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A Curious Promotion.

23rd April 1908, Page 20
23rd April 1908
Page 20
Page 20, 23rd April 1908 — A Curious Promotion.
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Which of the following most accurately describes the problem?

In the Chancery Division before Mr. Justice Parker on April t3th, Mr. Eustare Smith applied to rectify the register of shareholders of the National Motor Mail Coach Company, Ltd. (in liqui. dation), on the ground of misrepresentation, and to set aside the allotment of shares on the ground that they were issued in contravention of Section 4 of the Companies' Act, two.

Mr. Eustace Smith said that under the Articles of Association of the company the minimum subscription under which the directors might proceed to allotment was 25 per cent, of the shares offered. They stated in the prospectus that 35,000 ordinary shares representing 25 per cent, of the whole had been underwritten, and this was the first misrepresentation alleged. The directors further stated that Mr. Herbert C. Webb was the promoter of the company, whereas Mr. Smith alleged that Dr. Lehwess was the real promoter. That constituted the second misrepre sentation. But the more important part of the case would depend on the allegation that the minimum subscription never was subscribed. About 8,000 shares were subscribed by the directors and the public, and the directors then called upon Mr. Webb, in accordance with an agreement, to underwrite the additional shares required. In response to this request Mr. Webb brought forward a company called the Modern Traffic Development Corporation and offered them as underwriters for the 27,000 shares. The directors were not satisfied with this company and ultimately another, called Securities Exchange, Ltd., also introduced by Mr. Webb, undertook the underwriting for 12,000 shares. Other shares

were allotted as follows : Modern Traffic Development Corporation 6,000 shares, FL C. Webb 2,000 shares, and G. H. Hayes, the original owner of the business, 7,000 shares. Mr. Hayes, however, would state that before the 6th June when the company went to allotment, he Withdrew his application for shares. On the 6th June at the board meeting, some bank notes were produced and handed to the secretary the company. These bank notes never went into the company's banking account. On the loth June cheques representing the amount of the application monies were paid into the companies' account.

George Henry Hayes, the original owner of the business the company was formed to acquire, said he regarded Dr. Lehwess as the principal in the transactions for the purchase of the business. Dr. Lehwess, however, did not wish his name to appear, and so Mr. Webb's was substituted.

Captain Lowcock, managing director of the Modern Traffic Development Corporation gave an account of the board meeting of the National Motor Mail Coach Company when the shares were allotted. He said that he produced at that meeting bank notes— previously received from Dr. Lehwess —for the amount of the application money.

This evidence concluded the case for the applicants, and Mr. Justice Parker remarked that the whole case turned on when the money was paid. The evidence at present was that it was not paid till the Toth.

Mr. Henry Alfred Johnson, chairman of the directors of the Motor Mail Coach Company, giving evidence on behalf of the company, said the directors did not find out until some time afterwards that the application moneys were not paid into the company's account at the bank until after June 6th.

Sir Martin Conway, another of the directors of the company, said proper inquiries were made as to the standing of the two companies which undertook the underwriting. Witness said that although Webb was nominally the promoter of the Motor Mail Coach Company, he regarded Dr. Lehwess as the financial backer.

An argument ensued between counsel as to whether notice of the motion of the applicants in the case was served within a certain time of the holding of the statutory meeting of the company. It appeared that the meeting was adjourned. No definite conclusion was arrived at after counsel had argued the question for over an hour, and at last the Judge suggested that the case be allowed to drop on permission being given to both sides to have their costs out of the estate. Counsel agreed to the suggestion. His Lordship added that he was quite satisfied the directors acted perfectly bona fide in the matter and that when the applications were made the money was produced. It was quite possible that there was some explanation of why it was not immediately paid into the bank, but the transaction legitimately gave rise to suspicion which the plaintiffs in the application were advised to take advantage of. There was not the smallest ground for imputing any want of ordinary caution on the part of the directors, but he had also to say that it was a legitimate case for inquiry.


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