New-York tribune., 1922-05-14
Reorganizing Company in Receiyership

.., Question.-I question, do not know that you
who're my experience and foresight are not
lhuci' ! suggest 1t to you--tor reply or the
waste basket, at your choic. The situa-
tier IS this: y manufacturing company
here, with 1000 stockholders scattcred over
n dozen counties in tne territory of eastern
Ohio has been abused and put upon by
its organizers and promoters .hat it has
come, through attorneys, Of whom I am
one into The charge of the court for re-
ceiNers. wi:h much Involvement in promo
ton stock undcSra bic selling contracts
and other complications. The actual debts
arr are about $4,000. and the assets-in
$4,000 SO there is a basic equity
for stockholders OF about $500, 900 There is
outstanding r bona nde stock, bought by
original stock subscribers. and paid for nj
par in cash. $4,000 preferred and $780,
c.Inmon cen n5 ste stock; In view OF an indicated
the old company. with It's many tnvolv-
mcnts. cannot be financed so as 30 bo-
come again as goi1g concern, If a new com
pany be forme0 by the major part OF the
stockholders, who want 10 save themselves
by making new cry" and which shall
finance the requirement. in purcha Sc m oney
at the sale by an innmcdiate mortgage OF,
the plant, II as highest biduer they buy i.
IN then. In contemplation or the premises
TO arrange for and present by circular let
ter for the consideration Of all these stock
to each class of this outstanding stock.
through an exchange OF their old stock for
stock in the new company. and also raise
working capital to run the plant: In or
sanizng 2 corporation under tho Ohio
sSSnut1s seaibad 10 ,ot per cent Of the stock sub
20 business. completing it's org nization. IF
three e-fourths of this old STOCK should prove
venture, and to contribute the new cash
what should be the plan arrangement
mostly likely to win adhesion? A shrink
age of the stock in the exchange half
or two thirds-a major surgical operation
to eliminate proud icsh'--would be per-
haps. rather too drastic for the patient:
but IL is suggested not good rsvchoI-
ogN for success in the come back. Your
reply VIII be greatly appreciated, if this
subject snail interest you for response
Answer-The situation You describe
would, in our opinion, call for re-
organizatio along comparatively sim
pie lines. The formation of new
company and the offering to stockhold-
ers to subscribe to bond issue of suf1i
clent amount to iquidate the debts OF
the old company and provide working
capital to continue the business, would
be the most favorable procedure. Each
stockholders quota would be fixed in
proportion to his stock holdings in the
old company Where stockholders re-
fused to subscribe within the time
limit their stock in the old company
would BECOME valueless. If fair ap-
praisal Of the assets of the company is
S470,000 and there are debts of S17oOOo
a mortgage of s250,oOO would take care
of the debts and provide working cant
tai of $4,000. 1t might be possible to |
secure the consent Of the creditors to
accept bonds in settlement of their
claims. IL this we're accomplished tho |
amount to be raised would be confined |
to the amount of working capital
deemed necessary. Stock in the new
company should be issued to the suh.
scribing stockholders share for share
or in smaller proportion if deemed ad,
visable.