BACON COMPANY'S CRASH

Evening Star, Issue 18336, 25 July 1923, Page 5

BACON COMPANY'S CRASH

BILL TO ASSIST GUARANTORS. GRAVE SUSPICION AROUSED. STRONG SPEECHES IN PARLIAMENT [From Our Parliamentary Reporter.] WELLINGTON, July 24. “ What chance has a shareholder under such circumstances?” exclaimed Mr Wilford, Leader of the Opposition, to-day when the House was discussing what the Hon. J. A. Hanan characterised as a piece of extraordinary legislation —namely, the Companies Special Empowering Bill. The Hon. W. Nosworthy, Minister of Agriculture, who moved the second reading of the Bill, briefly explained that certain guarantors had been called upon to substantiate liabilities incurred by a meat packing company. Some co-operative companies desired to relieve some of the directors of their personal liability, and the Bill proposed specially to empower companies to do that. Sub-clause 2of clause 3 provided “ that no company shall assume the liability set out except on a resolution of the shareholders of the company first being passed.” Mr Nosworthy pointed out that the matter was, therefore, absolutely in the hands of shareholders, and the Bill was merely an empowering measure. It would depend on shareholders whether they relieved a director of any liability. Mr Wilford said that one important point had been omitted by the Minister, who had not said a single word about debenture-holders or preference shareholders. Where did they come in? Mr Wilford declared that he did not know what to make of such a Bill, that made no provision for them. Here was a big company, called the New Zealand Meat Packing and Bacon Company, Limited, in process of being wound up. Certain directors of that company were liable for certain payments, and the bank that financed that company, now in liquidation, had called up from the guarantors so many thousands of pounds each to meet the bank overdraft. These guarantors were in many cases interested as directors of small companies. He knew one preference shareholder in one of these small companies who, at the company’s request, had become a preference shareholder with a guaranteed dividend, and hero was the Minister authorising the shareholders of the company to lake away £5,000 nr £6,000 of assets from such small companies to the detriment of preference shareholders. The Bill absolutely disregarded the rights of anybody who had put £SO or £2OO into a company in the way ofi taking preference shares. The whole position was that shareholders could, out of a company’s funds (including preference shareholders’ money), refund to any guarantor, or bis personal representatives, the moneys he had paid out. The preference shareholders were up in arms. Mr Wilford said that he had been asked to take a deputation to the Minister, and lie proposed to do so. That deputation would bo beaded by a man of whom even the Minister would take notice. It would raise a big howl. The Hon. J. A. Hanan said the Bill should go to ihe Statutes Revision Committee. It was an extraordinary piece of legislation. Ho did not think there was a precedent for legislation of that special character. Surely members would not commit themselves to what was proposed unless it was thoroughly investigated by someone acquainted with company law. If they went to the Supreme Court under the Bill the 'court would naturally ask what safeguards were given to preferential shareholders. Unless there, was some provision on the lines indicated by the Leader of the Opposition, the court would bo scandalised by the proposition. There would be a, big howl in the dominion if they played ‘ast and loose with company law as proposed. Mr Hawken said that certain vendors and daily companies guaranteed the account of. another company to the bank on behalf of their companies. Mr Holland! Wore they authorised by their companies ? Mr Hawken: “ I believe so, in certain cases.” Ho added that he knew of no case where debenture-holders were concerned. It seemed to him right, where a director took upon himself the responsibility of the company, with the knowledge of that company, that ho should he recompensed if losses were incurred. Mr Poland said that he had already presented a petition from quite a largo number of shareholders of the New Zealand Co-operative Hairy Company, who opposed the Bill. Mr Ilockly said the guarantors wore not directors so much from the standpoint of their own interests as from the standpoint of representing their particular companies. Mr Poland : Not all of them. Mr Hockly: I do not say all of them. Mr Holland, Leader of the Labor Party, urged that the Bill should go before the committee. One was struck with the absolute lack of business foresight in connection with this matter. A DANGEROUS PRECEDENT. Sir John Luke thought the Bill introduced a most dangerous precedent, and unless it was made clear that every provision had been made to protect those who could not exercise a vote ho would have considerable hesitation in supporting the Bill.

Mr Sidcy: I foci sure the Minister cannot refuse so reasonable a request as to send tbs Bill to the Statutes Revision Committee.

Mr Nosworthy : I have not said I would. Mr P. T. Rolleston said that, what the Bill proposed did not seem to be right, in the, absence of any evidence. Mr Veitch declared that the. Minister had, in explaining the Bill, simply read the statement furnished to him, which gave the impression tha-t Mr Nosworthy himself had not gone closely into the matter, and was bringing forward the measure merely with a written explanation from his department. This, it appeared, had very often been done by Ministers of late yea'i;s. The result was that in many cases Civil servants wer.e being given power, through weak Ministers, io overrule Parliament, It was clear tiiat an injustice must of necessity be done to the creditors of companies if the Bill was passed in its present form. Only in cases of the greatest necessity should Parliament pass legislation in any way altering the effect of the principles underlying company law, because it had to be remembered that anyone becoming the. creditor of a company in the ordinary way took info consideration the assets of the company. “ FINANCIAL IMMORALITY.” Mr Sulliva.ii said that to him the Bill had the appearance of financial immorality. 'Mr Ransom declared that the Bill proposed to safeguard the guarantors at the expense of the preferential shareholders. Mr Forbes said that after the Bacon Company had proved a failure the guarantors asked for special legislation for their particular benefit, and (lie Minister coolly brought down a Bill for second reading without full investigation. The Minister must take the House for a complacent body. It was really an insult to the House. Did the Minister think that Parliament had got down to such a. low level that it would swallow anything? The House should certainly resent that. In reply, Mr Nosworthy expressed surprise at some of the speeches. As a. matter of fact, the discussion and the insinuations —— Mr Foi’bes : There have been no insinuations ! Mr Nosworthy: Yes! The expression “financial immorality” was used. Mr Forbes: Not by me. Mr Wilford : I did not use it. Mr Sullivan : I said Dial. Mr Nosworthy : It was rather a strong way of putting it. The Minister added that Mr Speaker, through the Clerk, had notified him that a petition against the Bill had been presented, and after the fiocoud reading lie would move .that the

Bill should go to the Statutes Revision Committee. Neither the Government nor ho had any intention to play with the .Mouse.- Members had insinuated that (hero was something crooked and underhand ; but that was not so. The Bill was then read a second time, and, on the motion of Mr Nosworthy, referred to the Statutes Revision Committee,.