Parliament MEMBERS IN WORKING MOOD

Dominion, Volume 28, Issue 121, 15 February 1935, Page 12

Parliament MEMBERS IN WORKING MOOD

Debate on Mortgage Finance Bill Opened I ' ' ' '■ . I importance; of primary industries Legislation Affecting Company Bondholders Passed , No time was lost by the House of -Representatives yesterday in passing through all stages the Companies (Bondholders Incorporation) No. 2 Bill, which was disposed of in less than three hours. A start was then made with the second reading stage of the Mortgage Corporation of New Zealand Bill. The debate was initiated by the Minister of Finance, Rt. Hon. J. G. Coates, who emphasised the importance of the primary industries to the prosperity of the Dominion. The farmer, he said, must be assisted to reduce his costs and to retain and expand his overseas market, and the Mortgage Corporation would supply the necessary financial facilities to many who were unable to obtain working capital on a satisfactory basis. Mr. Coates had been speaking for two hours when the adjournment was taken at 10.30 p.m. . . General approval was accorded the Companies (Bondholders Incorporation) Bill, which is designed to protect the interests of bondholders in a number of bond-issuing companies. Practically the only objection was to the proposal that the proceedings of the Bondholders Incorporation Commission should be held in private. The Minister of Finance was asked by Mr. A. Harris (Govt., Waitemata) if the Government intended to bring down further legislation this session giving effect to other recommendations of the Company Promotion Commission on whose report the Bill was based, and he stated in reply that nothing more could be achieved before next session at least. The commission’s recommendations would no doubt be the subject of further legislation, but a complete survey of the possibilities in this direction had not yet been undertaken. The House will meet again at 10.30 a.m. to-day.

BOND COMPANIES

Discussion of Measure SUPPORT FROM LABOUR Criticism on Some Points Further explanation of the intention and objects of the Companies (Bondholders Incorporation) No. 2 Bill was made by the Minister of Finance, Rt. Hon. J. G. Coqtes, in moving the second reading of the Bill in the House of Representatives yesterday. He said .that the measure, which related to about 50 companies, operating in tobacco, citrus fruit, 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 the .bondholders were represented by trustees. and it had been shown that realisation schemes could not be effectively carried out by the trustees. Moreover, the trustees for one issue of bonds had no power to combine with others in promoting a joint realisation scheme. The present Bill would overcome these and other difficulties by providing for the incorporation of the bondholders of a company into a limited company. The conversion of bonds into .‘-bares would be under the supervision of a commission. 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 part of the company’s undertaking allocated to any other group. The Minister explained that this provision .was desirable because plantations held by different groups might differ widely and that there should be some provision for 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 shareholders bv 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.” Delay in Taking Action. Tlffi opinion that publicity should be given the proceedings of the Bondholders Incorporation Commission instead of sittings being held in private as proposed in the Bill, was expressed by Mr. W. Nash (Lab., Hutt). Mr. , Nash, who was the first speaker from the Labour benches, also said that the Government had delayed too long before taking action after it was aware of the conditions existing in connection with bond-issuing companies. With these exceptions Mr. Nash expressed general approval of the Bill. Mr. Nash said he thought the analysis of the Company Promotion Commission and of the Minister of Finance, that it was not possible to realise the products affected by bonds in bond-issuing companies, was the correct one and that something was to be said for bringing in the legislation. Under compulsion circumstances the Government was in reality taking up a Bill which dealt with private matters. Under normal circumstances the people concerned would have to come to the House and promote a Bill of their own, but he thought the circumstances warranted the Government acting as it had.

He thought it necessary to provide some machinery whereby the chairman of the Bondholders Commission could be removed from office. No such machinery existed in the Bill. He did not see the necessity for sittings of the commission being held in private. From the report of tlie Company Promotion Commission it was apparent that publicity was desirable more than anything else. There was a good case for sittings in the open. There was no

■ appeal against an order <of the commission. What would happen if a dissatisfied person wanted to go to the jSupreme Court on a point of law ? The Bill was very necessary. Some credit was due to Professor 11. Bplshaw and Mr. F. B. Stephens, who wrote the original pamphlet on the promotion of bond-issuing companies in New Zealand, he continued. Credit was also due to the members of the Company Promotion (Commission —Mr. J. S. Barton, Professor Belshaw and Mr. F.' E. Graham—on whose report the Bill had been built. If one thing came but of the whole business it was the amazing indictment of private enterprise. "Whitaker Wright, Hooley, Hatry, Kreuger and Stavisky Rave nothing on the people who have been fleecing this Dominion, and the Government allowed it to go on for twelve months after the publication of the pamphlet by Professor Belshaw and Mr. Stephens,” added Mr. Nash. "The imperative factor in saving the people from these crooks, is publicity. The omission of provision for that is the, one fault in the Bill.” The Economic System. Mr. Nash contended that every word the commission had said about the bond system applied to the present econdmic system. The Government was merely patching the leaks, and had given no thought to the construction of a decent social system. The methods which had been exposed were inevitable under the economic system that determined Hie flow of goods and services. The Hon. W. Downie Stewart (Govt., Dunedin West) : If it is inevitable this Bill won’t cure it. , Mr. Nash: This Bill will just get oyer some of the difficulties of the victims of the system. The measure ought to be supported because it does ameliorate to a certain extentjhe difficulties under which some of our poorer and some of our better off people are suffering to-day. Mr. 11. G. R. Mason (Lab., Auckland Suburbs) complained that, the Bill was doing nothing to prevent a recurrence Of the very happenings that had been responsible for its introduction, but was merely designed to help those who had been victims of swindles. It could not in any way make good the swindles that had been perpetrated by the companies on the bondholders. There was nothing outstanding except their magnitude about the financial operations disclosed in the report of the commission. They were simply ordinary company swindles, and when the Bill had been passed it would still be possible to perpetrate swindles of that kind. He would like to see the Bill so designed that it would be .impossible for things of that kind to occur again., Mr. Mason also criticised the provision in the Bill that the cost of incorporation should be borne by the companies, and asked why they should be asked to pay for what really constituted a convenience for the bondholders. > Not Wide Enough. Mr. F. Langstone (Lab., Waimarino) considered that the Bill was not wide enough in application—it would not stop a great deal of the swindling that went on in this country. He a'si 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. 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 companies to prove their venture worth-while before being allowed to put shares on the market or issue bonds. The present Bill would have the support of the Labour Partv. It was definitely a step in the right direction. Mr. Coates briefly replied to the debate, indicating that the Bill made no pretence to deal with all subjects in vestigated by the Companies Promotion Commission. It would probably be found necessary to make further amendments to the Jaw relating to com pany promotion methods, although the present Companies Act had stood detest well. The Bill was read a second rime and committed immediately afterward. Commit tee Proceedings. When the Bill was in committee Mr R. A. Wright (Ind., Wellington Suburbs) asked whether bondholding companies that were quite sound would be compelled to conform with the rules .laid down. i“The soundest of our bond-issuing companies are asking for this legislation because they can t operate until they get it,” Mr. Coates replied. Mr. Downie Stewart inquired whether the Bill had met with any opposition Hi; said his question was prompted by the fact that it had been

suggested by 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 lie thought the matter mentioned in “another place”, deac more with the previous Bill than witii the present Bill. Mr. J. W. Munro (Lab., Dunedin North) sought to amend the Bill so that the court would have discretion in fixing the fine for publication in any newspaper of any report or account of a sitting of the Bondholders Incorporation Commission without its consent. The Bill provided for a fine of £lOO on summary conviction, but Mr. Munro sought to amend the clause by providing for a fine not exceeding that sum. The amendment was lost by 41 votes to 19. Tlie Bill was read a third time and passed. PERSONNEL OF COMMISSION Labour Members Curious Curiosity as to the personnel of tlie commission to:be set-up under the Companies (Bondholders Incorporation) Bill was expressed when tlie measure was being considered in tlie House of Representatives lasi night. Mr.' F. Langstone (Lab., Vvaimarino; asked whether tlie ehairnmn of the commission was to lie a judge, and what tlie emoluments of t.lie members were to be Tlie Minister of Finance, lit. Hon. J. G. Coates, said tliat tie could not say more than was contained in the Bill. Tlie- chairman of tlie commission would not be a judge, but lie had not anyone ill mind for a “cushy job.” Neither did lie know what salaries Hie commissioners woulu receive. Naturally they would need to lie persons specially equipped in approach ami 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, who was sitting liehiml Mr. Coates). Mr. Coates: Tliat- is a good suggestion.

Mr. A. J. Stallworth.v (Ind., Eden) •said lie expected the House could be assured that Mr. Barton would not lie chairman of the commission. Mr. Coates: Yon can get no such assurance from me.

Members of the Reform section of the Coalition Party met in the office of the Minister of Finance. Rt. Hou. J. G. Coates, yesterday morning Mr Coates stated subsequently that the meeting had been purely private, and there was nothing to communicate to the Press,