AN INVESTMENT COMPANY.

Press, Volume LVII, Issue 17316, 30 November 1921, Page 5

AN INVESTMENT COMPANY.

MAGISTRATE DELIVERS lUDGMENT. HELD TO .BE A LOTTERY. "Where a company, -whether incorporated or unincorporated, makes provision for the distribution of its income amongst its shareholders, in such, projJortions and at such times as may bei decided on by tllie directors in their absolute -and uncontrolled discretion, whereby it is possible for one shareholder, on. payment of ■Cs' 3d,, to receive a little more thnn one year thereafteif a sum of £SOOO, and for another shareholder, or his remote descendants,, ifi any, to be denied receipt of any benefit from the company, approximate to that sum for a period of. 400,000 years,- andr ' where the nominal ownership -of all shares of the shareholders, are. invested in the vnrious members of the directorate,- such a company does, not exist for the benefit.-of its members,- but for that of :.tho directors, and, moreover,, the business conducted by tfce -company is not a legitimate business, but a gambling transaction,; the vprofits being distributable, if , at all, : shareholders by means of a scheme similar to a lottery." The above was tHe head-note to the written judgment delivered, by Sir S. E. McCarthy, S.M., in the Magistrate's Court yesterday in the case in wMch, Harold P. Dalwood and William Collins were charged with having, on July 15tfli, published a circular inviting persons to take shares\in a. lottery o< scheme known as the Co-operative Perpetual Investment Company, contrary to section (33 of the Gaming Act, IOOeS. Chief-Detective A. Cameron, prosecuted, for tflio police; and Mr W. J. Hunter appeared for the defendants. The in the course of his judgment, stated that the company, whether incorporated or unincorporated, was proposed with a capital of £1,000,000, divided into 4,000,0C0 shares of os each. One million shares were offered'for subscription, and:3,000,000 were held in reserve, woich it was proposed to issue in sections of 1,000,000 each. After quoting the defined object® of the cpmpany, the Magistrate stated that the prospectus pointed out that, assuming tlhe cn,pital was fully subscribed, the interest, calculated on the basis of its being invested at £5 per centum, would give an annufil incrme of £50,000- Nothing was said in the prospectus as to what, if any, principle was to be adopted by the directors in exercising their discretion to distribute the annual income amongst its shareholders". Assuming that this was to be carried out by lot, the only purpose to bo served Jn taking up moro than one share was the greater chance it would "give the shareholder to receive . the earlier allotment of a dividend on the assumed annual income of £50,000, there would be a sum of £12,<500 for .distribution each quarter. This distribution, it was proposed, should be mada amongst 88 shareholders. On the assumption of 4,000,000 shareholders, 6.ich with a 'holding of only one share, and of .profits on a 5 per centum basis, ib would take 400,000 years for each shareholder or his remote descendants, if any, to draw the maximum sum of £-5000. After reviewing the case from another standpoint, the Magistrate said that if it was possible for one shareholder, bv a present payment of os ir* respect of his share and Is 3d in respect of brokerage and other flotation expenses, to get a payment v of £SOOO a little over a year later; where, also, it was possible for the receipt of any benefit to be postponed for 400,000 years, it followed that the transaction was a gambling transaction, and if not a lottery, it was a scheme similar to at lottery. "A critical examination of the prosoectu9, albeit, as through a glas9 darkly, convinces one that the scheme of those responsible for the management of the company's affaire is admirably adapted for the feeding of vultures and the pluckinsc of pigeons," said his Worship. "The high profit dangled before intending investors is the stronglyodoured meat necessary to attract thei pigeons. Ones, however, these arei within range, there is in the armoury of the company guns and ammunition of such deadly aim as effectively to shatter the extravagant hopes of tno illfated pigeons, and wheresoever the carcases are, there will the vultures be gathered together." The oase was a test on®, and the defendant IXilwocd would be convicted and fined £2 and costs. The police withdrew the case against) Collins. In leply to Mr Hunter, the Magistrate said that there was no question of I reflection on character in the charges, but merely that a minute inspection of the prospectus had been called for.