Liquidation of Three Companies: ABC Learning, HIH Insurance and One.Tel Phone Company

REPORT Student by (Name) Professor’s (Name) College Course Date Executive summary This report is commissioned to determine the events that could have led to the liquidation of three companies namely ABC Learning, HIH insurance and One.Tel phone company and discuss the ethics and governance to explain the company’s financial stress majoring in liabilities ass the cause of this company’s liquidation where applicable. This report considers several stakeholders of the organizations above and their governance in trying to look for possibleerrors

Report 1
REPORT
Student by (Name)
Professor’s (Name)
College
Course
Date

Report 2
Executive summary
This report is commissioned to determine the events that could have led to the
liquidation of three companies namely ABC Learning, HIH insurance and One.Tel phone
company and discuss the ethics and governance to explain the company’s financial stress
majoring in liabilities ass the cause of this company’s liquidation where applicable.
This report considers several stakeholders of the organizations above and their
governance in trying to look for possible errors; this stakeholder includes their customers,
management, and board of directors, the employees and the founders which help to determine
the source of problems within the organization.
The report presents its findings after analysis from various reliable sources such as the
journals, articles, Google database and electronic books which determine, discuss, comment
and reviews the performance of this company’s in trying to determine the cause of their failure
as key members in their area of existence. Generally, this report has shown that through the
liquidation of this companies was primarily attributed to by liabilities especially debt; other
ethical and governance factors have contributed to the issues that eventually led to the demise
of this companies.
The only limitation to this report is that it is difficult to determine the accuracy of some
information recognizing that some authors of the articles could have been biased in their
analysis and judgments and since most of them are on the internet they could have been
subject to change.

Report 3
Table of Contents
Executive summary..........................................................................................................................2
Introduction.....................................................................................................................................4
Finding.............................................................................................................................................5
ABC Learning................................................................................................................................5
HIH Insurance...............................................................................................................................5
One.Tel Phone Company.............................................................................................................6
Analysis............................................................................................................................................6
ABC Learning....................................................................................................................................6
HIH Insurance...............................................................................................................................7
One.Tel Phone Company.............................................................................................................7
Recommendation............................................................................................................................8
Conclusion........................................................................................................................................9
Reference.......................................................................................................................................10

Report 4
Introduction
ABC learning was a developmental learning organization founded in the year 1988 in
Brisbane; its primary role was the development of learning centers across Australia centers
explicitly that provided Early Childhood Education (ECD). Its performance was steady and
progressive as seen in its encroachment into countries like Australia, US and New Zealand and
its labeling as the most significant childcare provider until in March 2008 when it sold 60% of its
shares to Morgan Stanley in payment of its accumulated debt (Revans 2017).
HIH Insurance was an insurance company founded in the year 1968 by Ray Williams and
Patyne Michael. It was also known as ‘M W Payne Underwriting Agency Pty limited. It was
under the ownership of CE Health PLC in 1971 before transferring its holdings to CE Health
International Holdings in 1992. It progressed very well even after changing its name to HIH
Winterthur in the year 1996 when Winterthur Swiss purchased its holdings. It bought a lot of
companies in Australia, New Zealand, Argentina and the United States. Even though it was
mentioned as the most significant insurance company with an asset worth $8 billion It collapsed
in the year 2001 after stumbling when it compensated its debts reducing its net worth to $133
million.
One.Tel Telecommunication Company was started in the year 1995 in Sydney Australia
by Jodee Rich and Brad Keeling. It was receiving financial assistance from Murdoch and Packer
family. In its beginning, it majored in the production of telephony products such as cables,
internet service providers, and mobile phones. It later expanded to the establishment of a
network (1998). It then launched its next-generation network (2000). This company faired on
well as evident in the increase of its network provision and expansion to other countries in
Europe until in the year 2001. It collapsed though disputes continued over in the courts for
more than ten years.
This report will discuss the ethics and governance in explaining these company’s
financial stress and collapse majorly focusing on liabilities as the core of liquidation.
Finding
ABC Learning
ABC learning was an organization initiated by Eddy Groves and his wife in Queensland
Australia and with the help of the government, ABC expanded further in childcare development
sector. In the year 2000, it had already expanded to have 31 centers.
In 2001 ABC learning searched for funds to further their expansion thus it was floated on
the Australian stock exchange. In the year 2002 up to 2006, it was amongst the best-performing
companies with profit of 1,100% with continuously increasing shares, this attracted a lot of
shareholders while other business owners were not happy. With this profits, it began to expand
further into countries like New Zealand, China, Canada, UK, Indonesia, Philistines and Hong
Kong. This made it the largest childcare provider in Australia with approximately 2,300 centers.
During this time, issues arose (Revans 2017). Firstly, the fact that the CEO lived a lavish lifestyle

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and in 2006vEddy Groves was named as the wealthiest man in the country. This was as a result
of the business. Another issue was that during the takeovers from the other organizations they
used for expansion they reduced qualified staff and the best equipment’s for cheaper capital,
they also did away with the budget of its takeovers during expansion (Li, Kuo, Ho, Kao and Tai
2015).
The fall of ABC Learning in 2008 when its net profit dropped by 40% as compared to
2007, the price of its shares followed by depreciating by 65% which led to it starting to look
onto loans from the management and directors. To deal with this, it made a suddenly forced
sale of its share in the US which was 60%
In 2008 as its shares, a profit continued to reduce it was suspended from the operation,
and after some time its CEO Eddy resigned leaving ABC in receivership in poor condition. After
some time, ABC learning was sold to an enterprise of not for profit charities.
HIH Insurance
HIH insurance was an insurance company that provided the following types of
insurance: personal domestic insurance, workers compensation insurance, small business, rural
and commercial insurance, and travel on insurance, builders warranty, corporate insurance and
lastly sporting insurance (Damiani, Bourne and Foo 2015).
HIH insurance performance was steady and positive for quite a long time hence the
dissolution came as a surprise to everyone in the year 2001. Before this in the year 1995, it
acquired CIC insurance then Utilities (1996). It also acquired Colonial Mutual General Insurance.
In the year 1999, it won the $300 million bid from FAI insurance.
Things started going wrong in the year 1998 when there was sudden fall in net profit to
$37.6 million. This is a drop estimated to be 39%. HIH continued to claim the damages for this.
However, in the year 1999, it admitted that in acquiring the FAI insurance, it had paid more
than it should have. In the year 2000, the analyst foresaw the possibilities of liquidation, and he
proposed an increase in the capital requirement for insurers. HIH in a desperate move sold its
shares to Allianz a German insurance company before Ray William announced his retirement,
this is followed by retirement from Rodney Aler from the board. HIH goes to provisional
liquidation with losses that could amount to $800 million.
Shortly after its collapse, documents appeared showing its contracts not honored. Its
claims were also not paid. Some of the reasons why it collapsed include the inability to pay its
debt, poor financial position than the way it is shown in balance sheet. Also, most auditors
looked at the collapse of HIH Company as a way of showing the impact of an auditor in an
organization. Specifically, their role in ensuring the credibility of an institution. Even though
auditors usually are judged for not foreseeing the collapse and warning, the management, in
this case, the auditor saw and warned the administration. The audit profession therefore
significantly uses this example in addressing issues such as legal liabilities and audit
independency.
One.Tel Phone Company
One.Tel was one of the largest telecommunication industry in Australia established by
Jodee Rich and Brad Keeling with high profile banker form the Packer and Murdoch family. This
company grew with the constant increase in net profit and expansion into other areas such as
the US and New Zealand. In its development, it had to buy other companies. The company grew

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from the provision of telecommunication devices such phones and wires to provision of the
network with the help of other partners to reaching more than two million customers
The problems of One.Tel started with the additional purchase of Australian spectrum
licenses where the Packer and Murdoch family provided $280 million. In the year 2000, it
reported a risk of $290 million with the share price dropping below $1 this loss has also been
continued to by the remuneration of Keeling and Richwood both received a basic salary
$560,000 and a loss of $6.9 million
There were attempts to revive the company by two originations by News limited and
PBL that were willing to produce $132 million, but they backed out when reports further
emerged showing the failure of the company in handling its finance.
When researchers were conducted considering the issue of HIH insurance, it could be
seen that there was a problem with the audit quality, management scrutiny, management
communication, poor governance, financial reporting quality and the relationship between pay
and performance of an individual.
Analysis
ABC Learning
ABC learning failure can be attributed to poor governance or management majorly by
the founder Eddy Groves, some of this issue is:
Poor accounting standards: the to the availability of a lot of money Eddy Groves forgot
to keep financial records of all his activities this entailed recklessness in handling economic
issues in the organization this is seen when the auditors were not able to have financial records
in Tehri attempt to analyze the institution (Sumsion 2012).
Poor corporate governance: Eddy groves focus was majorly not on corporate
governance but on self-interest this thought is seen in some of his reckless decisions that were
not supported by the board of management (Penn 2011).
Entrepreneur vs. management: Eddy Grove be an outstanding entrepreneur a
preferably not a good manager and it seemed like people assumed that because he was a good
entrepreneur, he would also be a good manager.
Too fast and too expensive: In business, risk should be taken. However, in the case of
ABC, it expanded very fast with movement into other countries sending a lot to acquire the
companies it required for expansion. Between 2001 and 2005, the company kept on expanding
and in this process. It forgot the need of managing the available branches it had rather than just
growing.
HIH Insurance
Even before the collapse of HIH, the government had announced the need for insurance
company changing their policies. The collapse of HH insurance is mainly attributed to the
company not being able to pay its debts. Its final failure was characterized with the paying of a
deb that reduced its worth from having an asset worth billions to millions. With the number of
branches that were severally available not only in Australia but also in the countries, it
encroached it could not manage them with just $133 million recognizing expenses such as
remuneration, tax, and other expenses (Brennan, Cass, Himmelweit and Szebehely 2012).
Same to ABC learning this company also basked in its glory and sought to expand rapidly
forgetting the need for management over the need for expansionist, it should be noted that
due to liabilities the open was not able to have money to continue managing the company.

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Although the primary cause of HIH insurance was due to the debt, there were also issues to do
with the overseas element of the business wherein some reasons there were losses.
One.Tel Phone Company
This company was the fourth largest at the time of its collapse. After the finding, it can
be noted that some of the issues are uncontrolled growth, strategic mistakes, and failed
expectations. The wrong pricing polyhe company failure was because of poor governance by
individuals who though mainly of themselves by have high salaries and benefit stop themselves,
this challenges the ethics of the organization in that they were taking advantage of their
position to acquire wealth for themselves (Lessambo 2014).
The company’s rise was also very quick leaving an out issues that were not taken care of
within the organization resulting question to do with problems in internal control the company.
There was an abysmal pay to performance link and form the example of the
management who played a lot to themselves it can be concluded this same issue could have
been happening in all sectors nether organization where pay was not because of personae
which made it biased (Monem 2011).
Recommendation
This recommendation will apply to all the company since their problems are attributed
to by similar issues which are poor governance, huge liabilities as compared to assets and too
fast expansions.
 First, I would recommend that the government could have been involved in the
rejuvenation of the organizations even after they collapsed because they provide
jobs to the citizens. The government did not get affected by the provision of
funds or any support
 Another issue is that the companies should regulate their growth as an
organization it’s not good that the company goes for quick growth and vast
movement forgetting to manage its internal control
 Also, in dealing with issues of poor governance, the individuals in a company
should not assume that all entrepreneurs are managers since the cases of
collapse happened with the entrepreneurs managing
 Companies should ensure that the assets in an organization are greater than the
labilities this case this company spent a lot in liabilities when expanding rather
than in the management of the organization.
 Companies should also focus on the use of the available standards by Australia
board rather than ignoring the standards there is a professional code of ethics
that should be followed ad I the case that they aren’t there are such
consequences.
Conclusion
In conclusion, the liquidation of the three companies is due to governance,
overspending on liability and poor ethical issues. When all this happened, Australia had already
had standards of ethics and professional conduct yet this companies did not adhere to this rule,
companies should, therefore, focus on strict performance according to the standards and
finding the best leaders in its operation who must not be an entrepreneur.

Report 8
Reference
Brennan, D., Cass, B., Himmelweit, S. and Szebehely, M., 2012. The marketisation of care:
Rationales and consequences in Nordic and liberal care regimes. Journal of European Social
Policy, 22(4), pp.377-391.
Li, T.H.S., Kuo, P.H., Ho, Y.F., Kao, M.C. and Tai, L.H., 2015. A Biped Gait Learning Algorithm for
Humanoid Robots Based on Environmental Impact Assessed Artificial Bee Colony. IEEE
Access, 3, pp.13-26.
Damiani, C., Bourne, N. and Foo, M., 2015. The HIH claims support scheme. Economic Round-
up, (1), p.37.
Lessambo, F.I., 2014. Corporate Governance, Accounting and Auditing Scandals. In The
International Corporate Governance System (pp. 244-263). Palgrave Macmillan, London.
Lloyd, Eva, and Helen Penn. Childcare markets, edited by Eva Lloyd, and Helen Penn, Policy
Press, 2012. ProQuest eBook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?
docID=981514.http://www.hih.com.au/
Monem, R., 2011. The One. Tel collapse: lessons for corporate governance. Australian
Accounting Review, 21(4), pp.340-351.
Penn, H., 2011. Gambling on the market: The role of for-profit provision in early childhood
education and care. Journal of Early Childhood Research, 9(2), pp.150-161.
Revans, R., 2017. ABC of action learning. Routledge.
Sumsion, J., 2012. ABC Learning and Australian early education and care: a retrospective ethical
audit of a radical experiment. Childcare markets local and global: can they deliver an equitable
service, pp.209-225.