PRIVATE COMPANIES

Evening Post, Volume CVIII, Issue 81, 2 October 1924, Page 11

PRIVATE COMPANIES

LECTURE TO ACCOUNTANTS.

An address on "The Law of Private Companies" was delivered to tho Accountant Students' Society by Mr. A. W. Blair last evening. Dealing with tho history of private companies, Mr. Blair said that in tho English Companies' Act of 1862, thero was no provision made for such. Gradually a practice arojo of forming what were known as "one-man" companies, consisting of the statutory minimum number of shareholders—but the bulk of tho shares being held by ono person only. The validity of these "one-man" companies was questioned in 1895, but in 1896, the House of Lords laid it down that such companies were in all respects authorised by the Act. Private companies first received statutory recognition m-New Zealand in 1903, in the Companies' Act of that year. Statutory recognition was not given in England to private companies till 1907. Mr. Blair devoted a considerable amount of attention to the distinction between ordinary companies and private companies, the former being required to have a minimum of seven shareholders and a no maximum limit, while the latter must havo at least two and not more than 25 shareholders. In this respect New Zealand law differed from the English in that 50 shareholders were permitted together, with an unlimited number of employees. Ho dwelt at some length on the effect on private companies of a decision by Mr. Justice Edwards (bimson's case) in 1913. That decision, he claimed, had the effect of practically abrogating' all the usual machinery for voting so far as private companies were concerned.' Mr. Justice Edwards refused to regard a resolution of a private company passed as a special resolution in accordance with section 91 of the Act, holding that the only method whereby a privato company could express its wishes was by entry in the minute book, signed by three-fourths of the members holding three-fourths .of its shares. The result of this decision was that in a private company composed of three persons, one of whom held only a nominal share, such nominal shareholder's signature was necessary before the company could validly express its wishes by the equivalent of any sort of resolution either ordinary, special or extraordinary. The lecturer also discussed various provisions inserted in the articles of association of private companies, dealing at some length with restrictions on transfers of shares, the expulsion of members, and profit-sharing schemes, and other similar matters. Tho address concluded with a discussion on the matters to bo considered when the conversion of a business into a private company was proposed, and a reference to the fact that the report of the English Board of Trade for tho year 1921 showed that of the 6834 companies registered that, year 6293 of them —approximately 92 per cent.—were registered as private companies, a striking commentary on the popularity and con" mercial necessity for sm.ii a means of trading.