ACC701 Financial Accounting Liquidation
In recent years a number of companies have gone into liquidation (been 'wound up) because they have not been able to meet their liabilities when they fell due. In Australia, there are some well-publicised examples such as ABC Learning, HIH Insurance and One. Tel phone company
Discuss all three companies above and find (via electronic journals) the events that led up to the liquidation. Visit the CPA website; discuss APES 110 Code of Ethics for Professional Accountants. Highlight 5 codes of ethics. Visit the ASX website and discuss the Listing Rules ( 8 principles) governing listed companies in terms of corporate governance. Were liabilities a major factor contributing to the liquidation of individual companies?
Liquidation is a process by which the company brought to an end. Usually the liquidation occurs when a company becomes insolvent. Insolvency refers to the situation, when the company cannot pay its obligation and also unable to meet its day to day requirements. At the end of the company’s operations, the distribution of assets made among the interested parties on the basis of the priority of their claims. This is an initial stage of ending of the company which becomes the winding up and the process of liquidation is not a single day process that goes through the various procedures and events. These companies went into liquidation as it failed to comply the code of ethics and principles of corporate governance.
ASX corporate governance principles and rules
- Board of directors and managers are collectively responsible for any legal issues and transparency of the business.
- Company should comply with the all the applicable listing rules and regulation.
- Transparency and ethical code of ethics should be complied to strengthen the busienss functioning.
- Company should follow formal transparency process while appointing and re-appointing the directors in organization.
- Every listed company needs to define clear and concise all the terms, busienss objectives and policies.
- As per the ASX corporate governance principles, company needs to establish the effective corporate governance program
- Management of listed company should perform ethically and align the interest of the society with the organization development (ASX, 2018).
In 1988, ABC learning founded as a childcare centre. At that time the children care centres were considered as an organisation supported by the government subsidies. In 2001, it was listed on Australian Stock Exchange with a market capitalization of A$25 million. By November 2005, ABC had 697 centres throughout the Australia and New Zealand. After that ABC purchased the third largest childcare centre in the United States and had mergers with some other childcare centres, which results into a considerable increase in number of ABC centres (Code of ethics, 2018).
ABC was the listed Organizaiton which was offering the best quality services to client and having market capitalization of AUD $2.5 billion in 2006. Company has increased its debt payment and its entire UK subsidiary and 60 per cent of its US subsidiary. Although the company was famous for its childcare policies but being the monopolist, it started avoiding the