THE WILD CATS' CEMETERY.

Auckland Star, Volume XXXV, Issue 38, 13 February 1904, Page 5 (Supplement)

THE WILD CATS' CEMETERY.

.VANISHED MILLIONS.

(From Our Own Cocrcspcmdent.) LONDON", December 24. The twelfth annual report of the Inspector-General in Companies Liquidation for the United Kingdom is a terrible record -of company promoting, aud conveys a lesson to the investing public, which, however, will probably be forgotten ere another report is due. From the figures given in the present report it. appears that the total number of cases in which windiug-up proceedings were commenced during the year 1902 was 1629, of which 1301 were voluntary liquidations, lfi voluntary liquidations subject to supervision of the court, and 112 compulsory liquidations. The total number of new companies registered in England and Wales wa.s 3r»96. from which have to be deducted 1629 companies on the register, which have gone into liquidation, and ISOI companies removed from the register on other grounds, leaving a net increase daring the year of 166 companies. It thus appears that the total number of abortive and liquidating companies (luring the year was. in proportion to the new companies registered, ninety-five per cent., as against eighty-six per cent, during the previous year. The following table shows tin- amount of capital involved in these liquidations. distinguishing capital subscribed by the public or otherwise in cash, and shares issued to vendors, etc.. as fully" paid up for a consideration other than cash:— 1002. 10 years. 180.-MOO2. Public 2D,923,3. r >s 270,774.754 Vendors _ 34,347,009 280.877.100 Total '£64,270,454 £560,601,863 Of course, it is not to be assumed that the whole of the £360.000,000 involved in these liquidations has been lost. The actual anionnt of loss must depend upon the results of the liquidation. Further, with regard to 51 per cent, of this amount, representing a loss liy vendors or the holders of vendors' shares. that probably the larger portion of this is due to an originally inflated capital—or, in other words, that if was never represented by real assets. On the other hand, in addition to the loss o[ capital, whatever It may be. there must be taken into account the loss to creditors and debenture holders of these companies, upon which the above table throws no lisht. The estimated loss on liquidating companies is shown in a gt-neral table, from which it appears that on 13,517 companies wound up, the loss on vendors - shares \v:is £170.GirUJ,S.">: the loss on shares subscribed for each £163,434,137. and the loss to creditors nearly £39.500.000. On this basis it would seem that there has hecn a total loss during the ten years of £203,000,(100, as the result of misdirected or unsuccessful company enterprise. besides £179.000.000 on vendors' shares, in respect <>f which ft may be observed that whatever may have been the value of the property represented by them, a large Hinonnt passed into the hands of the public for a cash consideration. Moreover, during the ten years in question, about 11.000 companies, which did not go into actual liquidation, were, for variojus reasons, struck off the register and ceased to exist: and although it may be assumed that the majority of theso represent abortive attempts to form companies., yet in many ensos, including cases where the assets have been swept oft by dehenfVire holders, they represent a considerable amount of enpital, which does not enter into the esiunate of loss givon by the Inspect or-UeneraL WHAT HAPPENED TO JOHNSTON. The report includes several interesting and instructive rnmpauj histories, aud special mention is given to a group of. companies known as "Tlk- Johnston Die Tress Company." "The Johnston Foreign Patents Company," iiud "The Johnston Engraving Company." as furnishing a good illustration of the manner in which "one-man" companies may be manipulated to the undoing of the public, and the formati-ou of which would not be affected by the provisions nf the Companies Act. liioo, relatiug to the disclosure of material facts, seeing that they did not issue a prospectu-s. The nominal capital of the two first-named companies was £50,000, and the whole of the capital being practically allotted to Johnston in respect of his patents and service. nivthiDg remained for working capital. This defect of capital was supplied partly by advances made by Johnston himself, and partly by debentures, of which £26,000 appear to have been issued to the public. Besides this liabilities were incurred to unsecured , creditors to the extent of £SO,OOO, of which claims for Roods supplied amount to £29,000. Although the patents appear to have twen of some value, the companies worked at a loss, but Johnston, the v-endor, and managing director, induced his colleagues to declare dividends aggregating in aH oO per cent, per annum. A balancesheet was issued showing large profits, which were arrived at by the simple expedient of estimating the company's liability for the presses supplied to it at much less than their actual cost. On Johnston's undertaking to be personally responsible, and by taking credit for the sale of fictitious assets, this balance-sheet was certified as ■correct by a chartered accountant. The sale of shares in the case i.f the Johnston •Foreign Patent Company, and the method in which it wa.s effected, constitute a most interesting feature in the proceedings. An agreement was entered into by Johnston for another man under whi<*h a market was created in the shares. For example, the man referred to wrote to the directors offering to take an allotment of all unissued shares in the foreign company—9o:; in number—at a premium of £1 per share. This offer was, at the instigation of Johnston, refused by the directors as inadequate, and the fact that an offer of this nature had been received and refused by the directors was immediately made public. By means of this and other devices of a similar character, many persons were induced to purchase shares on the market, theso shares being supplied by Johnston. KXPECTATrON V. REALISATION*. Very apropos comes the report of the liquidator of the Standard Exploration Company, which was forced into liquidation on the collapse of the Whitaker Wright financial house of cards. Then the comjwny's -assets were estimated at £1.160.000: now the liquidator is seeking his discharge, and he reports that these assets realised £11,80S! Su-eh is the discrepancy between paper and actual values, thonirh there are, one hopes, i-omparatively few cases on a par with the inflation practised by the Globe group of companies. The total costs of the Standard Exploration liquidation amounted to £460fi, learfng £7232 for the creditors. These unfortunate people have received a dividend of a fraction ov-er 7d in the £, absorbing £7231, find leaving the nob-le sum of 15/10 in hand. The capital of the company was £1,500,000, which, of course, is entirely lost. The Golden Treasure mine was sold to the Golden Horseshoe Company for £14.600. and the other Westi-alian properties were taken ever by ■the New Century Tmst for £15,000. The interest in tlw Thames Ha-uraki Goldfields was sold by the New Zealand creditors for £500, but for the holdings in the Caledonia Copper Company, the British America Corporation, the Globe Corporation, and allied concerns, it was found impossible to get any offer, and. nothing is ever lifcely to-be realised from, tfceso -'.wild cats."