The financial inspection of the companys books

From “Oil Nationalisation and Managerial Disclosure: The Case of Anglo-Iranian Oil Company, 1933-1951”

Chapter 4: Profit distribution by the AIOC


16th May 1951: Persian newspaper editors are shown around the Anglo Iranian Oil Research Centre at Sunbury on Thames. (Photo by Fox Photos/Getty Images)

Ferrier has pointed out that, as part of Persia‟s dividend was based on 20% of the company‟s profits, the Iranian government must certainly be aware of the company‟s accounts and have the right to ask the company to furnish information similar to that given to auditors[592]. Sir William McLintock, a professional accountant and one of the leading figures in his profession, issued a report disclosing certain undoubted errors and irregularities of accounting which had resulted in underpayment of royalties to the Iranian government[593]. McLintock‟s report reflected unfavourably on the AIOC but his comments were directed not so much towards the company as to the auditors who were, in a sense, his professional rivals.[594] The Gidel Memorandum claimed that, in order to supervise the operation of the Concession and check the calculation of its royalty and dividend share, the Government needed to “examine the Company‟s books and accounts and should acquire prior information with regard to such transactions and decisions as affect the rights of Iran”[595]. Ali Mansur was astonished that the owner of oil wells should not be confined as much as the auditors were[596]. Makki complained in 1949 about the quality of AIOC reporting and he emphasised that, under the D‟Arcy concession, Iran had had the right to examine all the technical and financial information of the company[597].

Razmara in 1950 called for the admission of a government auditor to their Head Office books[598]. These demands caused alarm for AIOC who argued that experts would always differ in defining gross profits because of the very many factors involved and that it would be quite impracticable to make the conclusion of purely commercial transactions subject to government approval[599]. British representatives were unhappy with the above-mentioned Iranian aims and consequently Gass claimed that Iranians were seeking control over their commercial transactions, accountancy, construction programme, the entry of foreign employees and even their management[600]. Meanwhile, Northcroft resisted the Iranian demands and stressed to Razmara that the books were kept in London and audited in accordance to British law by a firm of Chartered Accountants of unquestionable integrity, at the forefront of their profession[601]. He also pointed out that stockholders who had put all their money in the company had taken all the risk for nearly half a century and accepted the company‟s accounts without any question. These stockholders, he claimed, had received little enough in comparison with other participators[602].

The discussion ended with Northcroft rejecting the idea of inspection of accounts, saying: If the Iranian government is allowed to access their central ledgers which contain confidential information about the affairs of other sovereign governments and large foreign commercial undertakings, it would mitigate the resentment of those parties because their affairs are being subjected to scrutiny by a foreign government[603].
According to the 1948 Companies Act[604], shareholders had the right to access companies‟ registers of shareholders and directors so they could see who these were, and also access audited accounts. The shareholders did not have access, however, to the financial accounts, so Iranian understanding of the performance of AIOC would depend on what the auditors considered “true and fair” information. Thus, the Iranian request was nevertheless reasonable in the context of Iranian willingness to make an assessment of the alternatives. The AIOC was alert to the fact that the Iranian government had made a strong case in support of their contention that the profitsharing element of their royalty had not been fairly calculated and this was the main reason for their often repeated wish to scrutinise the company accounts.

592. Ferrier, The History of the British Petroleum Company: Vol. 1, The Developing Years 1901-1932,

593. Ibid.

594. Ibid, 367.

595. Gidel Memorandum, 2.

596. BP 126343, Notes on Supplemental Agreement handed by Ali Mansur to Shepherd on 3rd June
1950, 1.

597. BP 126346, AIOC concession supplemental agreement bill on 28th July 1949, 1

598. BP 126347, 28th September 1955

599. Gidel Memorandum, 12.

600. BP 126407, Report on visit to Tehran 31st August to 26th October 1948, 43.

601. BP 126347, Reference number 318, Northcroft to Rice, 29th July 1950, 5.

602. Ibid.

603 Ibid. 604 Companies Act 1948, Her Majesty‟s stationery office, reprinted 1965.



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