COMPANIES LAW.

Auckland Star, Volume LXV, Issue 234, 3 October 1934, Page 5

COMPANIES LAW.

TIGHTER CONTROL.

IMMEDIATE ACTION IN N.S.W.

BAN ON SHARE HAWKING.

i (From Our Own Correspondent.) SYDNEY, September 29. In view of the public interest which attaches both in Australia and New Zealand to the current investigations into investment trusts and security holding companies, it is significant that the New South Wales Government proposes to introduce immediately a bill amending the Companies Act. 6o'hio months ago a Companies Act Amendment Bill was drafted, and it will come before Parliament in due course. But it is said to be a "monumental" measure, occupying 140 printed foolscap pages —even without tables and I schedules—and containing over 350 I clauses. It will take a very long time to discuss these proposals, even though there is no reason for regarding the bill as a. "party" measure; and evidently the authorities are convinced that something ought to be done to provide better protection for the investing public at once. Accordingly the Minister of Justice lias drafted a short bill dealing with two features of company pro- ; motion—share hawking and the mis- ! leading prospectus. It is understood ' that the bill in these respects follows the lines of the British Companies Act. In England the practice of share hawking was practically abolished in ]°29; and this good example was followed a few. months ago by the Victorian Government. To Prevent Exploitation. It is obvious that if would-be i investors are provided with an accurately drafted and rationally worded prospectus, and have leisure to consider it themselves, they will be less likely to make regrettable mistakes than if they trust to a hurried glance at extravagant predictions of early profits, while subjected to "the hypnotic influence of the personal canvasser." ,

No attempt will be made to restrict | business conducted in a fair and reasonable way. To quote Mr. Martin, the Minister in charge: "While giving every freedom which modern legislation affords to the legitimate formation and j working of companies, the object of the | Government is to prevent this highly developed machinery of commerce and enterprise being used by company promoters to exploit uninformed members of the general public." With this purpose in view, penalties which range up to £500 are suggested in the bill share hawkers and for persons who issue a misleading prospectus. Of course, shares are' issued to be sold, but wl>g.t is aimed at is the practice of going j from place to place urging investors to j buy stocks or shares. j Profits and Capital. \ Further, it is proposed to establish a certain measure of control over the financial arrangements of companies, fixing a limit to the absorption of profits by directors' fees, and insisting that when the capital of a company exceeds a certain amount a qualified secretary must be employed.

All these proposals scorn reasonable enough, and it is believed that if New South Wales gives a lead in these respects, it will be followed by the other States. These matters are questions for the local Legislatures, as the Federal Government hae no constitutional power to pass company laws; and no doubt the New Zealand authorities will take careful note of what is happening over here, so as to obviate any future necessity for such, investigations as they have recently been compelled to undertake.