The Sun.
London, England, 1865-10-17 00:00:00

Another Joint-Stock Company Scandal.

(From the City Correspondent's Article of the Times)
A committee, consisting of Messrs. Edwards, Bevan, and
Cheesewright, formed, with the concurrence of the direc-
tors,.to investigate the affairs of "Smith, Knight, and Co.
(Limited),"—a company started some time back, with a
nominal capital of £4,000,000, to take over the contract
business of that firm—have issued a report, to be submitted
at a meeting on the 26th inst. This document is of an ex-
traordinary discouraging character, and will operate as the
most efficient warning that could be conveyed to investors
in undertakings which involve the purchase of the good-
will and plant of such establishments. It states that the
purchase-money agreed to be paid was £230,000 (£130,000
in cash and bills, and .£lOO,OOO in 20,000 shares with
£5 paid), and that it does not appear either that
any balance-sheet of the firm was ever submitted, or that
any valuation was obtained or inventory taken of the
plant and effects until months afterwards. In the opinion
of the committee, the goodwill of the contracts handed
over was worthless, and these contracts, taken as a whole,
were not only unremunerative, but burdensome. It is at
the same time intimated that there have been improper
additional payments to Messrs. Smith and Knight to the
amount of £22,747, and that further sums amounting to
£72,000 have been privately disbursed ; also that two
calls on the shares held by Messrs. Smith and Knight
are in arrear. The committee regard the general cha-
racter of the business with " the greatest alarm," and
add that, to raise money to meet pressing demands, the
most improvident engagements have been made by the
issue of promissory notes and debentures—a prac-
tice, perhaps, at the root of the large dividends,
which some of the companies who direct themselves to that
class of transactions are enabled periodically to declare. A
repetition of such borrowings, the committee believe, "must
infallibly lead to utter ruin, and in the end to every solvent
shareholder being called upon for the full term of liability
of £5O per share." As a sot-off, however, against this,
there is the fact that important contracts undertaken by
the company since its formation have been sublet at a profit,
to yield, if they can be depended upon, about £177,500 over
the next three or four years as the works progress. It is
finally remarked that—..

" The committee are persuaded that oven with this as-
aiatance nothing can save the company Unleaa the share-
holders resolutely intervene at this moment. The committee
are of the decided opinion that no new business should be
undertaken ; that a voluntary liquidation should forthwith
take place, and that the creditors of the company should be
negotiated with to postpone their claims ; that the expenses
of the administration of the company should be cut down,
and that three shareholders and two directors should be ap-
pointed liquidators. The committee further advise that all
relations of the company with Mr. Smith and Mr. Knight
should cease; that their 20,000 shares should be at once
forfeited, and that they should be proceeded against for the
amount of the two calls, as well as the sums improperly re-
ceived by them. It being provided by the articles that Mr.
Knight should hold the office of managing director, with its
benefits for seven years, unless removed by a special resolu-
tion, such special resolution would be necessary to be passed.
The committee are convinced that it is only in this way that
it will be possible for the holders of the remaining 20,000
shares to recover ultimately a portion of the money they
have invested, after satisfying the claims of the creditors.
In conclusion the committee earnestly recommend that the
shareholders pay up the present call, that they may be en-
titled to attend and vote at the ensuing meeting."
md conciseness
materially
The entire report seems to have been drawn up with
ca
ernets an
that
softened
the hope
being
explana-
tions, especially as it manifests no personally hostile feel-
ing toward the directors, against whom the charge is that
of neglect, and not of general participation in the proceed-
ings of the manager.