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WHITEAWAY, LAIDLAW & CO., LTD.
HONGKONG.
HONGKONG DAILT PRESS, FRIDAY, APRIL 9TH, 1926
CHINA PROVIDENT CO.'S POSITION.
INVESTIGATING ACCOUNTANTS" "DISQUIETING
REVELATIONS.
LOSSÉS ESTIMATED TO APPROACH $2,000,000.
*
FRANK STATEMENT BY THE CONSULTING COMMITTEE; AND THE GENERAL MANAGERS' REPLY.
It has been generally known in business circles that the affairs of the China Provideat, Loan & Mortgage Company, Ltd., havs recently been the subject of investigation by the Company's Consulting Committee. aided by auditors and legal advisers. Yesterday at an extraordinary general meeting of the shareholders of the Company" preliminary statement" of the position revealed by the investigation' was presented to the meeting. It stated that: Without going more fully into the position, the preliminary statements show that loans on shares and property are in excess of security to the extent of approximately $1,750,000, bat we sincerely hope that the full loss will not amount to this sum.“ Other items are estimated to bring the losses up to $2,000,000, ns outside figure.
an
"In reply to the statement, Mr. Robert Shewan, on behalf of the General Managers, said he had no hesitation in attributing the present financial position of the Company to the recent financial crisis and resultant-commercial conditions.
The meeting elected a committee of six shareholders to act with the Consulting Committee as a Committee of Investigation in completing the investigation of the Company's affairs. The Consulting Committee present was as follows-Mr. R. G. Shewan (Chair. man), the Very Rev. Father L. Robert, Messrs. T. G. Weall, H. P. White J. H. Taggart and D. de Meester.
Others present were: Mr. W. E L Shenton (company's solicitor); Mr. D. L. King (secretary) and the following share holders:-Messrs. J. F. Wright, M. G. Beale, A. Zimmern, Chin Lim Fu. P. M. N. da Silva, J. M. Alves, P. Tester, 'Poon Li Fung, V Sorby, I. S Perry, Fleming. T. Wong, D. J. Lewis, C. B. Brown, A. L. Alves, Kelly Sayce, C. A
Now as these shares on "March 15th, 1924) were standing at a high premium in the market it appears to us that it was the plain duty of the General Managers either to offer the remaining' unissued shares to all the shareholders or to have disposed of them in the market and obtained the premia for the benefit. of the Company. In fact they did neither.
An examination of the books abawi that from March 13th up to the end of the year the General Managers proceeded to issue these shares at par to certain
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Loans have been made on various securities, for example, borrowings by Messrs. Shewar Tomes, the accounts and valulations calculated to December 31st, 1925, showing the firm to be indebted to the Company in a sum of $258,000-the security being partly shares and partly goods with an estimated excess of in- debtedness over security of '877,000. de Rozu, J. T. Bagram, Chan Yuk shareholders whose acceptances they There is a total of roughly $20,000 Soo Per Shao, W. J. Hawker. D. H. received after March 15th-thes paid out any security whatsoever. And large outstanding on Promissory notes with- Cameron, A. H. Thompson, W. T. Stan-dividends upon shares do issued as though sums due to the Company for ton, L. Duclos, L. Duabar, A. P. Samy, they had been taken up and the allot storage charges, in some cases going back W. Morley, Wong Kwok Ming, Ip Fook, ment money paid upon March 18th in nearly 10 years. We cannot, of course, expect to recover, all of "these from D. W. Munton, L. Tse Fong, In Tak many cases they failed to charge the clients at this late date. Cheung. I. W. Showan, Tse Team Tui.appropriate rate of interest upon the
B. C. Randall, Henry Humphreys, W. Allan, A. W. Thornhill, Chon Poa Min. E. Sadick, Chan Wing Foo, E M. Ray mond. F. M. Crawford, N.V. H. Crdu cher, D. Templeton, C. H. W Bew, W. J. Carroll, A. A. Alves, D. J. Lopes, Cho Hon Fun, C. M. Heanley, "S"Lopes and others,
acceptances.
We believe that these methods resulted in a loss to the Company of about 8100,000.
Not only did the General Managers thus fail in their duty to the Company but at the general meeting held on April
shareholders were led to believe that at that date the whole of the 400,000 shares had in fact been taken up, and the allotment money paid.
ATG
ESTIMATE OF LOSSES.
;
GENERAL.
(101
Mr. WELL then read the following resolutions:
(a) That the Company confirms the measures already taken by the Consulting Committee, with refer. ence to the investigations made by them into the financial position of the Company and authorizes pay- iment by the Company of auditors and legal expenses incurred to date in connection therewith,
(b) That three shareholders to be nominated at this present meeting be appointed to act with the Con sulting Committee incompleting the investigations of the Company's financial affairs and to report to the shareholders the result of such investigations when completed.
(e) That the Consulting Committee be authorised to employ auditors and lawyers in connection with such further investigations of the Coin- pany's financial affairs and that the costs and expenses incurred thereby be borne and paid by the Company, (d) That a qualified accountant be em- ployed by the Company to asdist and advise the present staff of the Company.
REPLY FOR GENERAL MANAGERS",
Without going more fully into the position, the Preliminary Statements show that loans on shares and property are in excess of security to the extent of approximately $1,750,000,- but we sincerely hope that the fail loss will not are the smaller items such as Bad Debts, amount to this sum. In addition, there
Unpaid Interest, etc, allowance for which will have to be made and we place the losses to be met at an outside Egure of 82,000,000. This may mean a drastic adjustment of the issued capital or possibly reorganisation" of the Com
Mr. R. G. SHEWAN, replying, said:" pany. As to this, it is impossible to form an opinion until a more complete Gentlemen,-You have beard the state- investigation has been carried out. ment made by Mr. Weall on behalf of At the present moment I am not pre-the Consulting Committee arising out of perty have been found to be insuficiently pared to suggest to what extent the the investigation they have already car officers of the Company can be held liable ried out based on the information we secured. ' some cases Mortgage deeds for the losses incurred. It would be un- have supplied them with up to date, and, bad not been completed and in many desirable in your Committee's opinion Mr. WELL then read the following cases proper valuations had not been to attempt to do so until all necessary investigations have been completed and obtained of property against which all the facts known. money had been "lent.
PROPOSALS FOR FUTURE.
The Secretary read the potice corventh, 1924, our Committee and the ing the meeting, and the CHAIRMAN said: The first business is to receive and con- sider a statement by the Consulting Com- aittee regarding investigations made by them into the Gnancial affairs of the Company. I understand, that Mr. Weal! is to read it.
COMMITTEE'S STATEMENT:
statement":
The General Managers have called this meeting at the request of your Conauiting Committee, who have asked me to make a statement to you regarding what we consider to be the very unsatisfactory position of the Company's financial affairs, to advise you of the steps the Committee have already taken and to put before you certain proposals for the
future.
་
In October last year certain facta came to our knowledge and we at once re quested the General Managers to call in Messrs. Lowe, Bingham and Matthews as. independent accountants to carry out
MORTGAGES.
A large number of loans against. pro-
'made on landed securities.
you will appreciate from that state. ment, only a preliminary investigation has taken place up, to the present. Wo trust that a complete and thorough in- " quiry and investigation will show a sup- stantially brighter position than is at
So far back as November, 1995, your The foregoing gives you as concisely present indicated by Mr. Weall's state- Committee insisted and the General as possible the present position of the rent. Managers undertook to have legal Company and I now propose to deal The General Managers desire it to be mortgages executed in respect of ell loans with the immediate future. I suggest clearly understood that they welcome the that as it is impossible for a large body appointment of special investigating An illuminating instance, of the to deal with the situation, you be asked committee, and are only, too pleased to. methods pursued by the, General Mana to nominate three representatives from place all materials they may require at gers is that of Mr. Tong Hak Ting, com- your number to represent you and to co their disposal, and to give them all in- pradore and partner of Messrs. Shewan, operate with the members of the present formation they may desire. Tomes & Co., to whom approximately Consulting Committee, to continue the I will now deal with some of the points four and a half lakhs of the Company's investigations and to report to you at fraised in Mr. Weall's statement." money was advanced on title deeds, a later date together with any recom- which we are now informed by the mendations they are able to make as to
Managers General
дге valueless 19
the future of the Company. To be of The General Managers always consider- security for this loan.
practical use, this Committee should have ed that it was their duty, to assist share This information was given us for your authority, to employ such expert holders in taking up their shares and stand now that the General Managers They should also be empowered to engage did not consider, that they should have If a reasonable excuse were given. They were aware of it two months earlier." temporarily or permanently such persons
NEW ISSUE OF CAPITAL.
a thorough investigation and after a the first time on March 28th. We under- knowledge as they may deem necessary. were always willing to extend the time
period of three months, the length of which period was partly necessitated by the position of the Company's recordi, a report was presented to us. This re port, in spite of the time of necessity taken in its preparation, is merely a preliminary statement; it does not
LOANS ON SHARES, ETC.
as they deem necessary either for pur- endeavoured to make money out of some Very large sums of money have been poses of this investigation or for the shareholders for the benefit of other
shareholders. 9 advanced on the security of shares-the proper conduct of the Company's busi- result in many cases being dimstrousness. In this connection the Investi do not understand the reference to gating Accountants have called our atinuing shares to certain shareholders. in hay vay purport to give us a desnite Loads were made on shares carrying tention to the necessity of having more No shares were issued except to those and complete analysis of the affairs of liabilities for further calls and a assistants for the Godown part of the who were entitled to them. the Company, but it nevertheless reveals parently the prudent policy. of requiring business and your Committee consider it I know no reason why interest was not such disquieting matters that we felt it a margin of safety was not pursued.
most desirable to employ for a limited charged, but this matter can be gone into I do not intend to trouble you with a was obviously necessary to lay before you at the earliest opportunity the informa- long list of specific items, but as an period a qualified accountant to assist by the committee appointed. tion which it has contained. 2-
example there are two loans to Mesars in the completion of the investigation My statement, therefore, will not G. P. & H.A. Lammert on the security and to instal an efficient and up-to-date
system of accounting. attempt to give you an exhaustive survey of shares which according to the report,
'NEW, IBBUR OF CAPIZAL,
I do not think that there was any such. loss as $100,000 in the allotment of these shares. One large shareholder was given, rather longer extension than usual, as he could not get the money without com
of the report, because I think you will on a valuation of December 31st last, I would like to give you a few words agree with your Committee when you show an approximate excess of loan of encouragement before I sit down. municating with his wile in England, but have heard what I have to say that a over security of 8131,000 and 822,500 re- Your Company has excellent property this did not occasion any loss at all to complete investigation of the Company's spectively on that date. Unfortunately at West Point and an excellent Godown the Company, as if the General Managers affairs will be pecessary, and such com- there are many other similar enzen. business, which, if properly managed, had refused to give him this extension, plete investigation when made may in
Interest on loans is in a large number copid, I feel sure, give shareholders an he would simply bave sold his rights to some cases amplify or limit the conf cases in default. Such items adequate return on their investment and the new shares at a profit to himself, and clusions reached by the accountants in have in many cras been credited to I therefore ask you to give the Committee this remark applies to all other share. their preliminary report, but with your Revenue and marely added on to the your wholehearted co-operation to the holders, and Company would not permission. I will enumerate some of amount of the logs, and General Mana end that we may once more put the Com- have made the $100,000 in any case. As the principal items so far disclosed.gers' commision has been charged there- pany on a sound and paying basis. It a matter of fact the Company now hold fon. It is impossible to estimate the will be necessary to ask you to exercise the shares which formerly stood in the sum involved at present, but this is a patience and to attend shareholders name of that shareholder, as he failed You will remember that by a special matter for the Accountants to go into meetings which may have to be numerous to pay the final call.
I cannot see that there was any failure resolution passed on January 14th, 1924, more fully Needless to say, the in- in order to keep you fully posted: as to and confirmed on January 20th, 1924, elusion of such debts in the Balance sheet progress made, and I therefore nak you in duty in this case by the General a new issue of capital was authorised, as good amets tends to create an alte all to take a live interest in the affairs Managers.
I do not understand the statement that and 400,000 new abares created.
gether false impression of the Company's of the Company:
the committes and shareholders were led A specific date, March 15th, 1994, was standing, and I am afraid that a large I will now read you the proposąlę on fixed for these shares to be taken up by portion of these sums will need to be the Agenda after which Mr. Shewan will; to believe that the whole of the 400,000 shareholders whose registered address written off entiraly.
I believe, address the meeting. Then shares had in fact-been taken up, as the they have been trocuted, will be open for April, 1995, shows that there were 300,... your consideration before asking you to shares on which 62.60 had been paid?
(Continued on page 5.).
was within Hongkong, China or Japan In addition to the matters which fall each will be proposed in turn and when printed statement of account dated 18th.. After that date the remainder of the under the heads I have already mention unissued shares was to be disposed of byed there are many other transactions the General Managers,
which require further investigation. vote.