“No par value” share concept recommended for study

Press, Volume CXIII, Issue 33251, 14 June 1973, Page 19

“No par value” share concept recommended for study

The radical prospect of authorising the issue of “no par value” shares in listed New Zealand Companies was raised in its report on company law reform by the Macarthur Committee, with some support from the Stock Exchange Association.

The committee’s report, tabled in Parliament last week and now under Government study, wants the subject referred to the Commissioner of Inland Revenue for a close examination of the tax implications if legislative permission were granted for such a move. With shares of no par value, permitted for many years in some American states, an undertaking is divided into a certain number of shares, each representing a fraction of the whole share capital. The value of a share fluctuates with the value of the whole undertaking, without that being obscured (as with par shares) by the attachment of a nominal par value. In the United States, the Macarthur report notes, shares of fixed par value and shares of no par value exist side by side, without appearing to cause confusion. But the report adds: “When we come to consider the introduction of no par value

shares in New Zealand, we think it likely that this innovation. so attractive in theory, may present unforeseen problems in practice. “Undoubtedly, it would necessitate considerable amendment to our existing tax legislation, particularly with regard to the issue of ‘bonus’ shares.’’ The system has not yet been introduced in England—although it has been recommended there — or in Australia; the committee hesitates to recommend it in New Zealand before thorough preliminary studies have been made. Submissions suggested that no par value shares would be particularly suited to mining companies. “This may well be

so, and. if the Legislature thought fit. mining companies might be a suitable point of introduction of this concept. “The Stock Exchange Association of New Zealand, in a cautiously worded submission to us. recommends that shares of no par value be provided for. While the association cannot assess the likely i extent to which legislative permission might be used, it i considers that such legislation could be of advantage to the financial community. “Without making a positive recommendation, we record the fact that there is a considerable body of opinion in favour of permission for the issue of preference and ordinary shares of no par value. “The evidence has come, as might have been expected, from the more sophisticated. We are left with the impression that the average person will require to be educated in this system of share capital.”