COMPANY'S FINANCES.

New Zealand Herald, Volume LXIV, Issue 19720, 20 August 1927, Page 15

COMPANY'S FINANCES.

ACTION BY SHAREHOLDER.

MISREPRESENTATION ALLEGED

SHIPPING ENTERPRISE FAJLS. A sequel to the liquidation of the Northern Wairoa Steamship Company, Limited, of Dargaville, was heard in the Supreme Court yesterday, before Mr. Justice Stringer. John Leydon, storekeeper, Waiharara, North Auckland (Mr. Finlay and Mr. Thomson), proceeded against the company (Mr. Greville), for the return of £lO ss, the value of 21 shares. Plaintiff also sought £25 general damages and the removal of his name fi-om the share-register on the ground that he had become a shareholder through misrepresentation by the company's accredited canvasser.

Mr. Finlay said the formation of the company was first suggested by the fact that the small steamer Huia, under the command and part-ownership of Captain C. W. Williams, was trading in opposition to existing services between Onehunga, Dargaville and intermediate ports. As a result freight charges decreased considerably. An effort to form a company for the purchase of the Huia ended in failure. Captain Williams then gave his personal assistance, with the result that defendant company was formed in January, 1923. Difficulties arose, and four months later shareholders rejected a proposal to purchase the Huia. In the words of the directors, the company then "decided to sleep," and the Huia carried on a desultory trade for some time and was then withdrawn. Shares and Capital. In May, 1923, Captain Williams was engaged as share canvasser in order to increase the financial strength of the company. He commenced operations in January, 1924. The capital of the company was then £IO,OOO, but by June, 1924, it had been increased to £25,000. Of the £IO,OOO capital when the campaign was started, only £529 had been received from the allotment of 3593 shares. A total of £369 represented application and allotment-moneys outstanding, so that about half the available capital was unpaid. Preliminary expenses totalled £333, so that the company had a credit balance of £196 There were neither debts nor assets, and had it been called upon the company could have paid shareholders onlv 7s 9d in the £.

The position had sfightly improved by Alay 31, 1924. A total of 6506 shares had been sold at that date, and the company had received £llll in cash. Application and allotment moneys unpaid amounted to £515, so that once again about half the available capital was owing. Expenses totalling £598 had been paid out of the £llll, which meant the company could actually distribute £712, or 10s 7d in the pound. Between May, 1924, and February, 1925, when plaintiff purchased his shares, Captain Williams sold a further 5691 shares, and £1425 was received in cash from these. However, in view of other considerations it would then have been possible for the company to pay only 10s 7d in the pound had it wound up its business. Memorandum of Association. The steamer Kurnalpi, now lying idle in Waitemafea Harbour, was bought by the company in November, 1925. During his campaign Captain Williams stated the company was in a sound financial position. Prospective shareholders were told the company intended to purchase two steamers in Sydney. Shares were sold to people in all parts of the North Auckland district. Plaintiff made application for 21 shares in February, 1925, but after receiving notice of allotment he heard nothing of the company for a long time. It was rumoured the company was not financially strong, and on inquiries being made it was found the memorandum of association distributed was not the registered memorandum at all. Plaintiff said Captain Williams called at Waiharara in February, 1925, when a meeting of settlers was held. They were told freight and passenger rates would be reduced by the company, and about 50 shares were sold. Witness said he had no idea of the company's financial position until after litigation was commenced. As he had heard nothing of the company since he bought his shares he ignored the first call made upon shareholders. William Steed, butcher, Waiharara, said he did not know the memorandum was circulated was not a copy of the registered draft until after the company went into liquidation. The case was adjourned nntil this morning.