FUTURE OF TRUSTS

Hawera Star, Volume LIV, 18 January 1935, Page 7

FUTURE OF TRUSTS

Simultaneous Liquidations Proposed by Commissioner

SUGGESTIONS TO CABINET CONCERTED ACTION (United Press Association —Bj Electric Telegraph Copyright). SYDNEY, Jan. 17. The simultaneous liquidation in NettSouth Wales and Netv Zealand of certain companies is suggested by Mr Justice liaise Rogers in his final report on the investigation of the affairs of a number of investment trust companies. The report tvas before the State Cabinet to-day. “Unless the Investment Executive Trust and the British National Trust are to be put into liquidation concurrently," states the Commissioner, “I think there is a danger of the depletion of the assets of the Southern British National Trust. Its continued' existence is not so important as to counterbalance the difficulties which would probably arise from its liquidation alone. tMy 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 affaiis of the principal companies may have co-ordinated control, either in carrying on or in liquidation. I think tne interests of debenture-holders in the Southern British would be best served if the liquidation is decided upon, provided it is a concurrent liquidation, 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 is that the future of that company should be decided by the proper authorities on the consider at ion of what would be best for the debenture-holders.’'

RESULT OF BALLOT. • -r;«; The report states that a ballot of debenture-holders in the Southern British resulted in 148 voters, representing paid-up capital of £64,209, favouring reconstruction in accordance with the plan for the appointment of directors from among debenture-hold-ers. Fifty-nine, representing £24,140 capital, favoured immediate winding up. Twenty-two, representing £4840, 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. “Since the publication of the interim report," the Commissioner continues. “counsel for McArthur has submitted a scheme which involves winding-up a largo number of other companies. Even if that scheme ueie not adopted, there still exists in my opinion no reason for their continued existence. Most of such companies are purely New Zealand companies and any' steps taken in connection with them must be taken In New Zealand. The investigation revealed quite clearly that McArthur had used several of the companies named in the schedule presumably for the purpose of covering up his own transactions and also for’ the purpose of diverting for his own ends the capital, subscribed by the public, from the companies to which it had been subscribed.

“The companies -were called into existence when McArthur 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 yvere mere puppets of McArthur.”

NO JUSTIFICATION. [Referring to British Medical Investment Trust, the report states there was no justification for the name adopted by the company. It was not British and had no connection with the medical profession. “I think it is clear,” the Commissioner states, “that Mr 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 McArthur and Mclnnes to attach a public man to their organisation and Mr Jarvie according to his own evidence took those gentlemen at their own valuation and associated himself with their projects .without any inquiry at all.”

“British Consolidated Investments Ltd. 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 shares applied for in that company. Mclnnes was a considerable shareholder in this company, and I draw ihe inference that it was in some manner under his domination. ft 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 McArthur. ‘‘lf there had been anything like unanimity in favour of the plan I should probably have recommended that the wishes of the majority should be regarded and whatever my own opinion should have recommended that the scheme of reconstruction be allowed to proceed,” he says. “So far as people who complain that their investments were induced by misrepresentation are concerned, their

position will be no worse on liquidation than if the company continues in existence. The plan which has been put forward involved the reconstruction of the two principal companies and the British National Trust and it is obvious that the interests of all three are very intimately connected.

ESSENTIAL THING “The essential thing in the interests of everybody is to obtain the best possible price for the trust building and that may involve postponing the realisation for a period of years. Perhaps the best course would be to put the three companies mentioned and the British National Investment Trust into liquidation at the same time and have the affairs of each subject in the w'ind-ing-up to the same — or co-ordinated — control. That, however, would involve legislative action outside New South Wales and could only be done with help of other Governments.

“To some extent the Investment Executive Trust stands in a different position from the Southern British and it may be that debenture-holders may wish to carry on, and that New Zealand authorities will sanction such a course. In that case the position of the Southern British must be considered from hnother angle. In my opinion the New South Wales Government cannot dispose of the matter simply by deciding to put the Southern British Into liquidation. ‘ ‘.McArthur and Alcorn undertook to give their aid to the plan put forward by their counsel. The plan itself involved the surrender by them of some of the profits they had made as a result of their transactions in connection with the purchase of the trust building. It must bo realised that this surrender will not be voluntarily made if the companies are put into liquidation. It may 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.”

EVILS OF SHARE HAWING The Commissioner proceeds to deal with recommendations concerning company legislation. Referring to sharehawking, he says any disadvantages which might arise from the abolition of the system are of small moment compared with 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. He strongly suggests that the 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 be allowed to issue debentures except in some fixed proportion to paid tip capital. Other recommendations deal with the appointment, of trustees, holding annual meetings of debenture-holders, power for debenture-holders'to be represented on the directorate and to appoint auditors, the issue of prospectuses and the percentage of capital to be paid up before the company proceeds to allotment.

The commissioners recommended that the Southern British should be put into liquidation if it is decided in New Zealand that the Investment Executive Trust be liquidated, but if the liquidation is not decided upon for the latter company ,steps should be taken, whether by adoption of “the plan nr otherwise, for the carrying on of th» Southern British for a period.