Corporations able to sell State assets

Press, 17 March 1987, Page 26

Corporations able to sell State assets

PA Wellington The boards of the new Government Corporations have been given wide powers which will enable them to sell off valuable State assets into private hands as they please, the “Dominion” newspaper reports. Documents made public show corporation boards will not be able to sell their core busihessess without Government premission, but they face no constraints preventing them from disposing of a wide range of State assets such as mines and power stations which Come under their control from April 1. The power to dispose of the main assets, apart from the core corporation business, is derived from a clause contained in identical articles of association for the nine corporations which have been registered as public companies. But, while board chairmen such as Electricorp’s Mr John Fernyhough say in practice they would

refer a big asset sale to the Government for consent, Coalcorp’s Mr John Perham has revealed that the Treasury is fighting a “rearguard action” to get a provision included in the corporation’s statements of intent, making such referrals mandatory. “In practice, certainly until the corporations have settled down, I am confident no-one will sell assets,” Mr Perham, said. “But the Treasury is very keen to withdraw that power in the statements of corporate intent which have yet to be negotiated.”

The articles of association also contain some controversial clauses showing the Government will not be adopting a truly hands-off approach to the new corporations as had earlier been indicated.

The size of the dividend will be after agreement between the company’s shareholder, the Government, and the directors, with the Minister of Finance having power to

set the amount if no agreement is reached. ’ A lawyer pointed out this defection from normal commercial practice, where the directors set the dividend, could enable the Government to use the corporation as a tax device.

“It gives no protection aginst the shareholder bleeding the company qf resources,” he said. , Board directors are also concerned that they have no real indentity protecting them in the event of company failure. •» Mr Perham points out, that as the articles stand, the directors could be “quite vulnerable” if the Government makes their, business too difficult by setting unrealistically high asset valuations.

While the corporations have been registered as public companies, making a further move to privatisation easier, .the State Owned Enterprises Act prevents the Government from taking that step without reference to Parliament.