COMPANY’S COLLAPSE

New Zealand Times, Volume L, Issue 11651, 16 October 1923, Page 6

COMPANY’S COLLAPSE

LIQUIDATION FAVOURED N.Z. MERCHANTS LTD. TO GO OUT OF BUSINESS. SHAREHOLDERS* CRITICISM. Yesterday, after a lengthy meeting, in which some of the shareholders indulged in straight speaking on the subject of the conduct of the company’s affairs, the New Zealand Merchants’ Association, with its headquarters at Nathan’s Buildings, decided to go into voluntary liquidation. The chairman of directors, Mr W. u. Jennees, presided over the meeting which, behind locked doors, at the commencement debated tho question of admission of the Press; heated opposition coming from certain quarters The phrase of one member, however: “We have nothing to fear” epitomised the attitude of the shareholders in general, and the motion to throw the meeting open to the Press was carried by a large majority. “TOO HIGH A FIGURE.” Immediately Mr Jenness delivered his report on the company’s activities. Tho company, he snad, _ had been started hy Mr G. Thorpe, its manager, in 1921. Tho assets of Thorpe, Barr, Brown and Co. wero taken over at much too high a figure, against which he had protested at the time. Mr Thorpe had sold shares throughout the North Island. The agreement fby Mr Thorpe with the company, he regretted to say, was too one-sided. He had been a signatory to it, but had strongly objected to one clause which had been altered and which gave Mr Thorpe power to go aiway abroad on behalf of the company at any time. This had been changed by inserting the words “at the option of the directors.” “MUCH DISSATISFACTION About the month, of June ? 1922, there had been much dissatisfaction among shareholders owing to the agencies of Thorpe, Barr and Brown not giving evidenoe of development. It seemed that the general unsettled state of business - after the war was to blame for much of this. At this stage, however, Mr Thorpe bad insisted that it was absolutely necessary for him to go to England. A debenture of £IOOO for tbe purpose was arranged by Thorpe. And under bis agreement with the company, Thorpe had the right, in an event of this kind, to appoint an acting manager during his absence. In the speaker's opinion, a mistake had been, made in appointing i the secretary and making an agreej inent with *him that the company would pay him £6 per week for a tiwo, ! and later £l2 per week. This, on jtop of Thorpe’s own salary and travel - j ling expenses, was a serious financial set-back to the company. TOO MUCH STOCK BOUGHT. The then secretary, as broker for the company, was to have sold shares; but bis ©ales were negligible. Too much stock, as well a* samples, had been procured and arranged for. This, also had been a financial strain. On Thorpe’s arrival back be had secured sample rooms in Customhouse Quav, and afterwards moved to Victoria street. Repeatedly, at this time, said the chairman, be had asked Thorpe to cancel all past agreements with the secretary; but it had been quite a time before ho could get this done. About this time a move had been made to join up a grocery section of shareholders and a manager foT this department was secured. Ground floor premises were obtained and 1 the company had moved to Nathan’s Buildings. For these rooms a rental of £l2 per week was paid; with light extra. The grocery shareholders, however, became very dissatisfied and took steps to rediwe the expenditure of the company, dispensing with the manager. of the grocery department and limiting the premises occupied. The removals had necessitated a good deal of expenditure; and this then had to be sacrificed. PROCEEDINGS THREATENED. Dissatisfaction continued amongst a number of the shareholders, they took legal advice and proceedings were threatened. To aid tho company, therefore, said tho chairman, he, himself, hid given six months of his time to its affairs without remuneration. He also had been tho means of .selling a good number of shares, handing back the brokerage fees of between £2O and £3O to the company along with an extra sum of tlie same amount to make up the difference on a purchase of an extra 50 shares. Next a meeting of shareholders had sent in a requisition for a shareholders’ meeting. This requisition had not been in order, but the directors had arranged an informal meeting with them to discuss tlieir complaints. In consequence of this meeting arrangements had been made for an independent audit of the comjiany’s books and a valuation of stock. They had been pleased to find the value of tho stock (£2552) so satisfactory. The audit had been stopped, pending tho decision of the present meeting, and ho had an interim report from tho auditors (Messrs Clark© and Mcnzics). Tho last twelve months had been a constant struggle, arid at one period, to meet a sudden draft, Thorpe had arranged a second debenture of £3OO. Later on another draft for £SOO was presented; the manager was unable to make any arrangements to meofc it, and the directors obtained it under a personal bond. Later, all these debentures bad been replaced by the existing one. SHAREHOLDERS APATHY. Tho majority of tho shareholders had all along withhold their financial support. Had they not done this the company would have been in a much stronger position to-day. Matters wore brought to a head on September 29th, however, when a cable was received from England to the effect that the National Bank of New Zealand had refused to negotiate the company’s drafts, giving as their reason for this action the short finances of the company, the fact that the shares were not selling, and the lack of support i from the shareholders. ! He had hoped that, provided the ’ audit turned out satisfactory, the oom--1 pany would have had the full support of tho shareholders, and that more shares would have been sold. The holder of the debenture, however, had stated that it was his definite intention to force the company into liquidation, unless it chose to do this itself. COLLAPSE COMES. | . Since then, and against the wishes ! of five of the six directors, the bulk of the stock, which he estimated to be of the value of £2500, had been sold for tho sum of £lOlB. After tin’s sale

man, finally, “that a good company with almost unlimited possibilities, lias collapsed.’ ’ AUDITORS’ REPORT.

The chairman then read tlie interim report of the auditors. This stated that their audit was not complete, as they wore experiencing some difficulty in it. On September 11th, they had asked for vouchers, witli the invoices attached, to be given them. On September 27th they had asked again, and had not received them. The minutes of tho meetings wore not very satisfactory for the purpose of reference. For instance, they stated that- Mr Gilchrist had been appointed as manager of the grocery department at £4OO per annum. Actually he had been given £8 per week. Then Mr F. J. O’Sullivan had been appointed a director*: This proceeding was out of order, because Mr O’Sullivan had not sufficient shares. In any case, he had not been elected at the statutory meeting which had determined the number of directors by electing five. Vouchers were missing; in some cases they were without detailed invoices, and it wan impossible to check the various amounts paid, and details of expenses were not given. Receipts for certain salaries paid also wero wanting; there were differences between entries in the cashbook and those in the receipts, and thero wore entries for which receipts had not been obtained in the regular form.

MOTION FOR LIQUIDATION. Following this, Mr J. S, Nicol, a director, moved: “That it has been proved to the satisfaction of the shareholders that the company cannot, by reason of its liabilities, continue in business, and that it is advisable to wind up same, and accordingly that tbe com pan j' be wound up voluntarily.” Mr E. N. Sutherland, also a direct tor, seconded.

Mr Nicol remarked that this recoin, mendation would not be made if they thought that the company could weather the storm. However, there seemed to be no hope. Mr Sutherland stated, for the benefit of the meeting, that it was not the directors’ fault that the audit had not been completed. He would have liked business to have gone on until it was. The auditors, however, had refused to go any further, and if they desired the audit to go on they would have to put their hands in their pockets. As it was, they could not see that the company would pay 20s in the £l. Mr Nicol (appealing to the chairman): YVill you coll Mr Sutherland to order, sir. There is no statement in the interim report that the company could not pay 20s in the £l. The chairman: As a matter of fact, I telephoned the auditors, and they told me that.

Mr Sutherland: Well, will that suit you, Mr Nicol ? THE MANAGER’S STORY'.

Called upon by Mr F. Thomson to pive his version of the matter, Mr I borpe stated that nobody regretted more than he that the company was in such a pass. A wholesale co-opera-tive concern, with some of the finest prospects in the Dominion had come to an end. Of hie own choice ho had taken less than half-salary, and had never received any commission. The company had been unfortunate in being formed immediately prior to tlie plump. The agencies, bo maintained, were excellent, and were still full of possibilities. They still had some; such as that of one firm which turned out cotton piece goods, another rubber concern, and an Indian embroidery company. To 6ell shares, lie himself had paid commission, and in some oases salary as well. The matter of the English trip had been adjusted at tbe last annual meeting. The expenses had been very light, and it had been laid down then that these would bo more than compensated for by tho splendid agencies which he had secured. There had been an absolute refusal on tho part of English manufacturing firms to carry on business with New Zealand concerns, and though their own company had been strongly recommended By their bankers and influential New Zealand ‘merchants, it had required the exercise of considerable tact to obtain the agencies. On this trip there had boon many instances of amounts which he could have charged up to the company; but he had conscientiously considered each sum. Ho had appointed Mr Gooch as acting-secretary on the last day before sailing. SHAREHOLDERS SATISFIED.

After making a survey of the history of the company on the same lines a*s the chairman’s, but with more detail, Mr Thorpe stated that tho shareholders, or some of them, had given him to understand that they wero satisfied; others had wanted more for tlieir money; others wore di scon ton tod. As tho result of a later meeting, Mr Gilchrist had tendered his resolution, and tlie meeting had expressed itself well satisfied at the general state of affairs. Later they had tried to got a butter contract and failed, only to find that some of tlieir shareholders were operating against them. Profits on their first indent, lie said, had been largor than was generally realised. They had had letters from bpyers, eminently satisfied as a result, and had been told that more business wrm offering. Jio bad engaged a traveller, and he denied that the expenses of this man had been excessive. They had boon only 2.58 per cent, of tbe orders taken. Had tlie shareholders given them support, he believed that they could have kopt going and paid off tho debentures. He was satisfied, too. that more was made from tho forced ealc than would have been rcccvied had the stock been sold in small items. To tbe loyal shareholders ho expressed his regrets; the others, lie was sure, were not in full possession of the facts. It would have been bettor if they bad left tbe management to those appointed, and bad given them a chance. OPPOSITION ENCOUNTERED.

He spoke of opposition from other quarters. At the ■very first directors’ meeting which he had attended Mi Sutherland had offered a servant of tho company £5 to Is that the concern would soon go out of business. Another had wanted £G per week for his services—a sum which ho, himself, had considered preposterous. When they had had to face such things was it any wonder that they terminated in the meeting of that afternoon. He, himself, Was owed £BOO by the business and had £2OO in shares, the largest holding of anybody there. Decidedly he had every reason to desire it to prosper. Tho chairman, rising to make an ex planation, said that lio had given his services to tho company on the understanding that when it was in a position it should recomjx-nse him. He had brought matters to a head about this, and had put it to the directors that they .should give him £fl per vycok. in slum's, not in cash. He had put in hi.s full time and had. never asked for cash. In every way Ite had done lus utmost for the company. Further, he stated, Mr Thorpe e<l Gilchrist before he (tho speaker) had known anything about it. “GOULD NOT INTERFERE.” Yfr Thoipe pointed out, in regard to

control of the previous secretary, and that ho could not very well interfere in this side of the work. i\lr Sutherland: Of course I offered that £5; but l did it as a bit of tun. The trouble with tl\o company, he said, was that it had never lia-d a chance. Thorpe, Barr, Brown and Co. had hern bought out for £I7OO. Had they received £IOO, instead t.f £I7OO they would have been well and amply paid. lie had mentioned the matter to Thorpe who had exclaimed: “Well, Mr Sutherland, wliat would you have me do? I’m the seller; not the buyer.” REFUND SUGGESTED. Mr Thorpe was an honest man. Therefore he should refund to the company the sum of £IOOO, w’hich would help them along a great deal. As to the trip Home—it should never havo happened. The company was not in the financial position for such a thing. It had had £3OOO in shares, fox which it had received £2OO. and the directors’ money £SOO. To get Thorpe the flip Home a debenture of £IOOO had been arranged. How it bad been managed he did not know; he presumed that it had been issued on uncalled capital. The secret agreement had been altogether out of order. Also before the combined buyers had joined up, he had offered them a warehouse at £2 per week. The directors hod not had the courtesy to look at it, but had taken one for which they paid £l2 per week. Working expenses had been too high altogether, and when he had gone on to the directorate (against his will) he had wanted things dene in the businesslike way. THE BALANCE-SHEET. The balance-sheet as at present (as far as could be worked out) was as follows : —Capital £SOOO, debentures £2500 and £3oo—£7Boo in all, stock £2037 7s lid, grocery £455 15s, sundry goods £55 5s Od, travellers’ samples about £200; total £2748 11s od. Stock soldi bad realised £1730 11s Sd lea* than its value. He contended also that they had paid too much. He suggested that the company should be refunded £5330 11s 9d. (Applause.) Mr H. S. Hawker asked the chairman why the directors had bought out the firm ? Thorpe had had the offer, and could not be blamed for taking it. The chairman directed attention to the passage in his report in which he had stated that he had opposed taking over the goodwill of the firm at so high a figure. He had not been chairman then; merely one of the directors. “A WRANGLE OF DIRECTORS.” Mir Nicol: We seem to havo come here to listen to a wrangle between directors. It is too bad that such statements should be made. He pleaded for dispatch. Mr C\ L. Williamson: We are here for information. Nearly every shareholder has yet to learnthe A.B.C. of what has happened. He did not blame Mr Thorpe, he said, but the past directors had been “absolutely fools” to give what they had for the business. Mir Sutherland pointed out that the balance-sheet showed a loss of £6782 for less than two years’ working. That was not including £3OOO uncalled capital, which would make the position worse.

At the request of Mr F. Thomson the agreement between the company and Mr Thorpe was read. Following this Mr O'Sullivan stated that he supported the resolution that they should go into voluntary liquidation. At the inception of the company expenses had been great and business went back. The manager was away; and the agencies which lie bought returned little, were left in abeyance, and became non-existent. For a period of two years, instead of getting upon its feet, the company had steadily gone down. Finally, the receiver had been put in, and the directors prevented from doing any business that they had a mind to. LIQUIDATION DECIDED.

Mr Nicol stated that Mr Thorpe had been fortunate in finding an outsider to accept the goods lie had sold at such a price. He was to be congratulated upon clearing out these goods, and the shareholders should be grateful to him. The motion regarding the company going into voluntary liquidation th-en was put and carried. Messrs W. F. Jenness and F. J. O’Sullivan were appointed as liquidators.