DUNLOP'S LOST TEN MILLIONS.

Press, Volume LX, Issue 18266, 27 December 1924, Page 13

DUNLOP'S LOST TEN MILLIONS.

MR JUSTICE EYE OX

"APPALLING FIGURES."

The affairs of the Dunlop Kubber Company, Limited, were discussed in the Chancery Division. London, on November ISth, when Mr Sims. for the company, asked Mr Justice Eve io sanction a reduction of the c-apital of the company in order to deal with a loss of £10.327,.>12. Counsel said the nominal capital of the companv was £20,000,000 divided into 5.000,000 preference shares of £1 and 15,000,000 ordinary shares of £l. All the preference shares hud been issued and all the ordinary shares except 108.086. The tolal loss was ~ 12,552,000, but that had been reduced by appropriation of certain reserves and other items, leaving a net loss of £ ]0. t "i27,542. His Lordship: llow long did it take to get rid of that?

Counsel said it was done very quickly. The loss consisted mainlv of an item of £8,320.000 lost in the year 19'-'l. and it arose through depreciation in the market prh-cs of raw material?, principally rubber and, cotton, -and partly on exchange on the company's foreign business. That was very serious and it resulted in a rcconstitutioa of the Board. The new Board decided to face the situation, and after a drastic investigation they felt that there was do way out of the difficulty but to put forward tbo present scheme. The loss of over eight millions made in the year IP2I was reduced in the following year, as the company made profits amounting to .£."83.000, and applied that towards the reduction of the loss, with the result that in June. 1922, the loss stood at £7,730,090, and formed part of ihe total loss, of ten millions odd. The A, B, and C preference shares were all entitled to priority in capital, and the n preference shareholders had agreed to have their shares reduced to sixteen shillings each. The rest of the loss fell on the ordinary shares, which would be reduced to 6s Sd each. All the shareholders affected had agreed to the scheme, by substantial majorities. >i'o one voted against. The matter had been well thrashed out and there was absolute unanimity. His Lordship: There is some litigation pending between the members tho company. Counsel said that did not affect *hc scheme at all. The litigation was between former members of the board. An affidavit by the chairman of the company, Sir Eric. Gcddes, read by counsel, stated that the loss ar>.ie mainly •on a revaluation of the company's holdings in; subsidiary companies and depreciation in the market value of stocks of raw materials held by . the company.- The ■ 1920 report shower] that there had been a. severe slump throughout the work] am! the company found itself over-bought ;>t most unfavourable prices. Profits -had since been made by tho company, and part of (hem were being'appropriated to pay off arrears of interest. .

The affidavit further showed iiiaf. over three millions were lost, in certain American subsidiary .companies, besides other considi'iablc losses -in" Yorkshire cotton and other subsidiary con-paiiies. His Lordship: Does-any of 1,-e litigation deal with the question whether any.-of their Iransactiou's ought to h.-i'vo been done, because ' money serins ■ toi have boen lost in hundreds of thousands? ' • •

Counsel ea.IJ (his scheme was f|uile; independent nf any of the u-atters inferred to in ihc litigation. • • His Lordship: Po not. tho shareholders get snrthing from )i>n.s.V who embarked in ll'iis sort, of spcciilativi f Counsrl wid the litigation v.-;;s between the company and certain.. p;isl directors, I .'at' :iono of it. tone,lied the holdings in Dualop Plantations, Ltd.' The Board had to t'ace the situation, litigation or j.o- litigation, and this scheme, was propounded without the slightest Jdca that litigation would be taken. His Lordship: Jt, may he quite Tight to cut your loss, but at the same turn! there would be great difficulty,, once the loss is written off, for anybody .to t.akc sufficient interest to seo whether somebody can be made responsible for the loss. Counsel said that whether' the scheme were sanctioned or not, it Mould not affect the rights and liabilities of the parties in the pending actions. The new Board decided quite rightly that, whatever litigatiou it might, be thought, necessary to bring against certain persons 'should lie conducted by independent members of the Board, and that old members of the Board remaining directors should have nothing to do with it. Therefore a committee of new members of tho Bo'ard had been formed, and they we're' iu charge-of tho litigation and were doing their best in the interests of the company. His Lordship: Poos the litigation seek, to make somebody liable for this mismanagement? Mr Sims said as far as he knew none of the litigation Bought to make any director or other person responsible for the loss 011 any forward contracts. There was no litigation touching the loss made in connexion with Punlop Plantations. Limited.

His Lordship: But what about the other matters? Counsel said the schemo did not affect those matters, and it would be a disaster if it were not carried into effect. His Lordship: Poes the scheme involve the cessation of the litigation? Counsel: Not in the least. The Board are determined to prosecute that litigation as far as is necessary in the interests of the company. Counsel added that the scheme had been laboriously worked out and approved by the shareholders. The sum of £760,000 would be accepted hv the A, B, aDd C preference shareholders in satisfaction of all arrears of dividend. The capital of the company as the result of the schemo would be reduced to £9,472,427, but restored to £20.000,000 by the issue of new capital. His Lordship said that it was possible that the loss might be even greater than that stated, and in any ease it was appalling. He was not as accustomed as a chairman of a company to deal with millions, and the figures appalled him. Mr Sims: The axe has been-rigorously applied, and none too soon, and it is a very salutary application. His Lordship: I hope it will be so. Nobody appears to oppose the petition, and the resolutions have been passed with duo formality,, and I cannot see anything to suggest that the decision at which the directors have arrived is necessarily wrong. Therefore I confirm the reduction of capital and sanction the scheme.