EXECUTIVE TRUST

Evening Post, Volume CXX, Issue 122, 19 November 1935, Page 12

EXECUTIVE TRUST

DEBENTURE HOLDERS

AUCKLAND APPLICATION

A MEETING- SOUGHT

An application on behalf of William Henry Bracey, of Auckland, for permission to convene a meeting of debenture holders in the Investment Executive Trust of New Zealand (in liquidation) was made before Mr Justice Blair today. Bracey wishes the meeting to be called in order to consider a scheme whereby a new company would take over the assets held by | the Public Trustee as liquidator of the trust company. It was revealed that the McArthur company recently acquired £80,000 worth of debentures in the trust company, but it was strongly denied that this had anything to do with the scheme now put forward. Mr. H. P. Richmond (Auckland) appears for the applicant and Mr. E. P. Hay for tha Public Trustee: Mr. Richmond said that the application was made under section 159 of the Companies Act, and was simply for an order for the calling of a meeting of creditors. It was entirely distinct from the later proceedings in which, if the meeting was called, th"? Court would be asked to sanction any arrangements that might be made. In the present instance the Court had only to consider whether the application was bona fide and reasonably supported. His Honour asked whether the scheme was not rather more an embryo than a scheme. THE SCHEME. Mr. Richmond: I should not have thought so, Sir. The whole of the scheme is fairly comprehensive.. The scheme is for the taking over by the proposed new company of the whole of the assets held by the Public Trustee with the exception of possible assets in the form of a right, which may possibly be a legal one, against certain shareholders who have been placed on a contributory basis. Apart from that the scheme is a simple one. His Honour: It is simple in one way, and yet is it? There is no company. Mr. Richmond: The whole of the company is there, Sir. The memorandum and articles are all complete. The whole thing is set out. His Honour: There is no capital or suggestion of capital, is there? Mr. Richmond: That is quite a common scheme where one company is going into liquidation. Another company is formed to take over the whole of the assets. It pays for the assets by shares. His Honour: But in that particular case there is a company—well, one might say arranged, but in this particular case this company is only in the dim and distant future. Mr. .Richmond said that if there were any dissentients to the scheme amongst the debenture holders the company intended to buy them out: If the company was formed and was unable to provide the finance to buy them out it simply could not go ahead. His Honour said that the scheme involved the holding up of the liquidation of the trust company for approximately nine months. Mr. Richmond said it would take time to get in touch with all the debenture holders, but it might not take as long as that. The Public Trustee, as liquidator, said his Honour, was bound to have regard to the wishes of the creditors. Mr. Richmond: I don't know that he is bound to in this case. The debenture holders have no power to force the liquidator into a scheme such as this. I A POSTAL, BALLOT. I His Honoun^Vhose proposal is this? Mr. Richmond: It is, in form, the application of Mr. Bracey. His Honour: And he says he is a member of the committee of debenture holders in Auckland? Mr. Richmond: What has been done has been set out in the affidavits. A postal ballot was taken in various centres and as a result a debenture holders' committee was appointed having one representative, Mr. Paul in Dunedin, Mr. Bogan. in Christchurch, Mr. Levy in Wellington, and Mr. Bracey in Auckland. Mr. Richmond said that ballot papers had been sent to the holders representing £300,000 worth of debentures, and of those holders a proportion representing £200,000 had actually promised financial support in connection with the present application. The Public Trustee had the names of debenture holders representing another £100,000, but he would not divulge their names and addresses, and consequently they could not be communicated with. It was rather amazing, continued Mr. Richmond, that in view of the political influence against any cooperation amongst the debenture holders two : thirds had voted in favour of the scheme. His Honour: What does that mean? I don't know anything about political influence. Mr. Richmond: It means that questions were asked in the House after the legislation was passed. McARTHUR'S POSITION. The implication had been made in the affidavits of the Public Trustee, continued Mr. Richmond, that Mr. McArthur was somewhere behind or had influenced the present application. That was utterly untrue. There had never been one moment since the committee had acted in which Mr. McArthur had entered into the matter. The committee had been frightened of that very criticism. It appeared from the affidavit of the Public Trustee that a company promoted by McArthur had acquired £BG.OOO worth of debentures. The idea that the debenture holders' committee was in any way associated with McArthur's company or the acquiring of the debentures was absurd. His Honour said the statement had apparently been made on account of the possible suggestion that McArthur was really endeavouring to get a majority of debentures for the purpose of dominating a meeting of debenture holders and securing approval of the scheme. Mr. Richmond said that McArthur had either acquired the debentures from holders who had supported the scheme, in which case the position remained unaltered, or else he had acquired them from others. If tlie latter was the case it meant that the debenture holders in favour of the scheme represented £280,000. "THE BIGGEST SAY." His Honour: Let us assume that Mr. McArthur has acquired £30,000 worth of debentures. That means he has the biggest say, and would have the biggest voice in any debenture holders' meeting.

Considerable discussion then followed 011 the question of the manner in which the proposed new companywas (o deal with debenture holder's who did not approve of the newscheme.

Mr. Richmond explained that (he new company proposed to come lo an arrangement with the Public Trustee as to the value of the debentures and buy them in. If an arrangement could

not be made the price would have to be fixed by arbitration.

In reply to a question by his Honour as to how he was going to find the debenture holders, Mr. Richmond said that the Public Trustee had a list, though he would not supply it. Mr. Hay said that in refusing access to the list the- Public Trustee had acted with great propriety, to prevent debenture holders being troubled by "high-pressure" salesmen. Further questioned as to where he proposed to hold the meeting or meetings, Mr. Richmond said that he had no objection to meetings being held in the four main centres, though the I Act referred only to "a meeting." His Honour: What about (he question or the cost of these meetings'? Mr. Richmond: I suggest that these are .so substantial a body of creditors that they are entitled to have their views ascertained out of the assets held by the liquidator. (Proceeding.)