COMPANIES LAW

Gisborne Times, Volume LXXIII, Issue 12078, 18 October 1933, Page 5

COMPANIES LAW

NEW PROVISIONS AS TO PROSPECTUSES. HOUSE-TO-HOUSE SHARE CANVASSING BARRED. PRIVATE COMPANIES MUSt REGISTER ARTICLES. OFFICIAL ASSIGNEE LIQUIDATOR IN WINDINGS UP. (Press Association) WELLINGTON, Oct. 17. The issue of prospectuses, provisions relating to auditing, and the prohibition of house to house canvassing of shares are the three main factors in the Companies Bill' which w as read a first time in the House of Representatives to-night, h Restrictions are placed on the %le s of shares and debentures, it being made unlawful for any person to issue in New Zealand any. prospectus offering for subscription shares in, or debentures of, a company incorporated outside New. Zealand, whether the company will or will not establish a place of business in New Zealand, unless, before the issue of the prospectus, in New Zealand, a copy of it, certified by the.chairman and two other directors, has been delivered for registration to the registrar. Similarly, with certain exceptions, it is made unlawful for any person to issue in New Zealand a form of application for shares or debentures of such company unless a form is issued with the prospectus complying with the above provision. A fine of up to £SOO is provided for a breach of this clause. Particulars to be disclosed in prospectuses' issued in New Zealand by overseas companies are defined by another clause. . .... ,

The Bill prohibits any person going from house to house offering shares for subscription or purchase to the public. The .word “house” does not include an office, used for business make an offer in writing to any member of the public of any shares for purchase, unless the offer is. accompanied by a statement in writing containing exact particulars regarding the status of the person making the offer, and the financial position ond constitution of the company concerned. This prohibition does not apply (a) Where the shares to -which the offer relates are shares which are quoted, or in respect of which permission to deal has been granted by any Stock Exchange registered under the Sharebrokers’ Act and the offer states and specifies the Stock Exchange; (b) where . the shares '-.to which the offer relates are shares which a company has allotted with a view, to their being offered for sale to the public or (c) where the offer was made only to persons with .whom the person making the offer has been in the habit of doing business in the purchase or sale of, shares. A breach of the provisions of this clause renders a person liable, in the first case, to a fine of £2OO or six months’ imprisonment or to both these penalties, i A special .section of the Bill deals jfcth companies carrying on insui*3s .<e business other than life or ac/cic*ent insurance. No limited company shall carry on in New Zealand such insurance business unless has a paid up capital intact of £50,000. It may commence business, however, A it has paid up capital intact of not less than £25,000 and'the additional capital is called up and payable within six months of the date of registration of the company of an amount not less than the difference between £50,000 and the amount of the paid up capital. It may also carry on business of insuring property of its own

members, only if it has issued capital of not less than £50,000, of which not less than £25,000 is paid up capital intact. each case, certain conditions are specified. The section of the existing Act which declares that, with certain exceptions, no company carrying on the business of insurance, whether or not in common with any other business of insurance is to be registered, with limited liability, is omitted m the Bill. The memorandum to, the Bill f states: “The undesirable effect, of the -existing provision is shown in tie history of the Dominion Life Assurance Office of New Zealand Ltd. which, though consisting exclusively of shareholders domiciled in New ea land, and carrying on business exciusivelv in New Zealand, was originally ‘incorporated with limited liabi - ity in New South Wales and could be so incorporated in New Zealan on y by means of a private Act. " There are several important new provisions with respect to companies. It is now ma c o hS tory for new companies to regis their articles of association anc ex ing private companies wi e . quired to register articles. , companies are required to furnis annual return to the regis rar. vision is made whereby, in ■ i e e of an increase in capital apn company, the increase jnus ? ©. subscribed for in the docume cuted in the same manner, as U_ r memorandum of association. , >. the present law,- the Office Assignee ] appointed under the Bankruptcy Act is by virtue of fcis office, official h . quidator in the winding up o >- ? companies within his distric , Court has power to «*£*#*' as ficial Assignee or any other P liquidator. The court has ass ist to appoint a special amnager the Official Assignee m the retration of any estate or other quiring special knowledge or qualifications. , A wound up by its isubmitted a. verified s . Pro- «**■ to of a. rX spection replacing fisting may he appointed under the Act The court is promostrain a fraudulent IT6 > the ter or officer from taking management of conipam . year .s, red period the provision is made voluntary ’Towers of- creditors h*

( • > 1 ' ' y Y binding up 0 f a company that is not declared to he solyCnt.... In a winding .up., priority of payment is given to;, compensation under the Workers’ Compensation Act. It is limited in its application to cases where the rights of the worker 'are not protect ed by insurance. On the application by the liquidator or any creditor or contributory, t]ie court is empowered -to make an order imposing personal liability, without limitation, on directors guilty of fraudulent trading. A company in the course of being wound up will be obliged to disclose that fact on its invoices, correspondence and. other documents . Special provision is made to prevent registration of companies with names containing such words as Chamber of Commerce, Building Society, Royal, Imperial or National, Municipal or chartered or bank, cooperative trust, trustee or Stock Exchange, which are likely to deceive the public as to the true nature and functions of the companies. Subject to certain limited exceptions, the issue of forms of application for shares or debentures in a company is prohibited, unless they are accompanied by a prospectus complying with requirement of the Act. Under, the present .law, the minimum subscription without which a company cannot proceed to allotment of shares may he arbitrarily fixed in the memorandum of association without reference to requirements of the proposed company. The Bill provides that a minimum subscription shall bo fixed by reference to the requirements of the company in rcsp'cct to preliminary expenses and working capital. A company not issuing a prospectus is required to lodge with the registrar be fore proceeding to allotment, a statement in place of the prospectus. The present act does not fix a limit on the rate of commission that may lawfully he paid to a subscriber for shares. The Bill proposes a maximum rate of 10 per eent. Companies not having a share capital are required to make an annual return including a certified copy of the balance, sheet to the Registrar of Companies. A series of new provisions. is made concerning the keeping and auditing of companies accounts and the preparation of balance sheets. An important new provision declares that, except with the approval of the Minister of Finance, no person shall be qualified for appointment as auditor of a company unless lie is either a member of the New Zealand Society of Accountants (incorporated), the Institute of xiccountapts, of New Zealand or the New Zealand Accountants and Auditors Association (incorporated), or a member, fellow- or associate of an Association of Accountants constituted elsewhere in the British Empire. This provision, does not disqualify any person appointed as auditor of a company hefqre the commencement of the Act from acting as auditor or from being, re-appointed to that position. Another clause of the Bill requires a statement regarding the remuneration of directors to- he furnished to shareholders. Directors are required to disclose any interest they may have in any contracts with a. company. Provision is made>to facilitate the reconstruction and amalgamation of companies. Power, is also given to a company to acquire the shares of shareholders dissenting from a scheme or contract, involving the transfer of shares, which is approved by a nine-tenths majority of shareholders.

VOLUMINOUS MEASURE OF 284 PAGES. MINISTER OBJECTS TO DELAYBILL STUDIED BY EXPERTS EOR THREE YEARS. restriction ON SHARE hawking. (Pr ess Association) WELLINGTON, Oct. 17, The Companies Bill was introduced by Governor-General’s message in the House of Representatives and read a first time. ■ . „ . . Mr. Savage, Leader of the Opposition, asked whether the Bill coffid be referred to a Parliamentary committee, so that companies and others would have the opportunity to I’-e----sent their case.'' Mr. Coates said the Bill consisted of 264 pages, and between four and five hundred clauses. He was not in favour of referring' it to a Parliamentary committeeThe dommittee of the whole House would, no doubt go very closely into each clause. He Pointed out that the Bill was the result of some three years’ study by a committee set e.p bj the late Sir Thomas Sidev, aud consisting of lawyers, accountants, auditors,, company secretaries and com pany lawyers. If it was referred to a committee of the House, it might be another two or three years before it was possible to pass it into law. Continuing Mr. Coates said the Bill T ,-as as nearly , as possible an adaption of New Zealand’s company law to that of the United Kingdom. The opinions of departments of State had been sought, and expressed on the subject. The Bill also dealt with spme, .matters that had, not been considered by the committee.. These included restrictions on what wag commonly known as share-hawking. The Minister pointed out that the Bill had been based on the Imperial Companies Act and some notice had also been taken of the Queensland A : et and other contemplated ' amendments in Australia. COMMITTEE'S REPORT. Mr. Coates read to the n o use a brief report submitted by the committee which had framed the legislation. The report stated that-,the .committee had endeavoured to follow the Imperial Acta as closely as circumstances would permit. The committee 'had also considered many suggested departures! from the principles of com-pany-law, which although they seemed advantageous, migh thaye been dangerous As alterations,-. and ;if. adotfte'd v might have teen followed by unexpected effects and undesirable consequences, . Vi l: One important departure had been made from the existing law a n d prac-

tice both in .New Zealand and England. /.regarding; the provisions for-the registration of debentures. ‘ln England,” the report- stated, “the- Practice is to fdo notice of the particulars of debentures. In Neiv Zealand a copy of the instrument creating the charge is registered, and as doubts have been raised as to whether this registration was or was not notice ot the contents of the inustrument, it was- decided to make a definite recommendation that registration of the copy of an instrument should bo a notice of the contents of a document to all persons having dealings with the property charged- . The committee. realises the difficulty of the subject, and that some unforeseen consequences may arise.” WINDING-UP RULES. The committee bod not considered any recommendations as to windingup rules which, it was considered 'was a most important part of law companies. The absence of such rules was a serious defect, and the committee trusted that winding-up rules would be issued at the earliest possible date. It was emphasised by th 0 committee that the Bill did not alter the general pertaining to private companies, but some additional provisions liad been included imposing on- them the necessity of disclosing more information material to shareholders and creditors. The prohibition of houso-to-honsc canvassing for the salo of shares was considered to bo a- desirable amendment, the committee., believed that the Bill ns now drafted would give greater protection to shareholders and creditors, and would further protect the public i n the matter of new notations.

In unanimously recommending that ib. e . Bill bo passed this -session, the committee although holding differences of opinion on some details of t-l'e legislation, expressed the opinion that the measure in its present form was a very great- advance in company law in Now Zealand. Mr. Coates expressed his appreciation of the work done by the committee. NO CLAUSE ON “WINDING-UP MESS.” Mr. Barnard (L) suggested that the Minister should refer the Bill to the Statutes Revision Committee, which would not take two years to deal with it. He believed the committee would merely fasten on to those aspect ss which involved a change. TTe imagined that the work could he completed in, say, a week. ; Mr. Mason (L), expressed disappointment that the Bill contained no clauses to “clear up the mess about winding-up companies.’’. Tie said Lie law on this subject was tbe most antiquated and most hopeless part of New Zealand company law.