COMPANIES’ AFFAIRS.

Manawatu Standard, Volume LX, Issue 226, 22 August 1940, Page 12

COMPANIES’ AFFAIRS.

WITNESS EE-EXAMINED. PAYMENT FOR FORMULA. Per Press Association. AUCKLAND, Aug. 21. The public examination beiore Mr Justice Fair, in the Supreme Court, of officers of Loyal, Ltd., and the Consolidated Tobacco Co., Ltd., two companies in the process of being wound up, was continued to-day. Edward Valentino Owen, re-exam-ined by Mr Maekay, said he and his father, who was one of the first growers of tobacco in New Zealand in a large way, had conducted experiments and arrived at the conclusion that the New Zealand leaf had different bacteria from that of the American leaf, and they endeavoured to inoculate the local' leaf with the bacteria of the American leaf. When he started with Loyal, Ltd., he had evolved the full process. The time required by his method was much shorter than for the other processes in New Zealand. While he was with Loyal Ltd., he was offered a coutract to go to Australia. Mr Davie, of Melbourne, was prepared to pay him £30,000 to take his processes to Australia. He did not accept the offer because of his interests in Loyal, Ltd. Eventually he agreed to sell his formula for £20,000, taking part-pay-ment in shares because he regarded the shares as likely to be more valuable than the money. Replying to Mr V. R. Meredith, witness said he had one letter mentioning the Melbourne offer, but did not think it stated the price he had be o', offered. MAHER EXAMINED. Michael John Maher, hotelkeeper, of Wanganui, said that before the formation of Loyal, Ltd., he was an accountant and company secretary. Owen and he were tile main factors in the forming of Loyal, Ltd. Of the other three directors one was an electrical engineer, one a retail tobacconist, ■ and .the third man had no experience of tobacco. Witness subscribed £IOO and later took up 95 shares. In tho first year there was quite a substantial loss of £1321. Next year the balance-sheet showed a profit of £4535, and in January of the following year the Customs Department issued a writ alleging £6BOO short paid in duty. There was no previous arrangement that witness should get a substantial share of the money paid by the company to Owen for his formulas. That was entirely in Owen’s hands.

Mr Meredith produced a balancesheet taken out by witness on February 28, 1935, showing a net profit of £304.

Mr Meredith: Were you justified in then writing to the shareholders: “As at present advised the company can pay a dividend of at least 15 per cent.”?—Fully justified. Not on those figures? —Yes, because it was a rough balance-sheet. I knew there would be at the very minimum that profit. With a net profit of £3O-1 would you be justified in declaring a 15 per cent, dividend? It would bo absurd. In reply to further questions witness said that nine days after getting authority from the shareholders to increase the capital the value of Owen’s formula was increased from £IO,OOO to £20,000. The latter figure left a margin of £12,000 after payment of £BOOO to the Customs. Discussing the demand of the Customs on Loyal, Ltd., Mr Meredith asked whether it was not a plain fact that the company watered the tobacco outside bond, and that was where the increased weight came in. Witness said that possibly the Customs were told that. He denied that T. ,T. Grierson had told him that the stock figures in his balance-sheet of April, 1935, were inflated. He had heard Grierson had said that but be did not take much notice. Out of the £70,000 fresh share money £16,000 went to Owen for his formulas, and witness got approximately £2OOO. He said the subscribers of the £70,000 lost all their money, and the creditors of Loyal, Ltd., got 14s in the pound. He had nothing to do with the valuation of Loyal’s stock at-the end of April, 1935, at £51,000. This ended the examination.