HOLDERS OF BONDS

Evening Post, Volume CXVIII, Issue 114, 10 November 1934, Page 10

HOLDERS OF BONDS

PROTECTION BILL

INTRODUCED IN HOUSE

NEW ORGANISATION

Legislation 'designed': to enable holders of bonds in forestry! flax, and othercompanies of a similar nature to .convert' their bonds' into shares in a bondiioldei's'< company was introduced in the House of Eepresentatives last night; by the Minister iof Finance1 (the Rt.: Hon. J. G. Coates). It .is: not intended; to proceed with th'o, legislation at this sta'ge'V6f the. session, .but the Goternnient .proposes that it should' be passed early! next year. The legislation is one of the results of the operations of the Company Promotion Commission which sat recently and provides:for the setting up of a Bondholders' -Incorporation: Commission for inquiring, into and determining the respective rights ,of bondholders, ; bond-issuing companies, and any... persons interested' in ' the subject matterof anybonds;'.' ;> V v ■ ■ It: is proposed ;that the: Commission shall consist of three persons, and within three months' of, the passing Of the measure every v bond-issuing ' company is .to, send.to the Registrar of Companiesfull details of!-the company, including' the: names and 'addresses; of the- trustees for the bondholders):the number and :}£ ace value of the/bonds, and: the area of land affected .by'the bonds. < .•'•'■"' '\j ■■-..''.-".v',Vi".\"?--. ■;'.'':'■■'-*■':: ■■':. This, commission: may-at; any time order that a scheme for the incorporation of the; holders of bonds issued by any bond-issuing company or of the holders of vany specified classes of,, bonds, be submitted to; the ; by -;th'e bond-issuing company at any: time;within 'three months -of; the : ; ;date> of y; the OTdef.\,Before: any ; order .is -issued, rjthe bbn d-issuing '.company■■; or -Vthe v trustees for'the: bondholders,' 'if J/theyarev not parties; to!; the an opportunity to appear before the commission. Neglect to appear before the commission is to involve the person responsible in a fine of £100 and £20 during every day that the offence continues. % FORMATION OF COMPANIES. While general provisions are given to the commission in respect to the formation1 of hondholders' companies, the order for the formation of these companies is to include the details of the amount of share capital to bo g registered, * its division into shares, and, if necessary, into classes of shares, the persons to whpm shares are to be allotted, and the amount to be deemed to be paid up on each share. Further authority is contained in the Bill in lespect of repayment of expenditure incurred for purposes beneficial or likely to be beneficial to the bondholders, and the order issued by, the commission may require the surrender of any bonds, the delivery of any title deeds or other documents of title relating to any property affected by the tender. , ,- > ■ ". , The provision for the formation of the bondholders' company lays down that the.order for incorporation shall provide for vesting'in the bondholders' company the bonds .to which the ( order relates and any benefits attached to them, and the order is to provide for (he allotment to each bondholder of a share or, shares which shall entitle him to the same proportionate interest in the same property as- he was entitled to under his bond. Liabilities of any bondholder in respect to unpaid balances of purchase money or liabilities incurred on behalf of ■ the whole of the bondholders are to he deemod to ■ become liabilities of . the bondholders company. Powers of surrender of bonds are to be made applicable to shares in the new companies, and any disputes in this connection are to be settled by the 'commission. Any rights which the bond-issmt.<j company may have in tho land affected-may bo translated by the commission into shares in the bondholders' company. , REALISATION BCHEMES. Power is to be given, to the -commission to approve of any scheme of realisation submitted by tho directors of a bondholders' company, after a statutory meeting of shareholders, and after calling a further meeting of shareholders or taking a postal ballot of them the commission may order the reconstruction of the company, attaching to it any special conditions as to its assets and procedure. ~..' i • Bond-issuing companies are to be_sup-, iect to a'levy not-exceeding; = £ 200 within5 two-years 4f ian order^is .made forthesformation,of -a: bondholders Sany, while *ees are also to befpai^ Kspectvtd .any .<,t£en, Sder^he measure,^^fees^providjm? tot Sthe- whole'of the?etafciof>the.^op -^Sordermad^byHhe'c-oi^issionlis to4frlctth;erights;,or::«abilities,o^all bondholders of any^bondrJssmngo^om^ uaW ;^r' the^ shareholders :of ya ; bond t . Srs'company,i;and^rpc^ediiig 9^-; R-tfie commission-are; not;:.to; : be.amfor wantiof^form; orvappealed liS^iewed, quashed, prcalled in S^:in any^ourt^n aitf aW^f ? The Government, its i Departments, v,Wd^the '-■ Ncommissibn^are^expressly exempSifnl an^ implication;, tha S?of warraitß; Jhe .commercial or^conomic.,sofednes S :<.f: any :^company's scheme or policy-was Tespon: ;B^^£ pr:i ; the;^^ying, l out; i :.ofj^ny scheme. .!" j;r:^;':;''"'l':;;: ;?.U'•'■■:t i>=::..'V'vV,V..'L ■.'/..-"• g^ECnjARDINO i BONI)HOU)ERft; ': Thai'the::interes{s -of the" bondholders were being list eguarded^nder the. legw, ktion was^the^point strongly,.-,mad£ by Mr; Coatesi who,i in > explaining .the provisionsV'iindicateavthat^^e/legislar tion; had been .asked: for :by, some „of thei'coinpinieg*to::;enable,^hem. tp^con-, Yert"their-capital; ; >i:y..V>-v:^:Vsu;, / .:^v> ■;-■ Mr CPtttes saidi that; although ; > the ■Bill' was required; it not^be passed ithis? session,: but : y^as available for' circiilatipn purposes ,pn}f. Parliament would be asked .to pass the measured when .it"; met next1 year;: vv: ■.' '-■■- '"Will.'^-'that'1--': be ;-in; , Februaryf »■'. queried;;Mr^^W v -E.?Barn^rd ; v (Labour, ■<■■-»,'Yesc^or perhaps sooner,V '''-■ was.,■ the noncommittal replyi; of, the r Minister, who added that there were between 40 and? 50 bond-issuing cpfnpanies, operating'actively in New ZealaridVin. timber, flax tung oil! and so forth, and justification for: the; legislation was toy be found .in :the; Kinvestigatipns; -of % the Companies; Promotion Commission. The solicitor, to one of the big companies and representatives, of four other, companies; had asked^that the ;VBiirb c ■passed "at; price,.:for';...the;reason, ~;.that gome: of the concerns wished\,to^evote capitai to the installation, of'mills and were iuriable vto get into ■ % with their bondholders who .were- scattered throughout the worlds : They had^asked that a .commission be appointed >to Buperviso ■ and:: consider':<>:.recommendations for'the purpose- of: concerting the bonds into-share-holding capital.^ The companies could; agree, :amoiig;; themselves as to the methods to be adoptea, andiit was for the commission to;see that the interestsrof/the. bondholders werp; not prejudiced iby Ithe: rearranged •■ment's.:.^:-:.Th,e'''compaiiiißsyh'ad-Veache^'.'a stage' from i;which they-could; not; move arid could hot: legally iturh;any 'of: the capital .into; commercial-undertakings; Approximately.'£spo,ooo:would, it; was estimated, be :available :when the; Bill waspasscd, and;mpst:pf'it:iwould- bo utilisedin1 labour.. r^He did not think

that postponement of consideration of the measure would prejudice the interests of the bondholders. Parliament would pass the legislation when it reassembled. COMPANIES READY TO START. Mr. Coates emphasised that the duty of the commission would be to see that the interests of the bondholders were protected. Pour of the companiei wished to start immediately. In the long run it was quite possible that iome of the companies would go out, but that had nothing to.do with' the commission. Mr. F. Jones (Labour, Dunedin South): Will there be any Government examination of balance-sheets f "No," replied the Minister, who added that the costs of the commission would be borne by the companies. There would be no cost to the Government. "The companies themselves have asked for this," said Mr. Coates. "There is 'no State help, nor is there any warranty for the statement that the State is interested in any way. It is not. It is'merely setting up the machinery, and the companies are paying for it." < Mr. A. J. Stallworthy (Independent, Eden)-asked whether it was correct that a prominent Aucklander had seen the legislation about four days ago. The Minister replied that it was quite possible that a number of solicitors saw the Bill in memorandum form, since the measure was the result of negotiations which had extended over a long period. The Bill was read a first time.