COMPANY OPERATIONS

Hawke's Bay Tribune, Volume XXII, Issue 270, 29 October 1932, Page 8

COMPANY OPERATIONS

INVESTIGATION URGED. AN ECONOMIST’S REVIEW. “The problem is one of sufficient social importance to warrant the setting up of a Royal Commission with wide powers, which should make a thorough investigation into promotion, finance, and control, with a view to making appropriate amendments in the law relating to companies,” declared Dr. H. Belshaw, Professor of ’ Economies at Auckland University College, when addressing the Economic Society of Australia and New Zealand on the subject of ‘ ‘ The Financing of Afforestation, Tobacco, Flax, and Tung Oil Companies.’’ /He made it clear that the criticisms ho made did not apply to all companies, and that where the financial methods adopted were both sound and beyond reproach, such projects for large-scale land utilisation might provide a reasonable, even though a speculative, avenue for investment. There was not the slightest doubt, said Dr. Belshaw, that in some cases enormous profits had been made by the sale of land from company to company, with the result that the eventual holders had been loaded with a wholly fictitious value. In other cases the brokerage charges were far too high. Referring to bond-holdings, the speaker remarked that the term “bond” conveyed to the public mind a sense of special security which was lacking in some instances, the appointment of trustees not always being an effective safeguard.

With a view to securing fuller publicity for the operations of companies of the kind in question, whether public or private, it was suggested that the prospectus should be required to state all dealings with the land or other assets within, say, two years of incorporation, with information of, say, the three previous transfers of the land; that prospectuses for bonds should be brought within the provisions of the Companies Act; that they should state all remuneration for promotion, brokerage, or underwriting; that-an annual statement be required, showing the allocation of the moneys received from each issue of bonds; that every prospectus for bonds and every bond should contain a definite statement prominently placed, as to whether there was any security, and if so, the nature thereof; that consideration be given to the practicability of extending by legislation the powers and duties of trustees.

“We are far from hoping that the above suggestions will solve the problems we have discussed,” said Dr. Belshaw in conclusion, his initial “we” referring to the co-operation of Mr F. B. Stephens in preparing the paper, “but we feel that they will at least make it somewhat more difficult to fleece the inexperienced investor. It seems likely that in the long run more would be achieved by the periodic investigation of, and publicity in regard to, company matters. Periodic sample inquiries publishing relevant information in regard to doubtful concerns, including the names of the companies and those prominent in connection with them, would have a salutary effect. It is, perhaps, too much to hope that tho University or the professional bodies most intimately concerned will be ablo to undertake such a responsibility in the near future.”