Financial Distress: Liquidation of Companies - ABC, HIH, and One Tel

This report examines the liquidation of companies, focusing on ABC Learning, HIH Insurance, and One Tel Phone Company. It explores the causes of liquidation, including financial reporting issues, faulty corporate governance, and insufficient capital to cover liabilities. The report delves into the ethical and governance collapses within these companies, analyzing the impact of poor management, inadequate oversight, and flawed accounting practices. It highlights the role of liabilities in driving these companies into liquidation, emphasizing the importance of effective liability management. Furthermore, the report provides recommendations for companies to avoid liquidation, such as focusing on key drivers of profitability and developing turnaround strategies. The analysis draws on the failures of these well-established organizations to provide a comprehensive understanding of financial distress and its consequences.

Reference List: LIQUIDATION OF COMPANIES
Factors Resulting in Liquidation of Companies
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LIQUIDATION OF COMPANIES 1
Executive Summary
The present paper plans to clarify the explanation behind which various associations confront the
issue of liquidation. The report will clarify certain components which brought about liquidation
of these organizations alongside expounding parts of morals and administration clarify this
monetary anxiety. Prior to the aggregate disappointment, ABC Learning Company confronted
awesome misfortunes toward the finish of the year that diminished every one of the benefits that
was ever procured by the association. Also, the firm has freed of all the questionable cases for
achieving benefit. The organizations are prescribed to consider a settlement account with every
one of its loan bosses alongside building up an installment design. Such proposal may be
compelling for the association may need to manage less number of leasers.

LIQUIDATION OF COMPANIES 2
Table of Contents
1. Introduction......................................................................................................................3
2. Resulting Causes of Liquidation......................................................................................3
2.1. ABC Learning Company Liquidation Reasons........................................................3
2.2. HIH Insurance Company Liquidation Reasons........................................................3
2.3. One Tel Phone Company Liquidation Reasons........................................................4
3. Governance and Ethics....................................................................................................4
3.1. ABC Learning Company Ethics and Governance Collapse.....................................4
3.2. HIH Insurance Company Ethics and Governance Collapse.....................................4
3.3. One Tel Phone Company Ethics and Governance Collapse.....................................5
4. Company Liquidation from Liabilities............................................................................5
4.1. ABC Learning Company Liquidation from Liabilities............................................5
4.2. HIH Insurance Company Liquidation from Liabilities............................................6
4.3. One Tel Phone Company Liquidation from Liabilities............................................6
5. Recommendations............................................................................................................6
6. Conclusion.......................................................................................................................6
Reference List......................................................................................................................8

LIQUIDATION OF COMPANIES 3
1. Introduction
A company’s liquidation is deemed to serve as a technique of closing down an
organization due to several causes that includes absence of unnecessary fictitious assets
presented within the accounts, visionary management and high debt with less capability to deal
with the same. Constant losses along with inefficient profit planning control over passing years
can lead to liquidation of the company. With the growing years, it is gathered that several well
established organizations faced the issue of liquidation due to the fact that they were incapable to
deal with their liabilities if they are due (Foreman 2014). The current paper intends to explain the
reason for which numerous organizations face the issue of liquidation. By taking illustrations of
certain well-established organizations that failed namely ABC Learning, HIH Insurance and One
Tel Phone Company; the paper will explain certain factors which resulted in liquidation of these
companies along with elaborating aspects of ethics and governance explain this financial stress.
2. Resulting Causes of Liquidation
2.1. ABC Learning Company Liquidation Reasons
 Considering the ASIC grumbling it was assembled that techniques for money related
revealing that was utilized by ABC Learning Company was progressed keeping in mind
the end goal to produce investors esteem misleadingly without the way that this esteem is
connected with kids mind licenses. The same was reliant on future money streams of the
organization that may not get figured it out. Because of such reasons, it is accumulated
that this direct of the association ended up being misdirecting for financial specialists
(Doyle 2017).
 Before the aggregate disappointment, ABC Learning Company confronted awesome
misfortunes toward the finish of the year that diminished every one of the benefits that
was ever obtained by the association. In addition, the firm has freed of all the
questionable cases for achieving benefit (Damiani, Bourne and Foo 2015).
 With negligible government supervision, ABC Learning attempted the Macquarie Bank
trap of utilizing a dependable pay stream to finance acquisitions, and trusting a
consistently expanding share cost would finance boundless development. In any case,
they didn't have the nous or the assorted resource base to run the model appropriately and
were miserably presented to an expansion in credit costs.
 Incapability to support appropriate administrative and bookkeeping frameworks
alongside flawed improvement of bookkeeping norms and also organization law has
brought about the disappointment of ABC Learning Company.
2.2. HIH Insurance Company Liquidation Reasons
Faulty corporate manageable inside HIH Insurance Company with no powerful oversight
prompted watching the technique produced by HIH Insurance Company stayed unsteady fiscally.
The organization went into liquidation for it was not sufficiently able to understand the degree to
which it was made fundamental that additional arrangements must be kept up in Company's
market condition (Betta 2016).
A major aspect that came about to the liquidation of HIH Insurance was absence of
ability to manage the conceivable future cases. In thought to such future claims, this fills in as a

LIQUIDATION OF COMPANIES 4
crucial factor of the organization's business. Also, with the finish of essence of HIH Insurance
Company it was seen to be a condition in which a negative difference in 1.7% functioned
admirably in turning HIH Insurance Company absolutely indebted (Gannon 2014).
HIH fallen in 2001 with an expected insufficiency of benefits against leasers of $5.3
billion (in view of a 75% certainty level for claims holds). The gross estimation of cases against
HIH at the time was in overabundance of $8 billion. The purposes behind HIH's bankruptcy in
2001 are shifted and complex, and were the subject of a Royal Commission. To put it plainly, the
HIH gather experienced a mix of a forceful procurement system in the mid to late 1990s,
including the securing of both CIC and FAI Insurance. Inadequate due-perseverance was done all
through these acquisitions, and poor post-obtaining mix took after.
2.3. One Tel Phone Company Liquidation Reasons
A noteworthy issue that prompted liquidation of One Tel Phone Company was their want
to support a business that produces low yield and through not keeping up enough capital that
may help in covering every one of the liabilities for up and coming years.
The first framework was outlined and created by engineers, including software engineers,
under states of awesome anxiety and earnestness. It ought to have been seen as just a fleeting
arrangement. Be that as it may, the fundamental framework stayed underway, moderately
unaltered, until the end of business in 2001. The framework needed adaptability and was
bolstered by deficiently composed database tables. It progressed toward becoming difficult to
oblige, inside the database, the mind boggling deals plans, which were a critical piece of One.
Tel's showcasing technique (Lessambo 2014).
Liquidation of the organization came about because of the reality of forceful obtaining
arrangements that prompted struggle between benefit augmentation and adherence alongside
execution of effective techniques of corporate administration.
3. Governance and Ethics
3.1. ABC Learning Company Ethics and Governance Collapse
There were a few moral worries that prompted ABC Learning Company's liquidation.
Inside specific issues of owing the market there were a great deal quality worries in training gave
in the focuses. There was a disclosed arrangement of youngsters to specific proportions. ABC
Learning Company's liquidation comes about because of continuous morals and administration
structure disappointment in the association. It is assembled that the association that did not have
enough arrangement of key structures of corporate administration and ended up being influenced
by obligation based extreme procurement binge. Incapable corporate administration alongside
unsafe bookkeeping that was the organization's case. The association did not follow by corporate
manageable guidelines (French, Vital and Minot 2015). Additionally, it was not prone to
assemble immense benefit sum through managing the morals rules. In thought to same, it was
not the case that few corruption in quality in the organization's administrations was watched for
there was less number of workers to manage understudies.

LIQUIDATION OF COMPANIES 5
3.2. HIH Insurance Company Ethics and Governance Collapse
The legislature created a commission with a specific end goal to question the matter of
ASIC disappointment that can an incentive in a superior way in some working licenses of HIH
Insurance Company. The administration questioned ASIC disappointment in care of the
association in esteeming productivity its working licenses. It was guaranteed by HIH Insurance
Company that upgraded an incentive in specific licenses that was truly of diminished an
incentive in represent exchanging sense (Lee 2014).
Licenses of revaluation were permitted in bookkeeping measures. Likewise, new standard
of AASB 138 "Elusive Assets" permits revaluation of impalpable resources in certain situation.
These gauges are considered to get connected inside which bookkeeping treatment has a few
material effect. In thought the same, it is assembled that HIH Insurance Company was related
with specific acts of neglect in situation of the record upkeep because of which the offers esteem
diminished bit by bit (Pearson 2016). It is said that awful administration and poor bookkeeping
cause generally corporate disappointments. The most striking demonstration of awful
administration at HIH was, without question, its perpetual under-saving. As the Royal
Commission Report noted, 'the biggest single thing on the monetary record of the general
guarantor is the arrangement that puts aside for installment of future claims'. In making this
arrangement, the HIH board heaps of free statisticians and evaluations of those reports by its
examiner.
3.3. One Tel Phone Company Ethics and Governance Collapse
One Tel Phone Company's liquidation additionally connotes certain major corporate
administration structures of the association. Instead of having a very much created money related
position, the association had progressively corporate administration structure that is profoundly
insufficiency. There are a few motivations to trust that One-Tel's profit were of low quality.
Moreover, One-Tel had higher gathering part in its profit with respect to that of its rivals
with comparable size. Since gatherings are liable to administration control, high extent of
gatherings in income would recommend low nature of profit. For instance, both in 1998 and
1999, One-Tel had positive profit in view of extensive positive collections adding up to 18% and
7% of aggregate resources.
Fall of the One Tel Phone Company was because of disappointments of certain corporate
administration structure. One reason is that the CEO had expanded effect on incept top
managerial staff that can affect on being inadequate alongside constraining the ability to give
productive oversight and control (Ahmed and Ndayisaba 2016).
4. Company Liquidation from Liabilities
4.1. ABC Learning Company Liquidation from Liabilities
Incapable liabilities administration prompted liquidation of the ABC Learning Company.
Once the association was recorded inside Australian Stock Exchange, it had resource
capitalization worth $25 million. There are sure moneylenders of the association from which it
picked up an office of multi-bank choice. What's more, the organization's benefits diminished by
42% because of specific techniques of irregular accuses along of obligations religious circles of
around $1.1 billion went ruptured (Carnegie and O'Connell 2014). The organization's market

LIQUIDATION OF COMPANIES 6
capitalization improved to $2.5 billion inside the up and coming years. In future, it was
accumulated that the association got pressurized with obligation reimbursements for which it
considered offering around half of its auxiliaries in UK and in US (Tricker and Tricker 2015).
4.2. HIH Insurance Company Liquidation from Liabilities
Among the key issues that prompted liquidation of HIH Insurance Company incorporate
their goal for accomplishing less yield business and not managing satisfactory capital keeping in
mind the end goal to manage future liabilities. Crumple of HIH Insurance Company as it ended
up being wiped out which implied it would not have enough finances for managing every one of
the cases of obligation. Liabilities of the association ended up being $5, 3 bn which made
greatest corporate disappointment in Australia (Clarke and Dean 2014). This issue prompted
administration fall with a specific end goal to implement and checking for behaviors of due
perseverance.
4.3. One Tel Phone Company Liquidation from Liabilities
Deficient liabilities administration has brought about liquidation of One Tel Phone
Company. The association fizzled for the reason that it had restricted money for managing paid
money for managing every one of the costs with having an expanded obligation.
5. Recommendations
Subsequent to breaking down the main considerations base on which the eminent
organizations like ABC Learning, HIH Insurance and One Tel Phone Company confronted the
issue of liquidation, certain key techniques that are prescribed to the associations which can lead
them to manage certain extraordinary circumstances of liquidations. Such suggestions are
explained.
Create turnaround alongside systems of benefit increment: Selected associations needs to
consider centering on key drivers of productivity. A monetary consultant can be designated by
picked associations with the goal that they can maintain its money related circumstance. Employ
capital and gather back: Utilization of expanded capital for sparing the association from
liquidation may be another crucial procedure which can be utilized by associations in managing
an odd condition. In managing the organization's liquidation it must consider security enlistment
on "Individual Property Securities Register" in the various time. Settlement transactions or the
installment designs: The organizations are prescribed to consider a settlement account with every
one of its loan bosses alongside building up an installment design. Such suggestion may be
viable for the association may need to manage less number of leasers. Selling or rebuilding
organizations business: For the associations are not that fit for paying its lenders, getting engaged
with an arrangement of formal indebtedness can be viewed as unavoidable. A choice which can
be considered by such associations is to pitch its benefits or business to an unmistakable
organization that can add to a beneficial exchange forthcoming years.
6. Conclusion
The present paper means to clarify the purpose behind which various associations
confront the issue of liquidation. By taking representations of certain entrenched associations
that flopped to be specific ABC Learning, HIH Insurance and One Tel Phone Company; the
paper will clarify certain variables which brought about liquidation of these organizations

LIQUIDATION OF COMPANIES 7
alongside expounding parts of morals and administration clarify this money related anxiety. It
was accumulated that HIH fallen in 2001 with an expected insufficiency of benefits against
leasers of $5.3 billion (in view of a 75% certainty level for claims holds). The gross estimation of
cases against HIH at the time was in overabundance of $8 billion. The purposes behind HIH's
bankruptcy in 2001 are shifted and complex, and were the subject of a Royal Commission. To
put it plainly, the HIH gather experienced a mix of a forceful procurement system in the mid to
late 1990s, including the securing of both CIC and FAI Insurance. Inadequate due-perseverance
was done all through these acquisitions, and poor post-obtaining mix took after. The legislature
questioned ASIC disappointment in care of the association in esteeming proficiency its working
licenses. It was guaranteed by HIH Insurance Company that improved an incentive in specific
licenses that was truly of diminished an incentive in represent exchanging sense.

LIQUIDATION OF COMPANIES 8
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