OIL COMPANY'S AFFAIRS.

Auckland Star, Volume LXIII, Issue 237, 6 October 1932, Page 8

OIL COMPANY'S AFFAIRS.

PROSPECTUS QUESTIONED.

BUSINESS MAN CHARGED.

PRIVATE PROSECUTION.

A company manager, Harry Clinton McEiwain, aged 44, was prosecuted in the Police Court to-day, before Mr. F. K. Hunt, S.M., on two charges arising out of the publication of an alleged false prospectus for a, public company, the Speedwell Oil Company (N.Z.), Ltd.

The two informations were instituted privately by Royston Noel Sedman Chisholm, public accountant, Auckland. McEiwain was charged that, on April 3, 1930, being a promoter of the Speedwell Oil Company (N.Z.), Ltd.", he did, ■with intent "to induce persons to become shareholders' in the company, concur in the publication at Auckland of a prospectus -which he knew to be false in material particulars, in that it was falsely' - alleged (referring to a then existing company of the same name) that "the profits are satisfactory and the business solid," and in that it was falsely alleged that, "with the exception of 'Harry Clinton. McEiwain, who is the vendor of the company and is entitled to consideration heretofore mentioned, none of the directors of the company is interested in its promotion nor in the option to be acquired by it." It was further alleged that on July 15, 1930, being a director of the company, defendant, with intent to induce persons , •to become shareholders, , did conciir in the publication of a prospectus which : he knew'to be fake in material particulars.

Companies of Same Name. The case, which is most complicated, is expeced to occupy a considerable time in hearing.-The charges are of an indictable nature. "There are two companies of the same , name, and in order to simplify matters we will call the early company the Newmarket company," said counsel for the informant. "The second company , we will call the Anzac Avenue company. The first company sold out to the second. The 'fifsfc was ' a -very small concern, having a' capital'of £3300, of which 1000 iully.paidjup shareswere held by the British, Oil and Turpentine Company, which invented an oil known as Speedwell oil. The earlier company's business was to import raw oils and blend them at Newmarket for distribution throughout the North Island. This company prepared annual accounts, and" down .to March 3\, 1929, which was the last annual account before McElwain came into the picture, the losses were shown as :£ 1800. A subsequent account for the; following 1© weeks to July 20 was prepared,., and on faith of that, McElwain obtained, in December, an option over the assets for the sum of 10/. "This gave accused an option to acquire the , assets of the undertaking for i≥ 05 71 10/, of which £1057 was to be paid ; wdthin-one month, and the remainder to be satisfied by the allotment of 1000 fully paid up shares to the British Oil and ■Turpentine Company, leaving the balance to the shareholders, this being.equivalent to the shareholders of the ;earlier -company receiving 10/ per share. ,

"After getting- the option, McElwain proceeded to get provisional directors," continued; counsel, "and a prospectus was compiled and filed on December 28, 1929. Accused aiid : two others were named in the prospectus and 'McElwain -was also named as the promoter and the vendor. The prospectus disclosed the consideration, -to> jbe : paid.'' The , prospectus alleges that the' Newmarket company was being carried ! «if in a profitable way. Although the prbepectus was published on December 2&, : ihe law allows 90 days in which to float; but, it was never floated. The prospectus was re-filed in the same form on Apr|l 3, .1930, attention to this being shown v by. the - superimposed stamp on the original prospectus!"

. In Business, One Year. Continuing, .prosecuting counsel said the company was registered on Aprill6, 1930,. and it > traded from., August, 1930> until August, 1931, -when, pa tile .decision of the shareholders, it went into liquidation. There had.been.-considerable delay in taking over the Newmarket business. A f urtjier Ibalance-slieet was taken out on the Newmarket 'business, to March 31, 1930,.three days prior to the filing of the second prospectus, and this again showed a , loss. The company had never shown any profit. Counsel alleged that McElwain knew this, as he had the balance-sheet in his possession. He knew the 'balance-sheet ■ showed the capital of th&- company, and knew that shareholders were selling out at less than 10/ peg share. Within a few days after the incorporation of the company, Mr. Wilding, an accountant, was employed to open a'set of books. He perused all the 'books and examined the profit and loss account and 'balancesheet. He reported to the directors that the Newmarket company had shown losses amounting to £1700, and' a summarised liability of £900. Mr. Hunt: You allege that McElwain issued a prospectus knowing the statements made in it were false?— Yes. McElwain knew before he got the option that there were ; losses, as he had the balance-sheet and also Mr. Wilding's report. Directors , Shares. Counsel said that none of the directors took any more shares than the one contributing share. They subscribed to the memorandum of association by one share each. On the day the company was incorporated they cut up the vendor's, shares between them. ■ McElwain got the option, and in consideration of his acting as an intermediary he was to be paid £1000 cash in one month and 2500 fully paid up shares. McElwain only took 1000 shares, his co-directors, with only £1 invested, taking 700 between them.

Mr. Hunt: Why are not the codirectors charged, if you suggest they •were equally culpable in letting the prospectus out? Counsel: We have no evidence against them sir, tut we have against McElwain, who was the promoter. Evidence was then given by the Registrar of Companies and by Mr. Wilding, accountant. (Proceeding.)