BANKS’ AMALGAMATION.

Dunstan Times, Issue 1688, 21 September 1894, Page 2 (Supplement)

BANKS’ AMALGAMATION.

The proposal reads as follows : ’ 1. Negotiations have taken place for the . amalgamation of the Bank of Now Zealand and the Colonial Bank of New Zealand, and conditions have been provisionally defined. These are embodied in the accompanying memorandum, and arc now respectfully submitted toi the sanction of the Government as a necessary ; preliminary to their being laid before ihe sharei holders of the respective banks for their con--1 tirmation. Z. It is confidently claimed that this arrange- ■ meat, if carried into effect, will greatly con- : tribute to the soundness and stability ot r banking in the colony, and, by reason ol the ’ materially increased ret profits which will ’ accrue to the Bank of New Zealand from the accession of the Colonial Hank’s business, it would strengthen the security of the State in • in respect to its guarantee for the Bank ol New Zealand. , , „ ... „ 3. The presence on the Bank of Now Zealand -s balance-sheet of a large item representing shares 1 in the Bank of New Zealand Estates Company | is a source of weakness to the bank, and the . | Colonial Bank reasonably make it a condition i of the amalgamation either that it be entirely j removed or that tiro Government under- \ take to make good the ultimate deli--5 cieucy (if any) which might remain ’ after liquidation of the assets and of I the collateral cover held by the Govern- . merit, viz. (1) The paid-up capital ot the ■ bank, which, under the proposed agreement, is - to be written down to £600,000 2) Hcsorvo liability of shareholders, £1,500.000. (3) lire I interest of the Bank of Now Zealand share- , holders in the future profits of the ' bank, which, if the amalgamation be car--1 Vied out, cun hardly fail in ten .years to accumulate to £soo,ooo—say, £^,600,000. ’ j 4. This undertaking in point of fact already 5 exists, because the two millions of capital - ! guaranteed by the State is liable to the credi- ! tors to make good this item with the others in f the balance-sheet. The complete separation of 1 the Estates Company from the bank and the i assumption by the Government of a share m its management, and liquidation would be a , measure wise in itsel), and which the countij } I desires to see carried out. 5, It is respectfully suggested that a small board or commission lie set up-half to bo uomi--3 nated by the Government, halt by the bank I with an administrative head, to bo jointly ap- ■’ i pointed. , , . , , , ! 0. And it is submitted that, m order to L ecouonij' and thereby the better security of the / State, arrangements be made for the reclempt tion of the £1.500,000 5A per cent, debentures, . which arc now a first charge on the asses, ’ winch impose a heavy and quite unnecessaij 1 burden of interest, and so lessen the resources . to which the colony has to look tor the protoe- * tion of its guarantee, and which stand m the 1 way of a satisfactory rearrangement of the i administration. It is believed that this can bo s effected without raising any more money hv .• I, If pari of the money already raised be used

for extinguishing so much of these debentures there will, cm the contrary, bo an actual leductiou in the amount owing. B\ this means, bv the resumption of some of the estates under the Land for Settlement Act, and by assistance from the bank itself, the incubus refen ed to can be got rid of. : John Murray. Wellington, September 11, 1894. The undersigned, being of opinion that an amalgamation between the Bank of New Zca- j land and the Colonial Bank of New Zealand would be mutually advantageous and in the interest of the colony, agree as regards the Bank of New Zealand to recommend to the approval of the Government, and, as regards both hanks, to recommend to their respective directors and shareholders the following terms 1. The assets of each bank to be reviewed by a board or other tribunal, upon which the other bank’s representatives shall lie preponderant. Upon these boards respectively being satisfied that the assets of each hank j are so far sound that any deficiency can be | made good by the provisions available therefor, the Bank of New Zealand is to | assume the liabilities of the Colonial Bank j and take over its assets, as hereinafter provided. 2. The Bank of New Zealand to taketho ncecs- j sarv measures to increase its capital by the creation of new shares* of the nominal valu« j of one million pounds sterling, to bo designated B shares. Of these. £400,000 . to be issued to the shareholders ot I the Colonial Bank in lieu of and j iu exchange for the present paid-up j capital of that bank; the shares so issued to | be considered as fully paid-up shares, and j to carry no further liability whatever. The | I remaining £600,000 in shares to be vested , in the president of the bank for the time | j being, and to be held for the present as j unissued, but to be at the disposal of the j shareholders of the Bank of New Zealand j i or their transferees at a period to be I appointed by the directors of the bank for j the time being, but not later than the end ] of the’year 1903. The subscriptions to he j pro rata to the holdings of the C shares j hereinafter mentioned, and six months to be | given to subscribers in which to pay for the | shares by instalments. When all the in- 1 stalments are paid the shares to carry no | further liability. Such of those shares as j arc not subscribed for by i hose having a ■ light to do so shall thereafter be absolutely | the property of tho bank as then constituted, and free from any restriction as to issue The Bank of New Zealand to write down its present paid-up capital of £900,000 to £600,000; the sum of £500,00(3 so released to lie used as hereinafter provided. r I ho old shares so written down to be designated C shares. The capital of the bank after amalgamation thus to be guaranteed preference stock («) £?,000.000, B shares fully paid up £400,000. C shares fully paid up £600,000. total £5,000,000 ; B shares unissued £600,000 grand total £5,600,000. 3. The fust board of directors shall consist of seven members, of whom four shall be elected by the present shareholders of the Bank of New Zealand, and three shall be elected by tho present shareholders of fhe Colonial Bank or their respective transferees, j j it is of the essence of this agreement that j I the Bank of New Zealand shall have a pro- | ponderancc of one member on the new board I of directors. Therefore, if the Government should appoint as president of the bank a person heretotore connected with either bank, such president shall stand for one of the directors to be nominated by that bank, 4. With the exceptions of the principal executive officers—namely, the joint general managers, the chief inspector, and the Loudon manager (regarding which a separate agreement has been entered into)—the officers of the bank shall bo selected by the new board of directors from the present staffs of both banks, and appointed to thenvarious posts. These selections, as far as may be practicable, shall be made in accordance with the numbers and positions of the present officers of the two present staffs j relatively, departure from this condition being only made where deemed to no I necessary in tho interests of the j hank. The Colonial Bank officers coming i in shall have no rights in the present Bank i of New Zealand guarantee and provident j fund. The officers dispensed with to be compensated by the bank to which they at present belong. I 5, The liabilities and assets of the Colonial j Bank shall be taken over by the Bank of New Zealand as provided iu clause 1, exi ccpting such assets or advance business j which by the new board of directors (having a preponderatin'? number oleci/uu ",i fiau.k of New Zealand) shall Do considered unfit and not proper to be so taken over. Such amounts as may lie so rejected, but which :t may not be thought expedient to wind up, or not to wind up speedily, also such amounts as are determined to be subjected to speedy realisation, shall be liquidated or otherwise treated by | the bank under tho new board for behoof of . I the present shareholders of the Colonial i Bank or their transferees, but tinder the ’ | direction and according to the wishes of the ! appointees of the said shareholders. ’ | The reserve funds and undivided profits of the Colonial Bank shall be used in ! the first instance to make good any ij deficiency resulting from liquidation as ; above. If any surplus remains after j making good such deficiency, such surplus shall be divided equitably amongst the shareholders of the Colonial Bank. _ If 1 ihe reserve fund and profits be insufficient | to make good the deficiency, then a call shall be struck on the Colonial Bank shares, I and shall go to make good such deficiency ; before the final exemption of the share- ! holders from liability. The limit of time I | allowed for acceptance or rejection of advance business, as above, shall be four calendar months from the date of tho amalgamation, and no such account shall be carried on for more than twelve mouths, unless with a deposit of a reserve against it to the satisfaction of the board. 6, The new board of directors shall pass in like review the assets and liabilities of the ■ I Bank of New Zealand in existence prior to amalgamation, but if any representative of 3 j the Colonial Bank on the board shall take 1 exception to any asset so reviewed, then ) the tribunal must be narrowed by so many j of the representatives of the Bank of New i Zealand withdrawing as shall leave a preponderating uumberof Colonial Bank appointees to decide whether such asset shall be taken s over or "rejected. Within four months i from the date of amalgamation there shall be set aside for liquidation or other treatment all such assets and accounts as may be con--1 sidered unfit and not proper to lie continued as business of the bank. Such • accounts as may be so set aside shall be liquidated or otherwise treated by the i new board in the same manner as those of t the Colonial Bank, but under the direction and according to the wishes of the appointees of the present shareholders of the i Bank of New Zealand. The £500,000 ro--3 leased from the capital of the bank, as por J clause 2, the reserve funds, and the undivided profits of the Bank of New Zealand 3 shall be used, in the first instance, to make good any deficiency result- > ing from liquidation as above. If any surplus remains after making good such deficiency, such surplus shall be credited to 1 the account of the Bank of New Zealand Estates Company. Limited, with the bank, i if the sail released capital, reserve funds, 1 ami undivided profits, be insufficient to , make good the deficiency then the i dividends and profits, which shall accrue on i tiic £600,000 G shares, shall be u-ed in the • | first instance to make good such deficiency, and shall bo so applied until the deficiency 1 j be wiped off. • 1 7. The present premises of both the Bank oi - ! Now Zealand and the Colonial Bank to . | be valued by the new board on the | basis that they arc going concerns, and if ) these values be agreeable to the ap- ; pointces of the relative banks, then ' such values shall be adopted, and the , premises so agreed upon shall be taken over ’ by the amalgamated Dank. If the ap- • pointces of either bank disagree with any 3 such valuation of the new board, then the board and the appointees so disagreeing j shall in each case appoint an umpire, whose 3 valuation shall be final. But it shall bo re--3 acn ed for the appointees of each bank to decide whether tbc amount of any valuaI lion should be accepted from the ainalga-

mated bank, of that in preference any par- j ticuiar premises should be liquidated, as | (] specified in clauses 5 ami 6 hereof. Should v the valuations of the present premises of the Bank of New Zealand amount to a 0 sum exceeding that at which the whole of the premises now stands in the hooks of the said bank, such surplus shall j be credited to the liquidation account for , the ultimate behoof of the Bank of New 1 Zealand Estates Company, Limited, as per clause 6, and anv surplus in like manner arising by valuation of the premises of the ] Colonial Bank shall he credited to the hqui* ! , dation account mentioned in clause 5. If, j instead of a surplus, there should aiise a j deficiency to cither bank on account of i premises, such deficiency shall he treated, j in the case of the Bank of New Zealand, as | provided for deficiencies on other assets | , in clause 6, and in the case of the Colonial Bank as likewise provided in clause o. . 8. It is an integral part of this agreement that ■ before amalgamation takes place legislation i shall be passed by the Parliament of New : Zealand by means of which the Bank oi , New Zealand Estates Company, Limited, j will be entirely separated from the bank, so that the present shareholders of the j Colonial Bank, who arc about to transfer their capital, and the future creditors oi | ■ the Bank of New Zealand, may run no risk j whatever from the bank's connection with I the said Estates Company or future ad- | vanccs to it. j : 9. It is hereby agreed that after payment of 4 , per cent, per annum on the guaranteed , preference stock, and 6 per cent, per annum dividend ou the other paid-up capital of the bank, and after placing £20,000 per annum to a new reserve fund, all other profits and 1 dividends earned and payable (after due j provision for bad and doubtful debts) shall be applied to reduce the ultimate defic ency I of the Bank of New Zealand Estates Company, Limited. 10. The bank shall afford to the Bank of New Zealand Estates Company the necessary , banking facilities, under suitable guarantee, I for carrying on and liquha'ing the business ■ and assets of the company and the concerns belonging to it. Amounts at credit of the company with the bank arc to be placed for interest purposes against amounts at debit, and interest at the rate of 4 per cent, per annum is to be charged or allowed on the daily balances on cither side until the company shall be either liquidated or placed in a solvent condition. 11. The said amalgamation shall take effect within fourteen days after the shareholders of the respective banks shall have adopted a resolution approving oi such amalgamation ; but the parties may, by mutual consent, extend such period of fourteen days for a further period not exceeding two months. Dated at Wellington the 11th day of September, 1894. John Murray. Geo. M‘Lean. j