Trans-International Ltd is Australian based company. It was established 3 years ago. The company's business involves mainly importing and Electronics appliances from Japan, Korea and China and sell on wholesale basis to various Australian retailers. 

The company's current marketing capitalization is $33.50 million. There are 3 directors in the company's board. One of the directors is also the CEO of the Company. The following are name of the directors and their ownership:

Name	Position	Ownership	Independent
Chris A	CEO and Director	27.50%	No
Nick B	Director	24.30%	No
Rick C	Director	22.20%	No

            Note: minority shareholders hold remaining 26% of the Trans-International Ltd.

 

Ben D, the brother of CEO/Director Chris A is the company's Chief Financial Officer (CFO). He approves all payments including staff salary. Trans-International's policy is to give 20% discount for all cash sales. Therefore, its cash sales represent 75% of the total sales.  Board has decided not to have audit committee or risk management committee citing the small number of directors and straight forward operation. The Trans-International does not have documented internal control system. 

 

In addition to his CFO role, Ben D has also been acting as Operation Manager overseeing day to day management of the all staff. There is currently 10 staff working in Trans-International Ltd. Of the 10 staff 7 are sales representatives, 1 receptionist, 1 warehouse security and 1 account clerk. These sales representatives are also responsible of logistic and management of the warehouse. 

 

Recently, Trans-International board has decided to borrow $5 million loan from ANZ bank to fund its expansion project. The company's current leverage is only 12.5%. The additional loan, if approved will push its leverage ratio 27% which is much lower than average leverage ratio of companies of similar sizes. 

 

The ANZ Bank's loan approval process involves the assessment of the company's corporate governance policy and practice. In fact, it must satisfy with the company's corporate governance mechanism before loan can be approved. 

 

You are hired by ANZ Bank to assess Trans-International corporate governance practices. Based on the information provided in the simulated case scenario above, complete the followings two tasks.

 

Requirment1

Evaluate Trans-Internal Limited's corporate governance practice. Based on evaluation, do you recommend the Bank to approve the loan?
 

Requirment2

Suppose, you have recommended that Bank not to approve the loan based on the Trans-International's current state of corporate governance practice. Propose changes the Trans-International need to make so that you can recommend the Bank to approve the loan.?

Answer rating: 100% (QA)

Requirment1 TransInternational Limiteds corporate governance practice is inadequate and unsatisfacto... View the full answer