SCHEME OF AMALGAMATION.

Auckland Star, Volume XXV, Issue 237, 4 October 1894, Page 7

SCHEME OF AMALGAMATION.

T"he undersigned, being of opinion that an amalgamation between tha Bank of Now Zealand and the Colonial Bank of New Zealand would be mutually advantageous and in the interests of tho colony agree, as regards the Bank of New ZealandTto recommend to the approval of the Government, and as regards both Banks to recommend to their respective directors and shareholders the s following terms :— (1) Tho .assets of each bank to be reviewed by a Board or other tribunal upon which tho other bank's representatives shall be preponderant. Upon these Boards respectively being eatisfied that the assets of each bank are co far sound that any deficiency can bo mado good by tho provisions available therefore, the Bank of New Zealand to assume the liabilities of the Colonial Bank and take over its asaefcs, as hereinafter provided. |2) The Bank of Naw Zealand to take the neceasarv measures to increase ifc3 capital by the creation of new shares of the nominal value of unc million pounds sterling, to be do«ign.!*ted B Shares. Of these, £400,000 to bo issued to the shareholders of tho Colon! tl Bank in liou of and exchange for the presoirb paid-up capital of that Bank, the shares so issued to be. considered as fully paid-up eh area and to carry no further liability whatever. The remaining £600,000 in shares to be vested in thu president of the Bank for tho timo being, and to bo held for the present as unissued, but to be nt< the disposal of tho shareholders of tho Bunk of Now Zealand or '.hoir transferees, at a period to be appoihteil by the directors of tho Bank for the time being, but not later than the end ot the year 1903, the subscription to be pro rain, to the holdings of the shares hereinafter mentioned, and six months to be given to subscribers in which to pay for the shares by ivBtinfhcntf; When all the instalments are paid, the shares to carry no further liability. Such of those shares a3 are not subscribed for by those having a right to ' do so shall thereafter be absolutely the property of the Bank, as then constituted and free from any restrictions as to issue.

(1) The Bank of New Zealand to write down its present paid-up capital of £900.000 to £600,000, the sum of £500,000 ?o released to b9 used as hereinafter provided : The old shares so written down to bo designated "C " share?.' The capita! of the Bank after amalgamation thus to be : Guaranteed preferential atock (A) £2.000.000 ; B shares fuTcy paid up, £400,000 ; C shares fully paid up, £61!Q,G00 : total, £3,000,000 ; B shares unissued, £600,000: {,'rantl total, £3,600,000. (3) The first Bunrd of Directors shall coneisc of eeven members, of which four shall be elected by tho prcsenb shareholders of the Bank of Now Zealand, and three shall be elected by tlio present- shareholder? of tho C^oionial Bunk, or their, respective tr«n}fcrees=. ■It i* of the e=netice of this . a^reesnant thuti the Bank of Now Zealand Bhall have a pi^)poii:!i:t-aneo Of one member on the new Board of Directors; therefore if the Ggvernmoat should appoint as presi-

dent of the Bank a person heretofore connected with either Bank, each presidenb shall stand for one of the1 directors to be nominated by that Bank. (4) With the exceptions of the principal Executive officers, namely the joinb general managers, chief inspectors and London manager (regarding which a eeparate agreement ha 3 been entered into), the officers of the Bank shall be selected by the new Board of Directors from the presentstaffs of both banks, and appointed to their various posts. These selections, so far as may be practicable, shall bo made in accordance with the numbers and positions of the present officers of the two present staffs* relatively, the departure from this condition being only made where deemed necessary in the interests of the bank. The Colonial Bank officers coming in shall have no rights in the present Bank of New Zealand Guarantee and Provident fund, officers dispensed with to be compensated by the bank to which they at present belong. (5) The liabilities and assets of the Colonial Bank shall be taken over by the i Bank of New Zealand as provided in clause 1, excepting such assets or advance business which by,, the new Board of Directors (having a preponderating number elected by the Bank of New Zealand) shalf be considered unfib and nob proper to be so taken. Such amounts as may ba so rejected, bub which ib may nob be thought expedient to wind up, or not to wind up speedily, also such amounts as are determined to be. subjected to speedy realisation, shall be liquidated or otherwise treated; by the Bank under the new Board for behoof of the present shareholders of the Colonial.Bank or their transferees, bub under direction and according to the wishes of appointees of the said shareholders. The reserve funds and undivided profits of the Colonial Bank shall be used in the first instance to make good any deficiency resulting from liquidation as above. If any surplus remains after making good such deficiency, such surplus shall be divided equitably amongst the shareholders of the Colonial Bank. If the reserve fund and pvofits be insufficient to make good the deficiency, then a call shall be struck on the Colonial Bank shares, and shall go to make good such deficiency before the final exemption of the shareholders from liability. The limib oE time allowed for acceptance or rejection of advance business as above 9hall be four calendar months from the date of amalgamation, and no such account shall be carried on for more than twelve months, unless with deposit of a rosorve against ib to the satisfaction of the Board. (6) The naw Board of Directors shall pass in like roviow the assets and liabilities of the Bank of Now Zealand in exiatence prior to amalgamation, bub if any representative of the Colonial Bank on the Board shall take exception to any asset so reviewed, then the tribunal musb_ be narrowed by so many of the representatives of thß Bank of New Zealand withdrawing ib shall leavo a preponderating number of Colonial Bank appointees to decide whether such assets shall be taken ovor or rejected. Within four months from date of amalgamation there shall be sob aside for liquidation or other treabmenb all such assets and accounts as may be considered unfib and nob proper to be continued as business of the bank. Such accounts as may be soaot aside shall bo liquidabed or otherwise treated by the new Board in the same manner as those of the Colonial Bank, bub under the direction and according to the wishes of the appointees of the present shareholders of the Bank of New Zealand. The three hundred thousand pounds released from the capital of the bank as per clause 2, the reserve funds and tho undivided profits of the Bank of New Zealand shall ba used in the first instance to make good any deficiency resulting from liquidation as above. If any surplus remains after making good such deficiency, such surplus shall be credited to tho account of tho Bank of New Zealand Estates Company (limited), with the Bank. If tho said released capital,, reserve funds and undivided profits, bo insufficient to make good the deficiency then the dividends and profits which shall accrue on the £600,000 "C" shares shall bo used in the firsb instance to make good such deficiency, and shall be so applied until the deficiency bo wiped off. (7) The present premises of both the Banks of New Zealand and the Colonial Bank to be valued by tho now Board on the basis that they are going concerns, and if these values be agreeable to the appointees of tho relative banks, then such values be adopted, and the premises so agreed upon bo taken over by the amalgamated bank. If the appointees of either bank disagree with any such valuation of the new Board, then the Board and tho appointees so disagreeing shall each appoint an umpiro, whoso valuation shall be final, but ib shall be reserved for the appointees of each bank to decide whether the amount of any valuation should be accepted from the amalgamated bank, or that; in preference any particular premises should bo liquidated as specified in clauses 5 and 6 hereof. Should the valuations of the present promises of tho Bank of New Zealand amount to a sum exceeding that at which the whole of the premises now stand in the books of the said bank, such surplus shall bo crodit.cd to the liquidation account for the ultimate bohoof of the Bank of New Zealand Estates Company (Limited), as per clause b, and any surplus in like manner arising by valuation of the premises of the Colonial Bank shall be credited to the liquidation account mentioned in clause 5. If instead of a surplus there should arise a deficiency to either bank on account of premises, such deficiency shall be treated in the case of the Hank of New Zealand as 13 provided for deficiencies on other assets in clause 6, and in the case o£ the Colonial Bank as likewise provided in clause 5. (S) It is an integral part of this agreement that before amalgamation takes place legislation shall bo passed by tho Parliament of New Zealand by means of which the Bank of New Zealand Estates Company (Limited) will be entirely separated from tho Bank, po that the present shareholders of the Colonial Bank who are about to transfer their capital and tho future creditors of the Bank of New Zealand may run no risk whatever from the bank's connection with tho said Estates Company or future advance to ib. (9) It is hereby agreed that., after payment )f four pur cent, per annum on the guaranteed preference stock, and sixpence per cent, per annum dividend on the other paid up capital of the bank, and aft6r placing £20,000 per annum to a new reserve fund, all other profits and dividends earned and payable (after duo provision for bad and doubtful debts) shall be applied to reduce tho ultimate deficiency of the Bank of New Zealand Estates Company (Ltd.).

(10) The Bank shali afford to the Bank of Now ZGaland Estates Company the ineceseary banking facilities under suitable guarantee for carrying on and liquidating tho business and assets of the Company and the concerns belonging to it. Amount 3 at credit of tlie Company with the Bank are to .be placed for interest purposes a«ainst amounts at debit, and interest ab tho into of four per cent, per annum is to ba charged or alloweJ on the daily balance on either side until the Company shall be either liquidated or placed in a solvent condition. • .

(11) The said amalgamation shall take effect within fourteen days after the shareholders of the respective banks ehall have adopted, a resolution approving of such amalgamation, but the parties may, by mutual consent, extend such period of fourteen daya for a furthor period ! hot exceeding two months. Dated at Wellington the 11th day of September, 189-1. a;™'*A JoHK Murray, SlBQ9d GEOE6E M6UA3T.

THE CORRESPONDENCE.

In asking leave to lay the Bank Amalgation correspondence on the table of the Houae, the Hon. Mr Ward, Colonial Treasurer, Baid he would like to say in the firsb place that the communications which had passed from the Government! to the two Banks had baen unanimously arrived ab by the Government. The rumours which had prevailed as to strained relations between the Premier and himself in connection with this important matter were entirely without foundation. Not only had there been no diversity of opinion, but they had been in absolute accord in what was done by the Governmenb. He wished also to point oat how difficult and how impossible ib was to carry out the requests of hon. members to have had tho matter referred to a select committee. Responsibility in this matter rested with the Governmenb, and to have intercepted their judgment! or their conclusions on the matter by relegation to a committee would have asked to place a buffer between the Governmenb and the country. He mighb aay that while the Government recognised all tho advantages that would accrue to the colony by amalgamation they took up a position by saying thab the firsb consideration tho Governmenb had to look to ■ was, whab was best in the intorests of tho colony, and ib would be seen bhab the Government) regarded ib as essential that tho interests of the colony should be preserved and safeguarded beyond everything else. The correspondence would disclose the tact that the proposals made to the Governmenb by the two Banks were not regarded by the Government in some mosb essential features as sufficient to warranb bhom in assenting to some of the proposals, and he hoped honourable members, when they saw whab had been done by the Government, would give them the crodib of doing what was righb in the interests of the colony. The following is the correspondence laid on bho table of the House on Sept. 24 by the Colonial Treasurer :— No. 1. The Colonial Treasurer to Mr John Murray and the Hon. Goo. McLean, Wellington. Colonial Treasurer's Office, Wellington, 22nd September,1 1894. Gentlemen,— I have the honour to acknowledge the receipt of your joinb letter of the 11th inst., covering proposals for amalgamation between the Bank of New Zealand and the Colonial Bank. In reply I have to state thab the matter has received the careful consideration of the Government. Without in any way committing the Governmenb to any fixed course or approval of the proposals it will be necessary :

1. If any legislation is undertaken by the Governmenb that it shall be of a permissive character to enable the Government? to be satisfied before assenting to amalgamation that the general intorests of the colony are conserved and protected. 2. Thab in addition to the scrutiny which is proposed in the memorandum of agreement, the Government to appoint a special representative or representatives, independent of either bank, to examine and report to the Government on tho various accounts and assets proposed to be dealt with.

3. Shareholders of each bank to bo responsible for, and to make good all losses on existing business thab is nob paseed by the colony's valuers. 4. Thab upon the expiration of ten years the profits of tho combined bank shall still continue to be paid to the Estates Company until any deficit in the winding up of tho Estates Company is liquidated, the Governmenb Hen upon the interests of shareholders in the Bank of New Zealand to bo continuous until all liability to the colony is ab an end. . 5. The Government "to nominate tbo chairman and two directors of tho Estates Company, and the shareholders of the Bank of New* Zealand to nominate two directors to the same, the said Board to have full control over tht> uncalled capital of £1,500,000' of tho.Bank of New Zealand shareholders.

6: In addition to the appointment of presidenb and auditor of the Bank of New Zealand the Government to appoint one director to the combined bank.

I shall like to have your reply to the foregoing before noon on Monday. Tho Government will then further consider the matter, and decide what course they deem ib desirable to take.—l have, etc., J. G. Ward, Colonial Treasurer. No! 2. Mr J. Murray to the Colonial Treasurer, Wellington. Bank of Now Zealand, Wellington 24th September, 1894. Sir,—l have the honour to acknowledge receipt of your letter of the 22nd September, having reference to the amalgamation of the Bunk of New Zealand and tho Colonial Bank of' New Zealand, and setting forth certain supplementary conditions as necessarily precedent to any action therein by the Governmenb. These conditions, one to four inclusive,, I should willingly recommend to the Bank's shareholders, bub I greatly regret that I cannot cay co of Nos. 5 and 6 ; nor do I think bhab even were I to recommend them, the shareholders in the Bank of New Zealand would entertain them.

It will probably make the position more clear if I begin with clause 6, which is, "That in addition to the appointment of president and auditor to the Bank of New Zealand, the Government to appoint one director to the combined Bank." In considering thi3 stipulation I would ask the Government to boar in mind that the Bank of New Zealand shareholders are responsible, not only for the future of the Bank to the extent of their large paid-up capital, but for future profits without limit of time, and the reserve liability of £1,500,000, because under the terms of the provisional agreement, four per cent, is to bo debited to tho Estates Company in account of tho .large item, " share account," an,d in consideration therefore the eurplus profit?, after a dividend of six per cent., and £20,000 to the reserve, are to be returned on the Estates Company. Jfpnr, should there be ineHecstive management, the consequonces would appear in the amount of eurplus to bo paid over to the Estates Company, for the outcome of which shareholders are liable in the great sums I have named ; while with only four direetore on the riW board to the Colonial Bank's* three, and a director 'and president nominated by the Government, the Bank of Now .Zealand shareholders would be in a minority though primarily liable for the result, and would be at the mercy of persons not of their appointment, and beyond their control. It is of tho essence of the arrangement embodied in the Share Guarantee Bill tbab tho shareholders should by directors of their own appointment, manage the Bank, the Government maintaining an audit and power of veto on objectionable business. To take the ordinary management out of the control of shareholders while yet holding them responsible for its results would, I feel sure, be regarded by them.us inequitable. The explanations I ijave given above will servo to make clear the reasons why clause 5 would not be assented to, shareholders being held responsible .to the extent of over £2,000,000 cannot, I subm,io, be reasonably expected to part with the -control of their property to a person m whose selection they have no say, and hand over to him the power to oiako calk upon thorn. Clearly as between two directors appointed on each iido the chairman would exercise, at least as regards the shareholders, supreme power. At the same time I feel sure there will be no objection made to the Government taking an elJective part in the management of tho Estates Company.

In conclusion, I desire to point; oufc that an erroneous impression has been dhsominated that legislation is in pome way neceeeafy to free the Bank from the Estates Company. Except as a condition

of amalgamation made by the Colonial Bank there is no such necessity. It ia already a, separate compauy, and separately administered, though to a large extent" under i the Bank's control. As to its being a burden on the Bank, ib is only 80 in tbe sense of being a burden on Bank shareholders, which it musb of. necessity remain till ib be liquidated, unless the colony were to relieve them, which nobody proposes.—l have, etc., John Mdbkay. No. 3. , ■ Hon. G. McLean to Colonial Treasurer : Dunedin, 24th September, 1894. Sir,—l have the honour to acknowledge receipb of your letter of 11th, and have submitted contents to my colleaguee here. In reply, lam desired to state thab the conditions imposed by you make the scheme such as we could not recommend to our shareholders. Taking the clauses of your letter seriatim—

1. We do nob objecb to the permissive character of the proposed legislation. 2. We have nob bhe slighbest objecbion bo your appointment of representatives to examine the condition of our accounts and assets, and refer you to our letter of 20th July, when applying for a share of the Government account) we specially asked the Governmenb to do this before giving us that share.

3. This stipulation is all right, and was fully provided for in the agreement so far as scrutiny by the other Bank was concerned. We have no objection to its application to the suggested furbher scrutiny. 4. This so vitally affects the interests of onr shareholders thab we will nob, under any circumstances, agree to propose ib to them. Ib would be an invitation to spread the realisation of the Assets Company over an indefinite period, and would make our Shareholders' dividends responsible beyond what can fairly bo asked or was ever intended. This Bank will have no voice in the management or realisation of the assets. Regarding the Government lien on the interests of tho present shareholders in /c the Bank of Now Zealand we can raise no objection. 5. Tina does nob immediately concern us. 6. Tho powers possessed by tho Government under tho scheme submittod, and under clause 2 of tho above, namely, a presidenb wibh power of vebo, auditor, and preliminary scrutiny of assets and accounts to bo made by a Government representative, on whose report the acceptance by the Government of the whole scheme will dopend, must be held to bo sufficient. It ia obvious that the presence of a nominee of the Government on tho Board would detrimentally affect the business of tho Bank. Final clause: The asaenb to amalgamation on the part of the Colonial Bank would greably depend upon the shareholders being represented on bho amalgamated institution by men in whom they had confidence. Without this guarantee there would be little prospect of obtaining the necessary consent. The attitude which the directors at the general meeting on Wednesday must take up with regard bo the proposed amalgamation will evidently so largely depend upon the answer which we receivo to this that I must ask you to reply as definitely as possible on the whole afiair not later than noon to-morrow.—l have, etc, Gko. McLean. No- 4. The Colonial Treasurer to Mr JnoMurray. Wellington, September 24, 1894. Sir, —The Government: have carefully considered your communication of to-day, and in reply I hove the honour to inform you thab they cannot see their way to depart from the conditions named in my lottor of 22nd instant.—l have, etc. J. G. Ward, Colonial Treasurer. No. 5. The Colonial Treasurer to the Hon. G. McLean, Dunedin. Sir, —The Governmenb have carefully considered your communication of to-day, and in reply I have the honour to inform you thab bhey cannob see their way to depart from the conditions named in my letter of tho 22nd instant.—I- havo, etc.; J. G. Ward, Colonial Treasurer.