'The Guaranty Underwriters of china. Ltd, a British incorporated company charged with being under the control of an American firm, the China' Finance Corporation, Fed. Tne. contrary to Article 198" (2) of the" China Order-in-Council, were found not guilty by the Registrar, Mr. C, H. Haines, in H. M. Police Court on "Thursday morning.
The sub-section under which the charge was brought reads as follows—
"No person other than a British subject resident within. the limits of this order shall act as managing. dircelor of his judgment yesterday, the Registrar pointed out that the real question arising from the case was the meaning of the words "or otherwise exercise general or substantial company." jeontrol of the business of a China
The action was brought against the Guarcity Underwriters of China, Lid, at the instance of the Registrar of Companies. Mr. K. E. Newman of Messrs. Teesdale, Newman & Ca. represented the defendants and the Jprosecution was conducted by Mr. John MeNeill of Messrs. Hansons. The hearing started on May 22. In hig Judgment the Reaistrar said: quite {seis of the care are as fol-'The China Finance Corporation Fed. Inc. U'S.A., and American Company, was the main shareholder in the Guaranty Underweilers of China, Inc, which Company held the niajority shares in the Finance Banking Corporation Limited.
On the 30th July, 1994, the Guaranty Underwriters of China Lid. was formed as a private limited Company fo take over the business of the Guaranty Underwriters of China Me. The reason for the transfer of the business and capital from the Amerlcan Company to a British Company iwas given by Mr. Seth, the manag ing director, as his personal whim but the fact that insurance business cannot be condveted by an American Compeny formed under USA. law probably had far more weight with the majority shareholder ie. the China Finance Corporation which authorized the winding up of the American Company and the forma: tion of the British Company.
The directors of the defendant Company were on its formation and still are: Messrs. Payne, an American citizen, Turner, a British subject and Seth, a Brilish subject. The whole [share capital is owned by the China Finance Corporation but 100 shares are held by the directors between them as its nominees, The same directors are also directors of the China Finance Corporation Me, 'The business of the China Finance Corporation Inc, the Finance Banking Corporation' Limited, and the defendant Company, was managed by Mr, Seth who had his office for all three Companies at he same address: 9 Avenue Edward VII, Mr. Seth, in addition to. nominal Jdiveciors fees, received a salary for hig services. to all. three Companies Jand it. was left to him to allocate it thought ft—actually he charged all to the China Finance Corpora tion Me, The business of the defendant Company, apart from holding 39,800 shares inthe Finance Banking Cor-acting as agents ut Fire and Life Assurance Ca, Lid, and policies were accepted or refused by Mr. Seth, Mr. Selh has never received any in: structions from the China Finance Corporation 1Ad. regarding the conduct of the busines On, the 19th or 20th March, 1935, Mr, Sel, as a result of a letter from ithe Crown Advocate, called on him. Tu view of this interview he gave instructions for the defendant Company to cease operations as from the Sist Maren, 1988, At a mooling of dircetors held on the 25th March 1935, It was resolved to wind up the Company as soon as possible and the first of. cial stops ie. fling a declaration of solvency, were taken on the 14th May, 1035.
Tt is on these fads that the prosection claims to have proved that the Jgeneral or substantial contro! of the business of the defendant Company was exercised by the China Finance [Corporation Foa. Inc. US.A. have read carefully the cases ted by learned counsel for the [defence but they do not appear to a3~ sist in determining the real question here which is the meaning of the words "or otherwise exercise genera! or substantial control of the business of a China Company.
Having regard to the general rules for inlerprotation of statutes and the intention of the legislature as far as ascertained from the T consider that these fo things @jusdem genesis with the preceding. words which are: "No person, other than 9 British subject resident within he limits of this Order shall act as managing director o in any. position similar to that of managing director." This being s0, the pragecition must prove beyond all reasonable doubt the China Finance Cor.
jon Fed. Me. USA. exercleed {the same class of control over. the the business of the defendant Company which a managing director or some person in the position of a managing director would be expected, to exercise.
I am not satisfied on the evidence before me that the China Finance Corporation Fed, Inc. U.S.A. did. Jexereise "such control over—the business of the defendant Company. On the contrary, the evidence shows that such control was exercised by Mr. Seth, a British subject, without the slighinst supervision of the Corporation.
The mere facts that (1) a non-British Corporation is the majority shareholder "in. the defendant Company; (2) the managing director of the non-British Corporation is also the managing director of the defendant Company: (8) thatthe mon-British Corporation formed the de-Hfendant Company for the sole purpose of carrying on a business which it cona: dered it was forbidden to carry Jon itself, are not in themselves sumcient to' prove that the non-British Corporation exercised control of the fousiness within the meaning of Artlete 194 (2) of the China Order Council, 1925. guilty.
I find the defendant Company not:
"Eéitorial Comment on front page.
Text read from the printed page and cleaned; old type leaves the occasional error.