COMPANY LAW

Evening Post, Issue 25, 30 January 1935, Page 7

COMPANY LAW

INVESTMENTS BUREAU

PROPOSAL CONDEMNED

TOO BUBEAUCBATIC

Tlio final report "of the Commission of Inquiry into company promotion, methods, etc., issued towards the close of last year, contairis recommendations for the further control by legislation of companies and stock exchanges in New Zealand and the establishment of a bureau to be known as the Corporate Investments Bureau. It is suggested that this.bureau be administored by a controller and a council of throe members nominated by the Now Zealand Law Society, the Now Zealand Society of Accountants, and tho Now Zealand Stock Exchange Association .respectively, and appointed by the GovernorGeneral in Council; quoting the words of the report: "The Controller, as a Government officer; shall have a skilled staff at his disposal, and be empowered where necessary, to employ outside accountants and auditors." This bureau is to be invested with very wide powers.

At a meeting of the council of tho Wellington Chamber of Commerce last evening, the legislation committee brought up a report on the recommendations for new legislation in regard to companies and stock; The committee in its report said that quite recently information was received that it was likely, an attempt would be made to havo tHe recommendations of the Commission put into effect by Parliament early in the approaching/session of Parliament. Tho committee reported:— "This committee joins in the general tribute which has been paid to the Commissioners for the industry and ability displayed in their report and recognises that any recommendations which they have seen fit to make cannot be lightly dismissed but aro entitled to receive the fullest consideration. In view, however, of the serious consequences that might result from the far-reaching effects of the proposed legislation) in directions other than those intended, this committee is definitely of the opinion that it would be most unwise to put into effect tne recommendations of this Commission before they have been subjected to' a far more searching criticism than they have yet received. No one will question the wisdom of legislation that is proved to be necessary in order to bring men guilty of gross malpractices before our Courts of law'which are charged with the administration of justice, but there is a very real distinction between the passing of laws that create bureaucratic control and the passing'of law* to make, certain malpractices criminal offences. "In the past amendments to the law of companies have been regarded both in England and New Zealand as being of sufficient importance to demand the most careful consideration before being put into effect by law. Before the passing of the last. Imperial statute of 1929, the British Government sought the advice of a committee specially selected from leaders in the commercial, legal, and accountancy world in England, and in New Zealand similar safeguards were adopted by our own Government before the passing of the Companies Act, 1933, which came into operation less than a year ago. The passing of this statuto in New Zealand brought our company law very largely into line, with company law in England and .constituted a step-forward towards tho ideal of co-ordination of- companjrjjaw. throughout the Brrtish'-fcominflnweilth.-"The advantage to Now Zealand, of this co-ordination was referred 'to by the honorary advisory committee, in their explanatory memorandum to >the Companies Bill,' 1933, headed 'Conclusion,' in which' they state: —'Any attempt at improvements in language or arrangement would in large measure defeat the ultimate purpose of the Bill, namely, that there should -in this department of law be uniformity as far as that is attainable within the British Commonwealth, and' that the decisions of the English Courts should be applicable in New- Zealand as they are in England. If the criticisms of the Imperial Act, made in text-books, legal journals,, and,elsewhere, prove to be well* founded and substantial, they will inevitably be followed by\ amending legislation in England and it will then bo a simple matter for the New Zealand Legislature in its turn to adopt those amendments. This view has the support of the responsible officials of the Imperial Board of Trade; who administer the Imperial Act and with whom the proposals of tho Government in relation to the present Bill have been discussed.' " "In face of the views expressed in tho above quotation it would certainly seem to be desirable that before any amendments are made to tho Companies Act in New Zealand opportunity should be afforded for an exchange of views with the appropriate authorities in England."

: "STAB CHAMBER METHODS." "It may be that in the case of those companies referred to in the Commission's report as 'Land-Utilisation Companies,' " continues the report, "a situation has arisen that is peculiar to New Zealand and.which calls for special treatment. A draft Bill entitled 'Tho Land-Utilisation Companies' Empowering Bill, 1934,' is included in the Commission's report. This Bill provides for the appointment by the Gov-ernor-General of a Commission of three persons 'to be1 called The Land-Utilisa-tion Companies' Commission which shall have and may from time to time exercise the jurisdiction and powers conferred upon it by this Act.' Tne powers conferred on. this Commission by the Bill are so complete that, once constituted, it would be a law unto itself as there is apparently no provision made in the Bill for any appeal from its decisions. Its proceedings are to be conducted on 'Star Chamber' methods as they 'shall not be open to the public or to the Press and no report or account of the evidence or other proceedings before it ■ shall be published save with the consent of the Commission.' It is possible under the Bill for this supreme power to be exorcised by a single individual, the chairman." After quoting the clauses which, in the opinion of the members of the committee would vest such power in the'chairman, the report adds:—"This Bill would, in our opinion, create bureaucratic, control of the most extreme type. It affords a striking illustration of the usurpation by bureaucracy of the functions of the administration of justice which should be entrusted only to our Courts of law. In his book 'The Now Despotism' Lord Hewart, Chief Justices of England, calls attention to the danger which threatens the community and the individual liberty of the subject from tho ever-en-croaching power of bureaucracy encouraged by tho trend of much of our modern legislation. "Tho following resolution was carried:—

The Legislation Committee of tho Wellington Chamber of Commerce is of opinion that (a) -any proposals for amendment of the Companies Act, 1933, should be'referred to the Special Committee to which was referred the preparation of the 1933 logisla-1 tion, and (b) before any such amending proposals are presented to Par-,

liament, such proposals should be reported upon by that Special Commitoc.

CONTROL BY DICTATORSHIP,

In moving tho adoption of tho report, the chairman of. the committee, Mr. T, L. Ward, said the really fundamental principle involved was this: Were they going to stand for control by dictatorslripy or were they going to demand that the Government should progress an lines of observance of the law. When a man offender against the law the proper course to take was to bring liim before the courts of justice. Any suggestion of dictatorship was foreign to our conception of the rights of the subject in regard to individual liberty and freedom. The fact that financial scandals had occurred in respect to certain classes ■of companies was a secondary consideration to tho principles involved. The fundamental principles of the proposed legislation were bad. There was, however, a danger that the faults of the suggested legislation would ,be overlooked, and that the legislation would be rushed through Parliament without due consideration; Mr. J. H. Meyer said tho committee deserved thanks for giving the council of the chamber such a clear and definite report. He 'seconded tho motion. OF UTMOST IMPORTANCE. The vice-president, Mr. M. G. C. McCaul, said the question at issue was one of the utmost importance in respect to company and commercial life in New Zealand. The question had been raised as to the encroachment of the powers .of the Government upon the privileges and rights of a democratic community. The matter was of the greatest importance, and required the most careful consideration. In recent years more and more government was being done by Ordor in Council. This latest proposal would give three men powers which appeared to him to be | quite unwarranted, and not altogether safe. Mr. P. E. Pattrick remarked that in bis judgment, in essence tho report of the committee was absolutely right. The committee desired that before any legislation was passed the provisions of the Bill should be thoroughly examined by such a committee as considered tho Companies Act. Was that the position? Mr. Ward: Yes. that is the position. Mr. Pattrick said that in that case he would support the committee's recommendation absolutely. Mr. Arthur Seed expressed the opinion that the committee had done its work thoroughly and merited the highest praise. He referred to the report of the Commission with respect to land utilisation companies, afforestation, and the position of the bondholders, and the State. He agreed with the recommendation of the com mittce. Mr. J. Pearce Luke said that they were indebted to Mr. Ward and the committee for the able way in which they had dealt with tho matter. It was apparently intended to place practically absolute power in tho hands of three men, and there would 'be no right of appeal. What was proposed was against all tho recognised principles of British justice. He was satisfied that what was proposed was not only undemocratic, but would lead to a much worse condition of affairs than existed! at present. Mr. Ward said the committee did not want tfib administration •of justice" to be divorced; from the courts of law, j and be placed in the hands of bureaucratic officials.

The recommendation of the committee was adopted.