the basis of which the investors make vital decision and for this reason it requires to be reliable along with the accountants those prepared it.

Ethics and Governance Issues in ABC Learning136

ABC is observed to get involved in non-compliance with ethics and governance as it was involved in manipulating its financials and presented the same in a manner that it reflected the positive nature of the organization. The company is observed to have a net asset of 4.5bn with obligation of $1.8bn and on additional analysis it has been gathered that the organization had most of its assets that were intangible in nature and the intangible assets of the company were hardly attempting to make $1 bn (Chow 2018). Considering the spree of the company’s acquisition, ABC Learning was observed to invest a great amount in opening new centers along with acquiring several organizations in the same business.

Ethics and Governance Issues in HIH Insurance

Starting from a small organization, HIH Insurance observed an increased growth in its early business period. The organization started investing an increased amount within a freely competitive market along with offering service at a decreased cost. Over the past few years, the company acquired more than 200 subsidiaries all through the world and also merged with troublesome businesses. The company also acquired its largest competitor FAI Insurance that pays $300mn and the actual value of this business is observed to be $100mn (Clift 2018). At the end of the year 2000, HIH Insurance Company had attained an asset base of more than $8.1bn. This included a high leverage debt along with the liabilities related with insurance because of which this organization went into liquidation with an anticipated loss of around $5bn (McCormack 2016).

Ethics and Governance Issues in OneTel Company

An aggressive acquisition strategy of the organization turned out to be a poor decision. It attained a culture of growth at all the cost that has its own consequences. Though at the time of the company failure it was observed to attain an annual sale of $653mn but was low on profit and it also faced high expenses to experience. The company has also experienced constant decrease in its asset returns along ith its profits (Foreman 2014). The cashflow of the company is also deemed to be positive in the beginning and through aggressively acquiring other business. OneTel Company also entered within the agreements had generated a cash crunch. The organization ahs also acquired the license of telecommunications that is ten times higher in comparison to its competitors. For this reason, with having an increased liability along with decreased income, the organization turned out to be insolvent that later takes place on shareholders votes.

Conclusion

The main objective of this paper was to explain the failure of some Australian renowned companies made sure of faulty governance and ethics. It was gathered from the report that the three Australian organizations that are focused on this paper and they enjoy the advantage of being increasingly valued organizations of their times. This is because of their insolvency because of which liquidation of their assets took place on poor governance along with ethical grounds. Moreover, the company compromised its ethics and governance for attaining business growth and hid its deficits through managing its earnings. It was involved in assets overstatement along with liabilities understatement along with several other debts which deceived the company’s stakeholders.

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