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You say you have received money in respect of shares when all you have done is simply a cross entry?. Theoretically you have done it.
This Company on the 1st of June had $9,000.00 actual cash, coin, notes that circulated her and received during that month $50,000.00 or so. During that period it purports to make loans of 7 lakhs in which the total amount of money received would amount to not more than $80,000.00. Would you have been content to say you have received 7 lakhs cash for your shares?
I would have in my mind that I would receive the total amount of my loans. That is my idea, it is a simultaneous transaction.
By that you mean?.
Immediately this loan is granted the balance of the unpaid capital is paid. It automatically applies. How do you reconcile yourself that the company did not have the cash to grant loans?.
It is a simultaneous transaction.
You consider it a cash transaction?.
I say theoretically cash.
As an Accountant, is it proper for a company to apply and pay for shares with its own money? would you allow that?.
NO,
I don't think I would.
Their own k it.
4,000 odd were applied for and paid by Company' money. You would have passed that as cash?. without anything leading up to it, no. Articles of Association might prevent Could you possibly say that amount was cash received in respect of shares, when it was their own money?. No, I don't think I would. I don't know the hist- ory of the 400,800 but it that money was in the
hands of the Company, the Company applied for shares out of its own money and granted to itself a loan on them. I would say it was wrong.
would you say it was wrong, if granted to a nominee to whom they gave an indemnity?.
I cannot see the object.
A person not worth $432,000.00 applies for a further loan and obtains it. Would you as an auditor permit that transaction to be stated as money re- ceived by the Company in respect of shares issued wholly for cash?
I say this, as far as the 10% out of the Company's funds, would hold that up. Then the 90% and loan
granted, never minf the person, the person was guaranteed.
I say that person was unable to pay the money and holds a personal guarantee given by the Directors. The money is the Company's.
If it is personal I would be inclined to treat it th same as anything else, but not from the Company. 10% you would not take as cash received, the other 90% you would?.
If personally guaranteed I would say, Yes.
The indemnity would not come into the matter at all? Once the Board of Directors allotted shares I would be prepared to transfer shares to loan.
Re-Examined By Mr. Brewers
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The Share Register is not allowed to have any notice of trust on it, are you aware of that?. It is where I came from.