COMPANIES BILL

Press, Volume LXXI, Issue 21399, 15 February 1935, Page 12

COMPANIES BILL

INCORPORATION OF BONDHOLDERS FURTHER EXPLANATION BY MINISTER THIRD READING PASSED [From Our Parliamentary Reporter.] WELLINGTON, February 14. A further explanation of the intention and objects of the Companies (Bondholders Incorporation) No. 2 Bill was made by the Minister for Finance (the Rt. Hon. J. G. Coates) in moving the second reading of the bill in the House of Representatives to-day. The measure, which relates to about 50 companies operating in tobacco, citrus fruits, flax, tung oil, and timber, was intended to remove difficulties suffered by bondholders in the past, and difficulties in contemplation. At present in almost every case bondholders were represented by trustees and it had been shown that realisation schemes could not be effectively carried out by the trustees. Moreover, trustees for one issue of bonds had no power to combine with otMers in promoting a jcint realisation scheme. The present bill, continued Mr Ccates would overcome these and other difficulties by providing for incorporation of the bondholders of a company into a limited company. The conversion of bonds into shares would be under the supervision of a commission. Clauses Analysed Mr Coates explained the steps that must be taken before legal incorporation, and proceeded to analyse the individual clauses of the bill. On one section he was questioned. He was asked by Mr F. Langstone (Lab., Waimarino) why it should be provided that dividends might be paid to one group of shareholders, even though there might be a loss in a part of a company's undertaking allocated to any other group. The Minister explained that this provision was desirable because plantations held by groups might differ widely in character, . and that there should be some provision for an equitable arrangement. Mr Coates emphasised that the Government was to accept no responsibility for any undertaking under the bill's provisions. He referred to the section of the bill which reads as follows: "Every share certificate issued in relation to shares in a bondholders' company, and every voting paper, circular, or other communication issued to the shareholders by direction of the commission, shall state conspicuously that no shareholder has any claim in. respect of his shares upon the Government of New Zealand or upon the public revenues, and that the Government does not assume any responsibility whatever for the commercial or economic soundness of the company's undertaking."

Labour Members' Views Mr W. Nash (Lab., Hutt), the first speaker for Labour, considered that the Government had delayed too long in taking action after it was aware of the position of bond-issuing companies. With minor exceptions, Mr Nash expressed general approval of the bill. He thought it necessary to provide some machinery whereby the chairman of the bondholders' commission could be removed from office if necessary. No such machinery existed in the bill. He did not see the necessity for sittings of the commissions being held in private. From the report of the Company Promotion Commission, it was apparent that publicity was extremely desirable. There was no appeal against an order of the commission. What would happen if dissatisfied persons wanted to go to the Supreme Court on a point of law? Some credit was due to Professor H. Belshaw and Mr F. B. Stephens, who wrote the original pamphlet on the promotion of bond-issuing companies in New Zealand. Credit was also due to the members of the Company Promotion Commission —Mr J. S. Barton, S.M., Professor H. Belshaw, and Mr F. E, Graham—on whose report the bill had been built. If one thing came out of the whole business', it was the amazing indictment of private enterprise. "Whitaker, Wright, Hooley, Hatry, Kreuger, and Stavisy have nothing on the people who have been fleecing this Dominion," he said. "The Government allowed it to go on for 12 monuis after the publication of the pamphlet by Professor Belshaw and Mr Stephens. An imperative factor in saving the people from these crooks is publicity. The omission of provision for that is the one fault in the bill." A Member's Complaint Mr H. G. R. Mason (Lab., Auckland Suburbs) complained that the bill was doing nothing to prevent the recurrence of the very happenings that had been responsible for its introducUpn, but was merely designed to help those who had been the victims of swindles. It could not in any way make good swindles that had been perpetrated by companies on bondholders. They were simply ordinary company swindles, and when the bill had been passed it would still be possible to perpetrate swindles of that kind.

Mr Mason also criticised the provision in the bill that the cost of incorr poration should be borne by the companies, and asked why they should be asked to pay for what really constituted a convenience for the bondholders. Mr F. Langstone (Lab., Waimarino) considered that the bill was not wide enough in its aDplication—it would not stop a great deal of the "swindling" that went on in this country. He also thought that the bill should apply to bondholders' companies, which were not necessarily incorporated in New Zealand. As it was, these would be immune from the restrictions and protection afforded by the measure. Afforestation Companies Mr Langstone said that no afforestation company in the Dominion knew whether its trees were .going to be of commercial value. He would like to see legislation brought down forcing the companies to prove their venture worth while before being allowed to put shares on the market or issue bonds. The present bill, however, would have the support of the labour pp.rty. It was definitely a good move. Mr Coates briefly replied to the debate, indicating that the bill made no pretence of dealing with all the subjects investigated by the Companies Promotion Commission. It would probably be found necessary to make further amendments to the law relating to company promotion methods, although the present Companies Act had stood the test well. In the committee stage, Mr R. A. Wright (Ind., Wellington Suburbs) asked whether bondholding companies that were quite sound would be com* oelled to conform with the rules leid down. "The soundest of our bond-issuing j

companies are asking for this legislation, because they can't operate until they get it," Mr Coates replied. The Hon. W. Downie Stewart (C, Dunedin West) enquired whether the bill had met with any opposition. He said his question was prompted by the suggestion of a member of the Upper House that when the bill reached the council it should be referred to a joint committee of both houses. Mr Coates said he thought the matter mentioned in "another place" dealt more with the previous bill than with the present bill. The bill was read a third time at 8.30 p.m.

PERSONNEL OF THE COMMISSION

QUESTIONS IN THE HOUSE [From Our Parliamentary Reporter.] WELLINGTON, February 14. Curiosity as to the personnel of the commission to be set up under the Companies (Bondholders Incorporation) Bill v?\s expressed when the measure was bejrig considered in the House of Representatives to-night. Mr F. Langstone (Lab., Waimarino) asked whether the chairman. of the commission was to be a judge, and \yhat the emoluments of the members were to be. * The Minister for finance (the Rt i Hon. J. G. Coates) said that he could not say more than was contained in the bill. The chairman of the commission would not be a judge, but he had not anyone in mind for a "cushy job." Neither did he know what salaries the commissioners would receive. Naturally, they would need to be persons specially equipped in approach and knowledge, Mr J, A. Lee (Lab., Grey Lynn): And in politics. Mr Coates: They would need to have legal knowledge. Mr F. W. Schramm (Lab., Auckland East): You have a good man not far from you. (An obvious reference to Mr J. S. Barton, SM-. who was sitting behind Mr Coates.) Mr Coates: That is a good suggestion. Mr A. J. Stallworthy (Ind., Eden) said he expected the House could be assured that Mr Barton would not be ehairman of the commission, Mr Coates: You can get ne such assurance from me.