Day 159 The authentication process

The authentication process

The information security is becoming a more and more important issue in the business. Therefore there are new technologies developed to assist the management team to protect the company’s data. One of these important processes is the authentication system. It basically involves the recognition of the user’s identity.

• Something the user is …

The biometrics identification method is to identify the user’s physical characteristics. The Australia Border Control implemented the facial recognition technology on the ‘Smart Gate’, which is a traveller self-process passport control system. The camera will match individual’s facial structure with the photo, and therefore, only identified person may pass

• Something the user has …

The authentication system will request the user to provide a unique identification token. The Deakin student id is one of these special items to prove our identity. When we scan the card on printers, the system analyses the information stored in the card and recognizes us.

• Something the user knows …

The system will ask the user to provide the pin, code or passphrase in order to identify them. ‘It refers to a secret knowledge–based approach, where the user has to remember a particular pattern.’ (Clarke, 2011) For example, the Deakin University requests students and staff to pre-set their distinct password for using DeakinSync account.

• Something the user does …

The authentication process requires the user to perform the specific action. Australia used to adopt the signature authentication method on credit card payments. Where our signature is compared with the signature on the back of credit card. ‘Templates reflecting individual characteristics exhibited in signing one's name - the speed, angle of the pen and pressure exerted, as well as the physical appearance of the signature itself-are used in signature dynamics.’(IBIA, n.d.)

Day 158 Oppressive and unfair conduct

Oppressive and unfair conduct

As we know, the company operates under the majority vote rule. Where the majority group of members passes resolutions on decisions. So it is common for minority share being outvoted. In addition, the minorities cannot even change their situation by appoint the director who represents their rights, or alters the constitution. Since these modifications requires ordinary/special resolution in the general meeting. 

In order to protect the company and minorities, S.232 Corporations Act(2001) has stated that the court may make an order for remedies if the conduct of company affairs, actual or proposed act/omission, or actual/proposed resolution is either: contrary to the interest of the members as a whole, or unfairly prejudicial, unfairly discriminatory or oppressive to members. For the conduct to be oppressive or unfair, the court will consider the objective test. Which is it a decision that no reasonable board of directors would have made? See, Wayde v NSW Rugby League Ltd . In fact, it is not necessary for the member to prove that the director is deliberately oppression to the member, or act dishonestly. Generally, this unfairness is related to the commercial inequity, which determined in Morgan’s case. On the other hand, the company must act at the best interest of the members as a whole. That means the board need to make the decision in regard to balance both majority and minority shareholders’ interest. For example, diversion of business opportunities, improper exclusion from management, failure of directors to act in the best interest of company, oppressive conduct on board meetings, unfairly restrictions on dividends are the typical oppressive and unfair conduct. 

Once the ground of the oppressive and unfair conduct is satisfied, the court can make several orders to protect the oppressed members’ right including: compulsory wind up the business, order a share buy-out, or replacement of directors. It is important for us to understand the main purpose of these remedies is to protect company and minority shareholders’ best interest form possible abuse of voting power by the controlling member.   

Day 157 Employee monitoring system and ethics

Employee monitoring system and ethics

In the modern workplace, it is becoming more and more common for the management team to introduce the ‘employee monitoring system’. Such system works efficiently on controlling non-work related activities for the employees, and also provided a considerable protection of the information security to the company. However, the debate of whether using this system is ethical or not for the business has never ended.

In my opinion, the three essential factors that required us to consider on evaluating this issue, which includes: the purpose of the data collection, the standard of actual application and the user’s acknowledgement. At first, we have to understand the reason behind this system. According to the report presented on 2005 Global Security survey “It is clear that many security breaches are the result of human error or negligence resulting from weak operational practices.” (Deloitte, 2005) The lack of employee’s awareness on information security forces many company to introduce the monitoring system. In fact, the employee monitor system serves the common good for the business, and puts restrictions equally to every employee. If the system can properly balance between the security requirements with employee’s privacy rights, then it is likely to be an ethical application. For instance, the company has to determine the appropriate level of information collected (privacy); ensure the data is free from error or bias (accuracy); clearly identify the purpose of the data collection and ownership of the information (property); make the information only available for specific management team member (Accessibility). At last, in accordance to the requirement from Office of the Australian Information Commissioner (OAIC) (2014) the company should notify the employee about the system and only proceed with their consent. Once the company has successfully performed all these terms, we shall justify the employee monitoring system is complied with the ethical requirement.

Day 156 Company characteristics revisited on law’s perspective

Company characteristics revisited on law’s perspective

The company has been referred as the best investment vehicle, because its nature as a separate Legal entity. Tomasic and Bottomley stated ‘the company is distinct person with its own personality, thus it is separated from people who invested money and people who managed it’. Under Section 124(1) ‘a company has the legal capacity and powers of an individual both in and outside this jurisdiction’. The advantages of incorporating a company are listed below.

(a)    Company’s liabilities are limited to its own. Through the case Salomon v Salomon & Co Ltd, the creditors cannot seek shareholder’s personal asset to recover debts when the business wound up. On the other hand, partnership has mutual liability, which is defined in Section 13 Partnership Act (1963).

(b)   Company has perpetual successes. It is expected to have unlimited life, which is not affected by the variation of ownership. Consequently, this feature has granted the business share transferability, see Regal (Hastings) Ltd v Gulliver. Through a comparative, other types of business may experience significant change if on death of owner or other circumstances. It is explained on Part 5 dissolution of partnership, Partnership Act (1963). Company has income tax benefit. The flat tax rate for company is 30%, compare to the marginal tax rate applied for sole trader and partnership up to 45%.

(c)    Company has multiple sources to raise funds. The power to issue shares of the company is set out in section 124 and 254A (1). Other types of business only can rise capital through owner investment or debts, they are lack of opportunity compare with company.

(d)   Company has the advantage of separate management. The company runs by the board of directors to carry out the best interest of the entity. So the management system can be specialized. The section 198A delegated general management power to the board. See Cleansing Filter Syndicate Co Ltd v Cunningbame In contrast, the decision making for the sole trader and partnership is made by their owners without other support, so it may lack of proficiency.

Day 155 Informed consent

Informed consent

Informed consent is an important consideration for an organization’s customers and their Privacy Policy. Generally, there are two models of informed consent typically used in ecommerce and Social Networking sites privacy policies. So to determine which one is most preferred by the customers has became an important task for managers. 

The two privacy control models commonly introduced in ecommerce and social networking websites are Opt-in and Opt-out model. Opt-in model restricts the entity from using customers’ information, unless specifically consented by customers. In contrast, the Opt-out model allows the company to utilize the information, except data that customers forbidden to disclose. Jeffrey M. Lacker suggested that Opt-out means entities have the right to share information; customers can ask them to stop. Opt-in means customers have the right to no-information-sharing; entities can ask them for permission to share. (Lacker, 2002) 

Generally, privacy advocates and customers espouse the Opt-in strategy. This model requires the users to provide explicit consent, which instructs the use of information. (Johnson, Bellman and Lohse 2002) Customers believe that they will maintain more control over their privacy rights when adopting Opt-in model. Since all released information is under their instruction. In fact, people feel safer and comfortable to share information in this system, hence the Opt-in strategy actually yields a higher customer response rate. Which leads to produce more valuable information for entities. In addition, the Opt-in model prevents the involuntary information leaks, because people were not aware of the implicit privacy provisions or changes in the Opt-out model. In regard to this problem, Facebook was forced by the U.S. government to introduce Opt-in privacy changes in 2011. McIver and Elmagarmid further justified the customers’ preference on privacy control models where 72.4 percent of them choose the Opt-in approach. (McIver and Elamagarmid, 2002, p 251)  

Day 154 Standard of business ethic

Standard of business ethic

Many organizations had established their own standard of ethical conduct, in order to ensure the members’ behavior would comply with their objective. It is rather a complicated method to develop this framework of ethics, but there are three fundamental factors comprise it.

These three tenets are: responsibility, accountability and liability. Where responsibility requires people to understand, and willing to take the obligations or expected consequences derived from their actions. For example, a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest (Accounting Professional and Ethical Standards Board [APESB] 2010). The accountant may lose their professional certificate if they failed to act in accordance to this code of ethics.

In addition, the accountability is related to identity the individual or group that should take the responsibility. In the previous example, the professional accountant would be bound by their actions, hence they would be accounted for any consequences. 

Moreover, the liability is the right of affected parties to request compensation from the source of damage. For instance, it is both an ethical requirement and statutory provision, which the director needs to act in good faith in the best interests of the corporation. (Corporations Act 2001 (Cth) S 181) Consequently, the company may demand the cost of damage derived from director’s negligence in the performing that duty.

However, the ethical standard of conduct is normally a guideline of behaviours expected by the society. Therefore, contradiction of the ethical decision may not impose statutory obligations. To illustrate, the pension trustees need to ‘act with prudence, reasonable care and best interest of the scheme participants and beneficiaries.’ (Centre of Financial Markets Integrity [CFA], 2008) In fact, a lot of superannuation funds in Australia were under performing. Obviously, there are no legal requirements for fund managers to maximize the return on investment, but it led to ethical issue because they were not putting effort corresponding to beneficiaries’ interest.

Day 153 Superannuation funds

Superannuation funds

The superannuation fund is the retirement funds implemented by many countries with the purpose of providing incomes to people after retirement. It is a crucial part of social welfare program and also plays n significant role in the financial market. In Australia, the super funds are the major source of capitals in the market, hence as a financial decision maker, we should understand this type of investment. 

To invest in a superannuation fund will generate substantial taxation advantages. Generally, the capital gain will face a tax rate at maximum 15% and tax free during the pension phrase. In fact, the average tax rate will be around 7% to 8%. Other benefits of superannuation investment, including tax deductions over the guarantee charge amount, such as: fringe benefit tax. In addition, this asset is protected from creditors under the regulation of the bankruptcy act. 

There are two categories and three types of superannuation funds. The category is divided into accumulation fund and defined-benefit fund. Where the accumulation fund has determined members’ contribution, and the final return depends on the fund investment performance. On the other hand, the defined-benefit fund defines the payment at the end in advance. This value is calculated in relation with the employee’s position and salary level. Consequently, the main difference between these two categories of funds is the party that bears the investment risk. Where the risk is born by the contributor on the defined-contribution fund, and by the fund in the defined-benefit fund. Moreover, the three types of super funds are: employee-related funds, including: company funds, industry funds and public sector funds; public offer/retail funds which accept individual contribution in the market; and small-self managed funds(SMSFS). 

The last thing we need to be aware of is the regulation of the superannuation. The ASIC is responsible for market integrity and investor protection, and APRA is responsible for prudential regulation. However, the SMSFS that has less than five members need to report to ATO.  

Day 152 Winding up

Winding up

When a company decides to end its business, the process of liquidation takes place. Generally, the purposes of winding up a company are: ensure all creditors (secured or unsecured) share the distribution of the remaining assets in the company equally and fairly; protect the wider business community’s interest by shut down desperately insolvent business; and find out the reason behind this insolvent. During the progress, the liquidator would sell the company’s existing property except those held as security. In addition, he/she would also try to obtain extra funds available such as the voidable transactions, void security interest and remedies from directors. Therefore, these funds will be allocated to all creditors, and among the members as well if there is any surplus asset left. 

There are four major categories of liquidation processes. To illustrate, these are voluntary liquidations by members or creditors, and compulsory winding up by the court under the condition of insolvent or others. It is relatively easy to distinguish these types of the liquidation process, since the procedures after the liquidator appointment are the same. Hence I would like to explain the initial steps and circumstances when these situations apply. Firstly, the member’s voluntary liquidation must prove that the company is solvent. The section 95A Corporations Act determined the term as ‘ able to pay off all debts on due in the next 12 months’. As a consequence, the initial step for this approach is the provision of solvency statement.(S.494) After that, the members need to pass a special resolution on the general meeting, in order to acknowledge the liquidation. It is important for the company remains solvent on that period, otherwise the liquidator should seek other methods such as: administration, creditors winding up or court’s order to liquidate the company. On the other hand, the creditors’ voluntary winding up applies to the insolvent business. It can be issued by members’ special resolution (s.491) or on creditors’ vote if the business is under administration/deed of company arrangement.(s.446) Besides these two voluntary methods, the liquidation can be enforced by the court. In the case of insolvency, the creditor would normally use the statutory demand to prove the company will not be able to pay its debts. So, it this SD is not responded or challenged by the company within 21 business days, the court will determine the business is at insolvency and make up liquidation order. Before this application is recognized, a provisional liquidator may be appointed as to safeguard the company’s assets. Moreover, there are other situations listed under S.461 where the court may also order a compulsory winding up. For instance, if the company is not commencing business for a year, has oppressive or unfair conduct or other circumstances where court considers is just and equitable. 

After the liquidator is appointed, he/she will carry on his/her duty. The company’s operation and directors’ power will cease except when the liquidator believes is it necessary to retain that power. In the end, the assets and other funds recovered will be distributed to creditors and then to members. Thereby the business can be deregistered.   

Day 151 Voluntary administration

Voluntary administration

When a company faces insolvent, it is not necessary to wind it up immediately. Since the creditors and members may want to reconstruct the business, in order to help it out from the temporary financial problem. In this case, the company may pass a ordinary resolution in board of directors to appoint an independent insolvency practitioner to help them out. This occupation is referred as the ‘ Administrator’ and generally the administrator will take control of the entity for less than three weeks. During this period, the administrator investigates the company’s affairs and reports them back to creditors. Hence the creditors may rely on this information to decide the enterprise’s destiny. 

The objective of this administration process is to maintain the business’ existence, because it might fit the best interest of creditors. If it is not achievable, then the practitioner would try to maximize the return to creditors, compare to the immediate wind up of the company. At the start, the company, liquidator or secured creditor (who has security interest over all or nearly all the property) may initiate the voluntary administration. After that, the creditors will have the first meeting to elect the creditor’s committee. This committee would be responsible to review the administrator’s report, and if they are not happy with the current administrator, they may appoint another individual to do it. The position as an administrator has many powers to control the company’s business, management and affairs. For instance, the administrator can remove/appoint directors, sell company's property and perform all relative functions as a normal business officer. However, the person will be liable for any breach of director’s duties, contract entered and leasing expense during the administration process. Why does this position have these powers and restrictions? It is due to the process will create a safety zone for the business to catch on its steps. Under Corporations Act, most of the creditors are not allowed to enforce their debts during this administration process. Of course, there are two exemptions to this provision, where secured creditors has charge all/ nearly all property in the company(S.441A) and creditors with charge over perishable goods (s.441c) are not limited by this moratorium. 

At last, the creditors will have a second meeting and decide the company’s fate in regard to administrator’s report. In fact, there are three different decisions they can make: wind up the company, enter the deed of company arrangement or simply end the administration. If the creditor voted in favor of executing a deed of company arrangement, the administrator must provide an instrument containing the terms. (s.444A) Commonly, the administrator becomes the administrator of the deed unless someone else is appointed.(S.444A(2)) The deed is very flexible, it may comprise the term which certain proportions of debts are extinguished. All unsecured creditors and secured creditors who vote in favor of the deed are bound by it. Therefore, these people cannot enter legal proceedings against the company during this period. 

In conclusion, the administration process will provide the insolvent company some space to breath. It may still confront liquidation at the end, but at least some of them would be able to solve the financial issue and come back to business.   

Day 150 Receivership

Receivership

When a company is not able to pay all of its debts on due, it enters insolvent. The creditors may take actions to wind up the company, in order to recover the debt from the assets. However, the secured creditors normally will appoint a receiver to process the property, and consequently, the proceeds is used to cover their debts. 

Generally, the receiver is act on behalf of the secured creditor to recover the debts by selling or distributing the security on that liability. However, the creditor must be appointed on valid grounds, otherwise the take-over of the secured property may be treated as trespassing. Therefore, the receiver should either obtain an court order to make the appointment valid (S.418A), has a reasonable ground to believe the validation of appointment(S.419(3) or receives an indemnity from the secured creditor. On the other hand, the ASIC may also apply to the court to appoint a receiver while investigating breach of Corporations Act. In addition, the court could appoint the receiver in order to protect the interest of parities that the company liable to. After the appointment has taken effect, the receiver will be granted with power set out in security agreement. Moreover, the Corporations Act provided several statutory powers to the receiver as well. According to section 420, the receiver has the power to do all thins necessary as to achieve the objective of the receivership. For example, the receiver may carry on business, sell property or bring/defend legal proceedings on the purpose to recover that secured debt. Besides, the receiver has the power to obtain information. Where the directors must submit a report on the affairs of the company within 14 days of the appointment.(S.429) Furthermore, the receiver can request reports from officers /employees(S.430) and inspect the company’s books(S.431).  Although the creditor has so much power on the receivership, there are certain duties for them to perform. In fact, this position has a conflict of interest, where the duties owed to creditors and company are contrast. The section 420A further explained the duty of care owed to the company. It stated:’ receiver has the specific duty when exercising power of sale to take all reasonable care to sell property at not less than market value or for the best price that is reasonably obtainable. 

The receivership would commonly end once the objective is achieved. Otherwise, the director retains the power to challenge the appointment under s.418A.   

Day 149 Self-Reflection

Self-Reflection

Time pass by, it is already near the end of my first trimester. During these three months. I have been through and overcome a lot of challenges as a novice in university life. However, according to that famous quote by Professor Graham Gibbs: ‘we do not learn from experience, but we learn from reflecting on our experience.’ Hence I reviewed my journey, in order to make this brief conclusion on my performance so far. 

I always believed that the fundamental element to success is comprised of three factors, including: a proper goal, efficient method to approach and control the process. Therefore, I tried to comply with these rules in the first trimester. The ultimate goal for me was straightforward, which is complete the commerce degree with the shortest time possible and retain the quality of learning as well. I have divided this objective into several subsidiary targets, which are more applicable for me to approach. For instance, the unit MAA261 financial accounting requires us to understand and be experienced on handling financial transactions plus accounting standards. Thereby my short-term goal on this subject was to comprehend the learning resources and achieve a decent grade in this course. 

Once I have determined the objective, the development of the target achieving strategy took place. Although there are plenty of techniques could be discussed, I think the unique one in the university is the digital literacy resource. In Deakin University, the digital literacy created an outstanding platform to assist my study. The online library allowed me to access most of the academic resources through the Internet, so I could easily locate the external readings for my course. In addition, I realized the cloud-deakin system is very helpful, where the first-hand learning materials were kept in an organized manner. Moreover, I sufficiently utilized the collaborate discussion forum to find out the answers of my questions. All staff members were extremely helpful and showed profound knowledge on the subject. In conclusion, I was aware of the value on digital literacy resources, and anticipated using it more to achieve my goals in the future. 

The self-management was the hardest part for me, but I understand it is the most crucial factor. Thus, I made an immense amount of effort to improve my self-control. During this process, I recognized the power of consistency, so I invested my endeavor to establish inertia on study. My weekly plan helped me enormously on both time and activity management. Besides that, I insisted to update my writing practice blog every day (http://mikewriteprac.blogspot.com.au/), since I found it would help me to review my knowledge and record my ideas. More importantly, this activity made me understand the value of preservation. As a consequence, I obtained more control over my actions, and I believe this blog will eventually contribute to my future career. On the other hand, the experience on group assignment also helped me to enhance my self-management. Because now I understand the best way to win people’s respect is to create value to them. And only people who maintained substantial control over their goal completion would be able to do this. 

At last, I would like to thank all my lecturers and tutors for the help provided in this trimester. I am really appreciate that!

Day 148 Mid-week stock market observation and analysis

Mid-week stock market observation and analysis

During the last two trading days, both Chinese SSE index and SZSE component index has experienced an immense increase. Where the SSE had reached 4500 points earlier today and SZSE was sitting on 15400 levels. So I would like to provide a brief resonation of this bull pattern incurred right after the drastic down turn last week.

To be consistent with my previous analysis, we would still look at two major factors: flow of funds and market confidence. Since I believe these are the strongest force in the market and perhaps most obvious figures for inexperienced investors to read. In order to interpret the market movement caused by these elements, we should start with the most significant information that had influenced the weighted stock in the market. On Tuesday, the Ministry of Industry and Information Technology (MIIT) announced the ‘Made in China 2025’ strategic report, which claimed the Chinese manufacturing industry has become the world largest and will definitely bring the economy into a different level. In my opinion, this report is not same as the previous mid/long term plan, but as the strategy of development for the following ten years. It explained the relative policy support towards the green manufacturing, product innovation, and quality measurement. On the same day, the announcement stimulated the performance on concept stock of intelligence machinery, including Siasun Robot & Automation Co.,Ltd.(sz.300024) and HuBei SanFeng Intelligent Conveying Equipment Co.,Ltd.(sz.300276). As an investor, we should be aware of the profound effect in the future in the industrial relevant stocks. Therefore, we must monitor the ten major industries that can be expected to receive policy support in the next ten years, which were mentioned in the report. To illustrate, these areas are: new generation of telecommunication; aerospace equipment; computer-controlled robot and laths; ocean engineering equipment; new energy vehicle; transit equipment; electrical power unit; biological and medical equipment; new material; agricultural machinery. Hence the market tends to have more confidence in these stocks, and potential capital gain opportunities are generated. On the other hand, there will be 20 IPO on the market this week, which creates enormous pressure on flow of funds. Thus we must acknowledge the possible downward pattern in the following trading days as well.