DISTRIBUTION OF FICTITIOUS DIVIDENDS

REJECTION of leonard’s appeal against a judgment rendered on June 20, 1936 by the Douai Court of Appeal, which sentenced him to eighteen months’ imprisonment and a fine of 500 francs, for distribution of fictitious dividends.

THE COURTYARD,

Heard Councilor Lagarde, in his report; Me de Segogne, lawyer at the Court, in his observations, and Mr. Advocate General Carrive, in his conclusions;

On the first plea … (Without interest).

On the second plea based on the violation of articles 15 and 45 of the law of July 24, 1867, 44 of the statutes of the Feignies company, and 7 of the law of April 20, 1810, in that the judgment under appeal pronounced a conviction against the plaintiff for distribution of fictitious dividends, whereas this distribution was justified by the existence of reserves constituted by means of profits, and that, if the withdrawal thus made from the reserves without authorization of the general meeting may engage civil liability of the managing director, it cannot constitute the offense provided for by articles 15 and 45 of the law of July 24, 1867;

Whereas from the statements of the judgment under appeal it follows that Léonard, managing director of the Société anonyme des Aciéries de Feignies, has, in this capacity, drawn up, for the financial year 1931-1932, a balance sheet showing a net profit of more than five million francs, and that, by means of this balance sheet, it had the General Meeting decide on the distribution of a dividend of 3,047,327 francs;

That the judgment notes that Léonard has included in the assets of this balance sheet two debts, forming a total of more than 15 million francs, debts of difficult realization and with a long term, and which, consequently, do not should not have been listed at face value; that judgment adds that this registration was made by Leonardo knowingly and in order to achieve the distribution of a dividend he knew fictitious;

That it is claimed by the appeal that, if the results of the financial year did not authorize the distribution of a dividend, this distribution does not however constitute an offense, the balance sheet accusing the existence of extraordinary debts, not encumbered with special allocation, in an amount greater than the distributed dividend, reserves which the general meeting would have been entitled to order the distribution among the shareholders;

But whereas the judgment declares that Leonardo was not authorized by the General Assembly to make a withdrawal from the reserves;

That the general meeting decided, not a distribution of the reserves, but the distribution of the profits relating to the past financial year and such as the balance sheet established by Léonard showed them; finally, that the latter acted in bad faith;

Whereas in the state of these findings, the Court of Appeal, by ruling as it did, far from violating the texts referred to in the means made, on the contrary, an exact application;

And, whereas the stop is regular in form;

REJECTS.