INVESTMENT TRUSTS

Evening Star, Issue 21931, 18 January 1935, Page 9

INVESTMENT TRUSTS

M'ARTHUR’S COMPANIES THE COMMISSIONER'S FINAL REPORT LIQUIDATION OF CERTAIN CONCERNS RECOMMENDED Press Association—By Telegraph—Copyright SYDNEY, January 17. Simultaneous 'liquidation in New South Wales and New Zealand of certain companies is suggested by Mr Justice Halse Rogers in his final report on the investigation of the affairs of a number of investment trust companies. The report was before the State Cabinet to-day. • The Commissioner says: Unless the Investment Executive Trust, and the British National Trust are to be put into liquidation concurrently, 1 think there is a danger of a depletion of the assets; . The Southern British National Trust, by its continued existence, is not so important as to counter-balance the difficulties which would probably arise from its liquidation alone. My view is that the State Government should act only after consultation with, and in conjunction with, the government of New Zealand. It is essential that some scheme should be evolved by which the affairs of the principal companies may have co-ordinated control, either in carrying on or in liquidation. I think the interests of the debenture holders in the Southern British would be best served if liquidation is decided upon, provided it is concurrent liquidaton, but I do not think this expression of opinion should be used as by any means a determining argument for putting into liquidation the Investment Executive Trust, my view being that the future of that company should he decided by the proper authorities on consideration of what would be best for the debenture holders.” , , ~ , £ The report states that the ballot of debenture holders in the Southern British resulted in 148 voters, representing a paid-up capital of £64,20 J, favouring reconstruction in accordance with' the plan for appointment of directors from among the debenture holders. Fifty-nine, representing £24,140, favoured immediate winding _up-Twenty-one. . representing £4,840, favoured allowing the assets to remain in control of the Public Trustee. Twenty-eight, representing £10,940, favoured winding up, with control by the Public Trustee. ‘ The report continues: Since the publication of the interim report counsel for M'Arthur has submitted a scheme which involves winding up a large number of other companies. Even if that scheme is not adopted there still exists in my opinion no reason for their continued existence. The investigation revealed quite clearly that M'Arthur had used several of the companies named in the schedule, presumably for the purpose of covering up his. own transactions and for the purpose of diverting for his own ends the capital subscribed by the public from the .companies- to which- it had been * • • The report proceeds; “Companies were called into existence when, M'Arthur needed-, them, either to hold some assets or to act as a conduit for money from one holder to another. They ceased to function when he had no further need for them. Many of them had;'no assets, yet they issued debentures for thousands of pounds and made purchases of real estate with these debentures. The directors, secretaries, and company officials were mere puppets of M'Arthur.” _ , r ‘ , Referring to the British Medical Investment Trust, the report states that there was no justification for the name adopted bv the company. It was not British and had no connection with the iqedical profession. “I think is clear,” the commissioner states, that Major Jarvie, M.L.A., did not take proper steps to inform himself that everything was in order before allowing himself to become associated with the company. It was obviously the intention of M'Arthur and MTnnes to attach a public man to their organisation, and Jarvie, according to his own •evidence, took those gentlemen at their own valuation and associated himself with their projects without any inquiry at all.” . The report continues: “British Consolidated Investments Limited is a share-selling organisation, and its foundation was an agreement with the British Medical Investment Trust under which it was to receive 10 per cent, of the value of the shares applied for in that company. M'lnnes was a considerable shareholder in this company, and I. draw the inference that it was in some-manner under his domination. It scarcely functioned at all.’ ' Regarding the future of the Southern British, the Commissioner refers to the division of opinion among the debenture holders as shown by the ballot, and comments that the reconstruction 'plan was really inspired by M'Arthur. “If there had been anything like unanimity in favour of the Pj a *} 1 1 should probably have recommended that the wishes of' the majority should he regarded, and, whatever my own opinion should have recommended that the scheme of reconstruction be allowed to proceed. So far as the people who complain that their investments were induced bv misrepresentation are concerned, their position will he no worse on liquidation than if the company continues in existence. The plan winch has been put forward involved reconstruction of the two principal companies and the British National Trust, and it if* obvious that the interests of all three are very intimately connected. The essential thing in the interests of everybody is to obtain the best possible price for the trust building, end that may involve, postponing the realisation for a period of years 1 erhaps the best course would be to put the three companies mentioned and the British National Investment Trust into liquidation at the same time, and leave the affairs of each subject in the * winding up to th© samo—-or co*ordinated—control. That, however,, would involve legislative action outside New South Wales, and could only be done with the help of other Governments. To some extent the Investment Executive Trust stands in a different posifrom the Southern British, and it may be that the debenture holders may wish to carry on and that the New Zealand authorities will sanction such a course. In that .case the position of the Southern British must be considered from another angle. In my opinion the New South Wales Government cannot dispose of the matter simply by deciding to put the Southern British into liquidation. M'Arthur and Alcorn (Undertook to give their aid to the plan put forward by their counsel. The plan

itself involved surrender by them of some profits .they had made as a result of their transaction in connection with the purchase of the trust building. It must be realised that this surrender will not be voluntarily made if the companies are put. into liquidation. . It should be a matter for consideration by the proper authorities whether legislative action should be taken to make their profits available for the debenture holders, through the employment of whose money they were able to make them.” , The Commissioner' proceeds to deal with recommendations concerning company legislation. Referring to share nawking ? he says any disadvantages which might arise from abolition of the system are of small moment compared with the grave evils where it is in operation. The Commissioner comments on the methods used, in persuading depositors of the Primary Producers’ Bank, which was in liquidation, to assign their deposits for debentures in the Southern British. Ho strongly suggests that lists of depositors were obtained by bribery and refers to the difficulty of resisting the persistence of a trained agent. He recommends that no investment trust should he allowed to issue debentures except in some fixed proportion to paid up capital.. Other recommendations deal with the appointment of trustees, the holding of annual meetings of debenture holders, power'for the debenture holders to he represented on the directorate, and to appoint auditors, the issue of prospectuses, and the percentage of capital to be paid up before a company proceeds to allotment.

(Received January 18, at 1.30 p.m.) Mr Justice Halse Rogers’s report recommended that the Southern British be put into liquidation if it was decided in New Zealand that the Investment Executive Trust be liquidated, but if liquidation was not decided upon for the latter company steps shoiild be taken, whether by the adoption of “ the plan ” or otherwise, for carrying on Southern British for a period.

AWAITING INSPECTORS' REPORTS [From Our Parliamektary Reporter.] WELLINGTON, January 18. Further action in New Zealand following the completion of the company investigation in New South Wales awaits the reports of the inspectors appointed under the terms of the last session’s emergency legislation to overhaul the affairs of certain companies specified. It is anticipated that their reports will, be completed shortly for submission to the Attorney-General. Meanwhile the Public Trustee, who was appointed receiver of the group of companies, is conserving their assets pending decisions by the Supreme Court when the inspectors’ reports are available to it.