COMPANIES AND CREDITORS.

Auckland Star, Volume LIII, Issue 248, 19 October 1922, Page 4

COMPANIES AND CREDITORS.

By a Bill that it introduced yesterday the i;ovommeiit proposes another nf tho.-e intorferent'os with business to which the commercial community has grown accustomed. The onv operative clause in 1 he Companies Amendment Bill is a serious invasion by the State of the field of contractual right and remedy,

and a« eui'li must, he scrutinised very closely. It alters the law by which creditors can protect their interests by forcing rlehtors into liquidation. It provides that if a company is financially embarrassed, and it appear? to the Supreme Court that it would be. contrary to the interests' of company. crvditop?, or public that it should he wound up. file .Court may direct tho creditors, or a claew of the creditors, to meet and consider a compromise. If an arrangement is arrived at by a majority representing three-fourthe in value of the creditors present, in person or by proxy, the Court may hind this agreement uponr all creditors or upon the class. The Court's power is permissive, and the Court enjoys tne confidence of all, ibut the danger that lie£ in this propoeal should bo clear all business people. It gives authority to fetter creditors who are not present at thp meeting at which the compromise is arranged. It divides creditors into classes. One. category of creditor, say the rural creditors of'a company, might make an arrangement in its own interests, ignoring those of, say, finns in England who had supplied the company with goode. The Court has power to impos« such a partial arrangement upon either the cla6= or the. whole body of creditors. If it applied it to the elas.?, the result might be much the same as if the compromise wen? applied to all, for any move by other creditors would encounter this order of the Court. A company could not by at once bankrupt to some of its creditors and solvent to others. Comment on the Bill must be cautious pending the Trime Minister's promised statement explaining the alleged necessity for the measure, but we are entitled to remark that the principle embodied therein, of interfering between creditor and debtor, is dangerous. It reßembles the legislation that prevented depositors with non-banking concerne from getting their money back. It is in keeping with the Government's policy of propping up weakness, and of postponing, or encouraging others to postpone, the unpleasant task of facing and dealing with difficulties.