DUNEDIN COMPANY

Dominion, Volume 34, Issue 108, 31 January 1941, Page 8

DUNEDIN COMPANY

Shareholders’ Money Seen As Lost ASSIGNEE’S COMMENT Concern’s Losses Shown As £39,342 (By Telegraph—Press Association.) DUNEDIN, January 30. "The creditors to this company are in a very much happier position than the shareholders. They have the prospect of a dividend but the shareholders have no hope; their money is gone.” I his comment was made bv the official assignee, Mr. J. M. Adam, who presided over the meeting of creditors which investigated the affairs of S. R. Burns and Co., Ltd., a Dunedin company dealing in shares and the promoting of other companies, which is being wound up in accordance with a Supreme Court order made on December 13. ! The company’s losses on investments since it began operations in March, 1934, as shown in the deficiency account, totalled £39,342. The official assignee said that the shareholders were in the position of having lost all of their nominal share capital of £42 099 The amount owing to secured creditors totalled £1269 and the estimated value of security equalled that figure. Debentures and prior charges totalled £4CBB and they had the first claim on the' assets of the company. These assets were estimated to realize £7599, so that £2911 was available toward the claims of unsecured creditors which totalled £6199.

Examination of the company’s balance sheets showed that amounts_owing to unsecured creditors since 1935 were as follows: 1935, £3462; 1936, £4185, 1937. £1048: 1938. £4176; 1939, £2636. In the same years the company’s net profits were shown as follows: 193 a, £466; 1936, £1292; 1937, £lobl; 1935, £173-1; and in 1939 a deficit of £2854. The preliminary expenses were shown iu the first year at £27 <5 ana they remained at £27SO in the company’s fourth year. “This company was dealing in shares and the promotion of companies,” the assignee continued, “and it can be surmised that its apparent profits arose largely from dealings in shares in subsidiary companies, brokerage, etc., but all the time the dividends declared by S. R. Burns and Co. Ltd. have been out of the share capital. A company of. this nature would have to have a considerable amount of outside business to make a real profit.” After showing that the payments listed under the wide heading of salaries etc., had increased from £2545 in 1935, to £4578 in 1939, to point out that the company’s costs had been rising steadily, the assignee said that if the surmise were correct that its business was dependent on the transfer of shares to different companies, and that dividends were paid out of paper profits, then the capital must have been depleted accordingly. It was explained that the deficiency arose largely through loss on realization of shares in private or semi-public companies (all unlisted shares). The total cost of the main blocks of shares was £36,538, and they were estimated to produce £2BS4. Many of these companies had been struck off the register, but the official assignee stated that they could be restored, if necessary, on application to the Court. Most of the assets easily realizable had already been realized by the receiver for the debenture-holder, he added, and there remained assets valued at about £l7OO to be realized. After a number of questions had been put to the managing director of the company, Mr. S. R. Burns, by representatives of various creditors, strong comment was made by Mr O. G. Stevens on the company’s business methods. “It is absolute moonshine to talk about profits in this concern,” he said. “Tlie sum of £39,000 has gone down the drain in four years since the company began operations. Therefore, how could the payment of dividends be justified?” The meeting appointed the official assignee as liquidator of the company. Recommending that the creditors’ meeting be ’adjourned, the assignee said it was part of his duties to Carry out a thorough investigation of the affairs of the company, which might involve investigation into subsidiary companies. Creditors could be assured that the investigation would be made. The meeting was adjourned sine die.