Liquidation: Real Life Examples of Prominent Organizations

RUNNING HEAD: ACCOUNTING
Liquidation

Accounting 2
Executive Summary
The report discusses about the liquidation concept by giving real life examples of the prominent
organizations that went into liquidation in recent years. It highlights the facts that many
companies have been liquidate because of not meeting their financial obligations. The well
known examples given by the report are of ABC Learning, HIH Insurance and One-Tel
Company. It discusses and explains the actions and practices that led to the winding up of such
big Australian organizations. Further, it provides insights into the listing rules and code of ethics
required to be followed by professional accountants. Apart from this, the major factor
contributing to liquidations has also been explained in this report.

Accounting 3
Contents
Introduction.................................................................................................................................................4
Situations that led to liquidation..................................................................................................................5
ABC Learning.........................................................................................................................................5
HIH Insurance.........................................................................................................................................6
One.Tel....................................................................................................................................................6
Code of Ethics.............................................................................................................................................7
Fundamental code of ethics.....................................................................................................................7
ASIC – Listing rules....................................................................................................................................9
Liabilities - Major contributing factor.........................................................................................................9
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11

Accounting 4
Introduction
Liquidation is defined as a procedure of eliminating the business activities and winding up its
operations by selling out the assets to the interested parties is known as liquidation. In simpler
terms, it means the removal of a company’s existence due to its insolvency and poor financial
position. Generally, an organization becomes insolvent when it is not able to meet its financial
obligations or liabilities on time (Khan and Williamson, 2016). However, the main objective of
every firm is to operate its business for long run and experience the growth at constant rate. In
pursuit of achieving such goal, every company hires competent staff and apply effective
strategies but somehow such plans prove to be ineffective. Being operating in a competitive and
uncertain environment, some conditions and circumstances forces them to shut their business.
Such events or situations ultimately led to the liquidation of the organization. After the debacle
of the operations, the assets of the company are then distributed to its shareholders and creditors.
There can be many reasons for which a company shut down its operations such as poor
management of resources, failure in paying off the liabilities and many more. Mainly, an
imbalance and mismanagement of company’s assets and resources results in the increase unpaid
liabilities (Phillips, 2013). Moreover, if the same continues for the long run, the financial
obligations would pile up and as a result the company has to stop its operations and goes into
liquidation. Apart from this, the behaviour and attitude on part of employees and management
also contributes to the winding up of the entity. The events like mergers, unnecessary segments,
inadequate working capital, and inappropriate business model also bring the firm to an end.
Sometimes, the organization eliminates its activities because of the accomplishment of the
objective for which it was incorporated. Other reasons like practicing the illegal activities and
some legal restrictions also bring up the situation of liquidation.