Interesting Point in Liquidation Decided in Supreme Court A point of interest in connexion of the winding up of the Eastern Syndicate Ld. was decided by his Honour Judge Skinner Turner in H. M. Supreme Court on Saturday. Mr. N. Langley-Smith appeared for the appellant, and Mr. H. Lipson Ward for the Liquidater (Mr. Mortimer Reid).
His Lordship's judgement was as follow:
This is an appeal from a decision of the liquidator in the winding up of the Eastern Syndicate Ld., in which he placed the names of the appellant and certain other persons upon the list of contributories to the assets of the company in respect of 111 shares of Tls 30 each. Mr. Langley Smith appeared for the appellant, (A. P. Simoes): and Mr. Ward appeared for the liquidator. It is agreed that the position of all the parties is the same. The argument was begun in Chambers and was adjourned into Court for the purpose of the cross-examination 2f r. A. P. Simoes on his affidavit. The company was incorporated as a private company on May 20, 1920, and took over the business of a partnership (consisting of the same persons) as from March 1, 1920. It had a capital of 400 shares of Ils. 20 each; of these 120 were allotted, but only nine were subscribed for cash. On July 11 1920, the directors allotted 111 shares that theVare the matter in dispute here to the appellant and the others as fully paid up in consideration of "the purchase price of the firm." No invitation to the public to subscribe was ever made, nor does it seem to have ever been intended. The liquidator contends that there was in reality no consideration for this allotment: that the transaction was illusory and a sham, and that as all shares have to be paid fo: money or in money's worth, these shareholders are bound to pay 2p the full amount on them. On the other hand the appellant contends that it was perfectly bona fide transaction: that the company took over as a going concern a business that had been running on small lines and with varying success since 1915: that in addition to what was actually taken over there was a goodwill and that between the dates of March 1 and May 20, some was to get the benefit, were entered into and that these contracts were reasonably expected to be profitable. There is no doubt the promoters of the company thought that they had got the business into a successful stage and that they had an established connexion which would be valuable. There is no doubt that all parties knew the actual financial position of the firm as on March 1: it was fully set out in the report of the meeting of the firm on May 21. Then it was pointed out that all the bad assets had been written off against the capital of the firm, which in reality stood at $10,556.05, but was now to be taken as being $5,044.36 only; that though the Profit and Loss Account on February 29 showed a loss of $4,188.54, this really represented the expenses of the firm from 1/7/19 to that date and there was business being done; then they worked out the proportion of partners' shares in the above te-duced capital and allotted the fully paid shares to them accordingly.
Text read from the printed page and cleaned; old type leaves the occasional error.