COMPANIES LAW

Evening Post, Issue 6, 8 January 1935, Page 5

COMPANIES LAW

BEYISION IN N.S.W.

PREVENTING DISHONESTY

(From "The Post's" Representative.) SYDNEY, December 28. New South "Wales Ministeries "have for many years talked about amending the companies law. On all sides it is admitted that tho law is so obsolete in many of its provisions that the proverbial horse and cart can be driven through it. But to change it has been so difficult that Ministers of Justice have shirked the job. The present Minister (Mr. L. 0. Martin) has taken up the burden, and in'the; last week before the Christmas recess of .Parliament he introduced a;measure .which had for its object'a complete revision and the modernisation of the Comv panics Act. Mr. Martin, a very capable Minister, no doubt felt impelled to' introduce his Bill by evidence adduced at the Boyal Commission which inquired recently into the operations of Australian."and New Zealand investment and trust companies. Mr. Martin realises the importance of the Bill; by allowing members and interested parties the full Parliamentary recess to study-the clauses. They will need it, for tho Bill is of monumental proportions,' containing 370 clauses and 12 schedules. It fills 290 printed .'pages.. It repeals the existingrlaws and provides in tho one enactment tho whole instrument of company, legislation.*., Its policy' comes u.n- ---' dor, three iua'iri : .heads: (1) To provide a code under which companies may be formed, worked, and wound up; (2) to prevent the dishonest* exploitation of - the investing public; and (3) to follow the English s code as far as possible, incorporating also provisions which have been found satisfactory in other Dominions and States, as well as in New South Wales. . SALE OF SHARES. Drastic and entirely new restrictions on the sale of. company shares to the public are .proposed in the Bill. It . contains a' straight-out prohibition of hawking from house to house shares for subscription or purchase.,lf shares are offered ia writing ' (except to agents) the offer must be accompanied by a written statement containing full particulars. Penalties for breaches of this section are as high as £500, and twelve months' imprisonment. Where the offence is committed by a company, every director;"and officer concerned'in its management will be deemed guilty unless he proves that tho offence took place without his knowledge. The Bill will prohibit the circulation in the State of any prospectus of a company incorporated outside the State unless the prospectus has first, been delivered for registration to the Kegistrar-General; the prospectus must state this fact. The Minister will have power to appoint inspectors to investigate the ' affairs of a company on an application of fixed proportions of tho shareholders, who must, however, provide reasons ' for/the .application.: These inspectors may demand'all books and examine on oath officers and agents of a company, \ and the Minister shall institute proceedings if the inspection warrants such action. ' ; The Bill requires every company^ Tegistered after the measure becomes law to have at least two directors, these not to be appointed until the,; KegistrarGeneral has been notified and has agreed. Both directors must hold a specified share qualification. Directors will be required, when requested by a / 'specified, number qf\ shareholders,,,. to, furnish a statement of their remunera-tion.--A director-in-any way interested in a contract with the company must declare th 6 nature of his interest at a meeting of the company. ACCOUNTS OF COMPANIES. Stringent regulations are provided for keeping the accounts of companies, which at all times must be open, to inspection by the directors; ■ and : every year a profit and-Joss account must be produced at a general meeting. Extraordinary general meetings must be convened at the request of specified proportions of the shareholders, who may themselves convene the meeting if thedirectors fail, to do> so. Minute books of general me.etihgs1 must be available to members without charge. Every prospectus must be dated and registered with the EegiStrar-General. Every director at the time of the issue of the prospectus, and-every person who has agreed to become'; a director,-, will be liable to compensate, all persons who subscribe for shares or debentures. on the faith of the'prospectus for.loss or damage sustained by reason of any, untrue statement in the prospectus* ' ■ The Bill contains other detailed, pro-, visions covering every phase of coat: pany activity, including ■ no-liability companies, foreign companies, registration, winding-up, reconstruction, registration of charges, appointment jof: re* ceivers and managers, and provision for dissolution. '