Case study in corporate collapse: HIH
1 Briefly describe the ‘HIH story’
On 15 March 2001 the HIH Insurance group required liquidation. Formal winding-up orders were made on 27 August 2001—the corporate equivalent of death. By then the deficiency of the group was estimated to be between $3.6 billion and $5.3 billion.
The collapse of HIH is the largest corporate failure in Australia.
That’s because HIH failed to see, remedy or report what it should be do, and even ignored and concealed the true state of HIH’s steadily deteriorating financial position.
The collapse of HIH has reverberated throughout the community, with the following serious consequences: harming to individual, community distress, consequences for the public.

2 Who was affected by its collapse?
Firstly, the collapse affects most individual who got benefits from HIH. For example, About 200 permanently disabled people no longer receive their regular payments from HIH. These people have joined other unsecured creditors and policyholders, and they all face a wait of up to 10 years before receiving what the liquidator has predicted will be a ‘very poor’ payment.

Secondly, many local industries and organizations are involved by the collapse. For instance, some non-profit organizations have been forced to shut down businesses. A local theatre had to close its doors, with the loss of 70 jobs, because it did not receive sponsorship funds that had been promised by HIH.

Thirdly, the collapse caused bad effects in public area. For example, HIH was one of Australia’s biggest home-building market insurers. Its collapse left the building industry in turmoil. Home owners were left without compulsory home warranty insurance; the owners of residential dwellings have found that cover for defective building work has vanished; builders are unable to operate because they cannot obtain builders’ warranty