Corporate Finance ABC Rural

Question: Discuss about the Corporate Finance for ABC Rural. Answer: Introduction The report would dissect the issues of Corporate Governance (CG) as per the selected case in the Appendix published by ABC Rural on 25th of August this year. The issue of Corporate Governance refers to the business policies and processes which governs the direction and control systems in the business. The distribution of job rights to people associated, like Board of Directors, Managers. Stakeholders, auditors etc. which is further used to design the processes to design the rules and processes to make decisions in respect to corporate affairs (Krivogorsky, 2011). Thus the objectives of the corporate governance are to get the business objective which includes the ways adopted to achieve them. Hence, the CG has a direct link with ethics in respect to the social implications, market environments. Thus the governance in this context implies the activities undertaken; practices adopted which have direct implications for all the stakeholders in the business (Du Plessis, McConvill and Bagar ic, 2005). The case in context is the one where Australian Securities and Investment Commission (ASIC) are getting various complaints from the investors about the spending being illegally spent. The report explores the case on the style of corporate governance followed by the ASIC which has led to this. Since the principles of CG suggests that the system of law and approaches which direct the corporation to build its internal and external structures that monitors the action of managers and directors. Thus it helps in mitigating the risks associated with corporate roots of the business like decision making and misuse of stakeholder's resources (McHugh, 2016). Summary of the Argument as Per the Article The report says that the ASIC have received complaints from the investors about illegal use of their funds. Further, the count of such complaints is on the rise. In western part of Australia alone there were 10ssuch cases which are under investigation. The Commissioner John Price suggests that the tough business conditions were the reasons for such jumps where new start-ups may have the attitude to take the money from the trust with an intention to pay back. But the failing conditions of few are making the liabilities go high. The Corporation Act indicates that the money from fundraising should be with the trust until shares are issued or refund is needed. The Commissioner makes it clear in the statement where his suggestion is that the attitude of taking the fund with an intention to pack is not the cause but taking the money from the funds is unethical in itself (Gnecchi, 2006). The statement also suggests that if the inquiry finds out that Directors or company secretaries have taken the money, they have to face six months of incarceration. Again, if the money were taken by such positions to steal it from the fund using various allies, it would result in 10years of incarceration. He gives a hint of the backdoor listing of companies to siphon off the money. The story goes deep where the Commissioner hints at the ASX entry via merger by the bigger firm that has floated the shell company. This makes the assets being transferred to the listed firm, and the merger is listed with ASX (Taylor et al., 2008). Since such shell companies made a good deal of new directors being at the helm of affairs and the board expanded giving the shell company directors a chance of entry into the trust. In the midst, the trust money dealing had many loopholes due to the pouring in of new faces in the Board (Frc.org.uk, 2016, Psaros and Seamer, 2015). The hint of misguided or failed internal control of corporate governance is shown in this article. It gives the role that the people have positions of the trust is a big issue which has surfaced along with the actions that the investors may see shortly were clear. It was a measure to build the lost credibility to get back the investor's trust (Psaros and Seamer, 2015). Corporate Government Issues Discussed The Corporate Governance angle, in this case, is very interesting as the one in charge have been the foul play. Therefore, the basic idea of CG like monitoring, action, policies, decisions regarding incorporating new agents to safeguard the interest of the stakeholders is in question. There is no evidence to suggest monitoring was well done else the number of complaints wont have grown in proportion (Young and Gates, 2013). There had been a history of cases of corporate mis-governance leading to huge financial scandals in the past. The board or the secretaries were not at all looking into the policy and following its principles to keep the funds and its use tight and full proof. The people or the directors which joined the board, as the Commissioner suggests, have not played in accordance with the set Corporate Governance policy norms. There were shell companies which came in with an intention to be at the helm and thus get a hand on the funds (Arrigo, 2006). The idea to take it for some time with an intention to give back is not good explanation enough as the set CG laws suggests that that fund cannot be touched without issue of shares or refunding scopes. Hence the governance was at its best very uncontrolled and fraudulent in this case which have made the investors get the smell of the same and lodge complaints (McHugh, 2016). The rise in complaint suggest that the body like ASIC havent taken necessary steps at the very start of the process which should have blocked further scope of complaints. The Tough business environment is the excuse which is not granted in this case as the funds were not meant to be experimented with as per the existent laws. But it was done and hence its an issue of Corporate Governance going wrong at its very top level which may be due to the greed of a few. The rise of such complaints had been an issue which the Commission have taken note of and establishing the key people involved (Heenetigala, Armstrong and Clarke, 2014). Use of Media for Such Arguments There is a very significant point that requires being understood why the media has been a good role in such a case. The case is widespread and the ASIC have to deal with it which needs to investor's trust to be back which have seen a great loss due to such complaints (Lim, 2013). The cases under investigation have the ability to show some kind of deterrence to the shell companies or the one who are into such malpractice to get a stern message. Further, the declaration of the same suggesting the periods of imprisonment of people at the helm of such trusts like Directors, to get a clear message through. The people who intends to find some backdoor entry gets it loud and clear. Again, this also gives a message to other such funds about the corporate governance affairs to be taken more seriously to see it protected (Icaew.com, 2016). The media is a source to reach a huge group of people which also acts as the mirror to the society. The corporate governance ethics to be followed or as it is which needs change for better tomorrow, gets a good coverage. The faith of people is to be restored where the media can play as a canvas to see the way the case is being handled and get the needed faith back which makes the investors believe that the deterrence is in place to get back faith on the corporate governance issues of public funds (Liedekerke, 2004). The issues and the laws pertaining to the application money had to be conveyed to people who may not have a good deal of legal knowledge and thus serves as a platform for expressing the law and the misdeeds in a proper manner. The people may get aware of what is the case and get right advice and get away from investing into shell funds which may prove to be frauds. Opinion about the Case The contempt of stakeholders interest is the biggest breach of CG as the basics of it built upon the premise that the governance would be the guide to safeguard it. On the contrary the directors who were at the helm of the affairs used their power to manipulate funds. My personal opinion is that this should have been in the notice of the ASIC before so many complain would have reached their doorstep (Jansson, 2012). The guidelines and external audits were not done as is probable in these cases which have made ways to the people with malefic interest to get the money and walk away. The market is competitive and thus start-ups and their ability to make certain amount of foothold with the trusts money needs to be very minutely investigated before release of the fund. Further the fund can be generated or be given as equity only after a detailed study of the project. A project which lacks the details and seeks an entry to enlarge the board is of no use and this ASIC has to manage (Collett and Hrasky, 2005). There had been backdoor entries as shell companies which could have been stopped if there were a good analysis and perspective system in place. The person who floats a company can't be granted access till they have substantial evidence to show they are qualified to be part of the board. The policy regarding this is a need of the hour (Yeganeh, Oskou and Daghani, 2011). The policy framing for the qualification to be at the helm of the board and their liabilities and responsibilities has to be fixed and made public. The complainers from now on should not be seeking assistance of law which makes ASIC come in is to be changed. Again, listing in ASX should also encounter some changes like verification prior to listing like issues. Nevertheless, to get back the investors confidence, the said job of fact-finding and putting the one responsible behind bars is the first job that the ASIC needs to do. Putting few greedy criminals would be a good deterrent for future frauds (Icgn.org, 2016). Conclusion The past of ASICs mistake was that they did not take care of the investors asset protection is well established. This has led to the fraud where shell companies with fictitious character have got entry into the funds helm by the positional benefits. They have siphoned off the money using their shells that letter merged with larger companies to get an ASX listing. This was going well till complaints started coming into the ASICs doors. The Corporation Act which forms the basis of the CG in this case was not followed so the offense becomes punishable. Complaints have reduced the consumers confidence where the Commissioners media statements would be of good effect to get back some hope among the investors. The fundamental protection under the act also gets clarity via this exercise. The media had been a good resource for all stakeholders to upheld the CG standards and give a relook into the provisions. The principal on which the trust is formed and how it works and who monitors it gets a vivid clarity in the process. The Corporate Governance is being revisited with the ideas of what are the constituents of it and how they are responsible for best use of the same. Reference Arrigo, E. (2006). Code of Conduct and Corporate Governance.Symphonya. Emerging Issues in Management, (1). Collett, P. and Hrasky, S. (2005). 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