"ENGLISH LAGER BEER BREWERY, LIMITED.
The Company to be Wound Up.
An extraordinary general meeting of the shareholders of this Company was held on Tuesday at the Brewery, Batheaston. In the absence of any director at the opening of the meeting, Mr. James Cochrane, of Bristol, was elected to tbe chair. There were also present Col. Worsley, Mr. J. Humby, Mr. B. Newstead (representing Mr. W. Ferguson), Mr. W. Stevens, Mr. F. J Ferguson, Mr. B. A. Dyer, representing shareholders, Mr. William Cooke, and Mr. J. P. Hall (secretary).
The minutes of the last general meeting were not read, as the minute book was in the possession of one of the absent directors (Col A. Thrale Perkins), who, however, subsequently arrived.
The Chairman read the report of the Committee of Investigation appointed at a shareholdors' meeting held on the 19th July. This stated inter alia . —
The Committee were met by one director only, Colonel Perkins, with the Secretary. The only accounts which were available for investigation were the approximate balance sheet produced at the general meeting and the books of account belonging to the Company; no effort appears to have been made even to ascertain the financial position for the period between the 31st day of December, 1892, and June 30th, 1893, and the books of account afford no information upon the subject. Dealing, however, with the approximate balance sheet, your Committee beg to report that it does not afford a reliable or correct view of the present financial position of the Company. An effort was made to ascertain from the books how much cash had been received, and what had been done with it, but your Committee regret to report that they were unable to extract the information either from the books or from the secretary. The Committee have ascertained that practically the whole of the paid-up capital of the Company, a sum of close upon £30,050, has been paid by the directors to Mrs. Humby, or to her nominees, as the purchase money of the brewery, mill and premises. Unfortunately, however, this large sum did not secure to the Company the absolute possession of the property because it was not conveyed to the Company free, but subject to mortgages amounting to £10,000. These mortgages consist of two. namely, one for £3,460, now held by independent parties, and another for £6,540 in favour of Mrs. Humby. It follows, that in addition to receiving close upon £30,000 as the purchase money for the property, Mrs. Humby is still the proprietor of a second mortgage on the whole property of the Company to secure a further sum of £6,540. Following the history of this mortgage transaction, we find that originally both the first and second mortgages covered the whole of the property—in other words, they included the mill Within the last six months the first mortgage for £3,460 was transferred, and in this transaction the mill was withdrawn from this particular security, but it still remains, subject to the second mortgage, in favour of Mrs. Humby. We further find that this second mortgage is now held on behalf of the National Bank of Wales under circumstances stated to be as follows:—Mr. James Humby, the husband of the vendor, Mrs. Humby, had an account with the Bank and at some date, which your Committee is unable to ascertain this second mortgage of £6,540 was deposited by Mrs. Humby to secure the general account of her husband with the National Bank of Wales. In addition therefore to the liability of £6,540 on the second mortgage to Mrs. Humby (since transferred to or deposited with the Bank) this Company is also liable for its overdraft at the Bank which amounts to the sum of £10,647. So far as your Committee can ascertain the National Bank of Wales claim a security in respect of this overdraft upon an unpaid and uncalled capital of the Company and also hold a limited guarantee of some sort from the Directors. In addition to the bank overdraft of £10,647. the Company appears to be indebted to the extent of about £2,000 —although in the absence of any information touching the last six months this figure must be accepted with some reserve —making a total indebtedness of, roughly, £12,500. As the whole paid-up capital was paid to Mrs. Humby as the price of a property which was then and still is subject to mortgages for £10,000, it follows that the only assets to meet this liability are the loose stock—casks, barrels, and bottles, and unfixed plant, of the total value of perhaps £200. Your Committee are of opinion that the value of the brewery and mill together is not more than sufficient to discharge the mortgages. Under these circumstances your Committee took the responsibility of passing a resolution calling upon the directors at once to take the necessary steps for winding up the company, and they also decided to request Colonel Perkins personally to take charge of the books and papers recording the condition of the company. The state of affairs disclosed by the investigation is such that the Committee are unanimously of opinion that a liquidator should at once be called upon to deal with it, and they urgently recommend the shareholders to wind up the company in the most expeditious and speedy manner. In conclusion your Committee regret that the result of their labour has been of such a thoroughly unsatisfactory character, and beg to assure the shareholders that they will be prepared to give the liquidator every assistance in their power to enable him to conduct a careful investigation into the inception of the company and the causes that have contributed to such a disastrous result."Bath Chronicle and Weekly Gazette - Thursday 10 August 1893, page 3.
If I read that correctly, they paid all the money raised from the sale of shares to buy the brewery, but they didn't really own it fully, because they bought it with mortgages still on it. So rather than owing it outright, they owed £17,000 for it. The company also owed an additional £12,000 and only had assets worth £200. It sounds like the company was ever solvent.
Why did the company pay Mrs. Humby all that money for the brewery? It sounds as if they paid way too much. If you remember the Pattison's brewery, that was brand new and only fetched £30,000 in 1899. £47,000, which is effectively what English Lager Beer Brewery paid, seems way over the top. Did they realise the brewery was mortgaged when they bought it?
This is a very relevant statement: "the whole paid-up capital was paid to Mrs. Humby". But she was only paid £30,000. The company's capital should have £100,000, if they had sold all the shares. Was this lack of capital behind the failure?
More about the chaotic extraordinary general meeting later.
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3 comments:
Ron, a sad tale indeed. As I read it, the mortgages were 10,000 pounds not 17,000, indeed the prospectus stated the property had been valued at 39,500.
The full authorized capital may have subscribed for but it was payable in installments, and the ones next due would have gone to the bank to pay the overdraft of 10,647. It's hard to understand how the mill and brewery would only cover the mortgages on a wind-up yet were valued at much more some time earlier.
Despite the word "unfortunately", I am sure the company knew about the mortgages.
Today in North America at least, when you subscribe for shares, you must pay in full the amount subscribed for. I.e., all shares must be "fully paid" on issuance. You can't owe the balance, even on a promissory note. The way to do it is borrow the money from a bank or other party, pay in full the shares, and pledge the shares to the lender as security for the loan. If you can find a lender. But the company can't be banker, any longer. I don't know if this is true in the U.K. as well.
Gary
Gary, you're right. I misread that.
They still paid a little more for the brewery than what it was valued at.
You can see the schedule of when the shares had to be paid for in the prospectus a few days back. I'm pretty sure they never sold all the shares. And even some of those allocated, as I'll write about soon, had less than convincing owners.
The valuation is even harder to understand when one considers that the lager beer plant was added after the purchase... I wonder though if part of the assessed 39,500 p.s. was on account of goodwill. Was Freehold Brewery a going concern earlier? Even if it was though, how could goodwill be gained from buying a brewery whose products would have been very different to the planned lager production? It seems to contradict the idea that lager is really different from mild ale et al. Something doesn't seem right in the whole picture...
Gary
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