Business Process Australian Securities and Investments Commission

Question: Discuss about the Business Process for Australian Securities and Investments Commission. Answer: Introduction As stated by Kratz and Schneborn (2015), Liquidation is the process, which takes places when a company fails to resolve the creditors, which leads to the winding up of the business process. The process takes place when a registered liquidator has been appointed for the purpose of the conduction of the winding up of the business activities followed by the liquidation of the assets. The three most common forms of the liquidation of the Australian insolvency procedure include liquidation, receivership and voluntary administration. The Australian securities the investment commission are responsible for the tracking of the informational sheets on the insolvency issues. The tracking procedure is done based on both number of insolvency appointments recognized for a particular period and companies, which have entered into the external business administration for the first time (Asic.gov.au. 2016). The report contributes to the different types of the findings, which are related to the ethics and the governance stating the reason for the financial stress of the companies. For the purpose of the study, three companies have been selected namely One.Tel, HIH Insurance and ABC Learning. In order to examine the collapse of the companys one needs to understand the conceptualization of corporate governance. Corporate governance is the way by which the contributors of the finance in the organization assure of getting a return in the investment. The six principles identified for the purpose of good governance includes (1)existence of a sound control system for the control activities, (2) Provision of delivering timely and quality information to the board of directors. Thirdly, (3) having a balance between the existing members and executive directors, (4) Division and specialization of responsibilities between CEO and the board chair, (5) Maintaining a sound financial Statement and (6) Fair and transparent procedure of the appointment of the directors (Tricker 2015). One Tel Phone Company The company is known to be one of the pioneering Australia company in the year 2001.Even during its collapse the company maintained its rank as the fourth largest telecommunications with more than two million customers operating in eight different companies. During the collapse of the company, it was observed to have annual sales of over AUD $ 653 million. The collapse of the company was itself a shock to Australia (Sexton 2016). Events that led to the liquidation of the company The main events that led to the collapse for the company has been observed due to the deficiencies in the corporate governance practices It was observed that the two chief executive officers had excessive influence on the board of directors to such an extent that the Onetel never had a regular designated Chairman to control over the operation of the company. The executive member and the CEO of the company rather acted as an adhoc member of the company, which took the operation of the company to degrade (Longdog.com.au. 2016). Role of ethics and Governance in analyzing the financial stress The role of the ethics is seen by the fact that the non-executive directors of the company was inadequate to monitor the oversight of the management which had its further effect on the composition of the audit, remuneration and the corporate governance policies of the company. It was further observed that the various types of the corporate governance practices failed in terms of the executive compensation, quality of the financial reporting and composition of the board members (Carnegie and OConnell 2014). Rationale for stating liability as the major factor for the liquidation The collapse of the company was also due to the fact, that the company was rational enough to declare fair reporting of the financial transactions. This is evident by the analysis of the annual report of the company in the year 1998, 1999 and 2000 before it was declared defunct in the year 2001. The trial balance and spreadsheets of the company clearly reported on the ageing debtors and the creditors, non-listed cheques and the reports, which are to be billed in the future. The reason for the lower quality of the earnings was observed due to higher accrual components in the earnings of the company with respect to the competitors with a considerably lower size. For example in the year 1998 and 1999, Onetel declared positive earnings due to the big positive accruals which amounted to more than 17% and the total of 6% of the total assets. On the contrary, competitors like Hutchison and Optus depicted a negative accrual. In the year 1998, the company made a declaration clearly stating that it does not maintain intangibles in the financial, statements but in the year 1999 the company was observed to change its policy related to the deferred expenditures. The past cost of the establishment of the company was capitalized for the purpose of the amortization, which did not exceed three years (Clarke and Dean 2014). HIH Insurance Company The HIH insurance group of the companies was observed to be one of Australia most prominent insurance companies. The company was observed to be liquidated with a loss amounting to AU$ 3 billion to AU$ 5 billion. The collapse of the company resulted incumbent in the Liberal Federal Government establishing a Royal commission (RC) which led to the investigation for the failure of the company (Healy 2013). Events that led to the liquidation of the company HIH insurance company was observed to collapse for maintenance of a conservative corporate culture which depicted in the several types of the deficiencies, which highlighted on the ineffectiveness in the maintenance of the corporate governance. This was further shown by the ineffectiveness of the CEO of the companies who were observed to be dominating in nature and involved in several types of the high-risk practices which were not suitable in the competitive markets The HIH was further observed to be lacking board of directors to exercise the independent functions. Among the eleven directors, three of the directors were observed to be former partners with the companys auditors. As per the statement given by the commissioner of RC Mr. Justice Owen, the primary reason for the collapse was observed due to the poor systems, vanity, poor monitoring of the activities and the poorly managed systems and not due to systematic fraud (Damiani et al. 2015). Role of ethics and Governance in analyzing the financial stress In several instances the corporate governance policies of the company was observed to be aggressive in terms of the acquisition strategy. The policy of the growth- at- all- costs and the attitude of the never declaring the bad news resulted in the conflict between the profit maximization and responsive ethics and corporate governance policies. In several instances, the directors of the company were observed to have breached the responsibilities, the various types of the duties stated under the corporations Act 2001, and they were further banned from the involvement in the activities of the company, which resulted in severe amount of the financial loss (Betta 2016). Rationale for stating liability as the major factor for the liquidation As per the report published by the company in the year 2001, it was observed that the liquidators of the company publicly declared the company was having a total deficiency of more than 4 billion. The company was observed to have a total amount of $8 billion of assets, however during the liquidation, the company was observed to offset its debt-laden assets and the insurance claims against the company left the company with a total amount of net assets of $ 133 m. In the year 2001, the Board of Directors decided to appoint provisional liquidator to take control of the different type of the HIH activities with more than 17 of the entities controlled by the company. On the same instance, the company was set to announce the financial result of the first half of the Financial Year. Once the rumor of loss was identified by the company delayed the information of the loss although the company was estimated to incur a total loss of more than $ 800 million which led to its liquidation (Gannon 2 014). ABC Learning Company ABC, based in Ashgrove, Brisbane, Queensland, was once known for its quality childhood education services. Goodstart Early Learning bought the company in the year 2009 and it was found to be defunct by the year 2010. The company was to operate more than 650 early childhood centers by the year 2005. The collapse of the company is an example of the outcomes of ignoring the basics of fundamental accounting (Wessels, B., 2013). Events that led to the liquidation of the company According to AML et al. (2015), the major events, which led to the liquidation of the company, included dishonesty in the business judgments, misleading of the market and breaching of section 180 under the corporations Act 2001, which is related to care and diligence of the directors and several other officers of the company. The company was further recognized to improperly project the revenues and non-focus in the core business decisions even duringthe growth phase of the company. The company was further charged with various types fthe issues related to the mal practices in the accounting of the company (McLean 2015). Role of ethics and Governance in analyzing the financial stress The failure of the corporate governance, which led to the demise of the company, was observed in the accounting practices and ethics. The collapse of the company was evident with the irregularities in the different types of the regulators, auditors, executives and accountants. From the very beginning of the company, ABC Learning had received several redresses relating to provision for childcare and several other warnings. The mergers and policies also led to the downfall of the company especially in the year 2005. The aggressive expansion policies related to the outsourcing of the childcare services led to the downfall in the existing policies of the company and this led to the downfall of ABC Learning (Poschmann 2014). Rationale for stating liability as the major factor for the liquidation In the year 2006, the company was observed to be trading in the securities at $ 8.60 and was operational in one of the five childcare centers across Australia. With less than passing of two years the shares of the ABC Learning were worth only 54 cents and the ownership of the company was transferred to the hands of the administrators. In the same year the market capitalization of the company was also observed to drop from $ 4.1B to $ 296 m. In the following year, the profit of the company reduced by 42% and ABC Learning incurred debt amounting to $ 1.8 Billion (Rossand Tinker 2012). Conclusion The best practice related to the corporate governance is important for the purpose of maintaining a decent financial performance. The aforementioned cases of the three companys facilities the important message of complying corporate governance is more crucial than having tick-the-box guidelines. The fundamental issues at HIH, OneTel and ABC Learning shared common myriad of problems. This included inefficient corporate governance policies, poor auditing practices, aggressive financial reporting, unsustainable business strategies, unsettled related party transactions, excessive management compensations and inefficient management of working capital of all the aforementioned companies. The root cause of the problems was also observed due to low returns from the business and the non-settlement of the capital to sustain the future liabilities pertaining to the business. Moreover, the various types of the discussed problems were exaggerated due to the failure of the management to cope up with the assignment of the respective duties to the board of directors of the company. In several occasions, the problems were stated due to the improper monitoring and poor diligence factors which led to the poor management of the operation of the company. 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