MINING PROMOTION.

Lake County Press, Issue 980, 19 September 1901, Page 7

MINING PROMOTION.

WELLINGTON, September 11. Iu debating in the Legislative Council the motion to go into committee on the Companies Bill, the Hon. A. L. .Smith said that recent inquiries made by him in the South confirmed his suspicions as to the amount of wrong-doing in connection with the affairs of companies, especially of dredging companies, and the relations of promoters, directors, and shareholders. During the dredging boom companies came into existence on nothing whatever. Out of eight companies examined as to what right the promoters had to go to the public, seven had got no property—not a shilling's worth. He condemned the misleading—he might almost say fraudulent—manner in which companies had been promoted. When the evidence taken in committee came down the public would be astonished to find that such things could take place. He instanced the case of a prospectus issued by a promoter in which there was in two days a large over-application for shares, and when the contract was tiled there was no reference to the original vendor. The agreement was to purchase a property on the West Coast, for which the promoter had paid 10s for option. * Bogus shares to the amount of £2,000 were issued, and the promoter did not trouble himself to make more than a provisional agreement with the vendor, and that agreement remained in the hands of a solicitor without anything being done. Vendors' and subscribing shares were issued, and a considerable amount of money was called up, but no attempt, was made at dredging on the claim. It was simply nursed to keep the license up. The poor unfortunate shareholders had seen many hundreds of their monev go in this peculiar, improper, and, he might say, illegal manner. The money went in directors' fees, and the promoter was a director and also secretary of the company; so that he kept the books. The money *vent in driblets in directors and secretarial fees. There was a nominal clerk of the company, but he was a paid officer of the promoter, and handed to his principal the secretarial and other office kevs. This company had not one scrap of" property. The original vendor had signed nothing, and couid hold the ground; so that this company had no assets. There were many other concerns in exactly the same position. Cold dredging had great potentialities, and if worked in an honest, proper, and businesslike manner would have a great future. But it was surrounded by a perfect hornets nast of people, whose pickings—he had almost said steaiinss—had so discredited the industry that it was impossible to get investors in this colony or in Australia to put money into it. Unless full disclosures were made, and steps were taken by Parliament to see that the interests of the Southern people and of the whole colony were protected, a great scandal must result. Members would soon be able to read the evidence for themselves. He was exceedingly glad that steps were being taken to alter the law. But the steps proposed did not go far enough. The Bill before the Council was a reproduction of the Bill passed at Home last year, and as i-ev had no gold mines at Home its provisions lacked application to mining companies. What was needed was the appointment of a special committee of experts to draft a Bill and submit it to Parliament. He proceeded to touch on the good points of the BUI. It was right that there should be evidence that directors were not only supporting the companies with their names, but also with their money. The

position that men could form a company by simplv writing their names should be altered. ' Promoters' shares sold at a premium had realised a profit of 200 or 000 per cent, to the promoters: but they had no further interest. This was absolutely wrong. Some directors had even had the presumption to sue shareholders for calls when their own calls were unpaid. Cancellation of shareholders' shares when the directors themselves were in arrears had been prohibited by the Bill. The provision that a State auditor should step m where a company had not properly appointed its auditor was greatly needed. Directors had drawn their fees while owingcalls, and had transferred shares on which calls were owing. Companies should be compelled to lav before their shareholders at short intervals their actual financial position, and he would prefer a threemonthly period to the six-monthly one provided in the Bill. Information as to new properties acquired or other important transactions by the directors of companies should be promptly placed at the disposal of shareholders. He impressed on the Council the high importance of the amendments to the company law. The Hon. J. M. Twomey advocated the appointment of a Royal Commission to investigate such matters as those referred to bv the last speaker. Retrospective legislation was generally opposed, but such legislation was needed in the present case. He proposed an amendment to the effect that no dredging claim be registered unless the warden shall certify that the ground has been thoroughly tested, and that there is, on the evidence, a reasonable prospect of the claim being payable, or until the Inspector of Mines has so reported. The Hon. R. Reeves contended that there was every safeguard in the existing law against a fraud. There had been gambling from the time of the South Sea Bubble, and it would continue. A man was not bound to go into it. Every man who went in for dredging of a sort went in for a gamble, .and in nine cases out of ten he " got a run for his monev." In ten cases out of eleven he would lose his money. A man had to use some common sense. That the Government should provide an inspector to report or a perambulator to "carry the babv" about in was equally absurd. The Hon.' W. M. Bolt agreed with a good deal that the last speakfr had said. He thought that harassing restrictions on companies might hinder the enterprise'. The Hon. Colonel Pitt advocated that mining companies should be dealt with separately from ordinary companies, and the present Bill should not be mutilated by the introduction of foreign matter affecting mining companies. The Mining Companies Act dealt with many of the evils that had been mentioned, and all mining companies should be compelled to register under that Act, instead of under the Companies Act of 1882. as many of them now did. * , , The Hon. H. Scotland supported the Bill. The Hon. G. Jones advocated a proper '"inspection of claims by an expert official of the Mines Department before registration- . i i .1 i The Hon. Wm. Jennings remarked that in quartz-mining an expert could not tell +he value of ground without doing exploratory working. He supported this Bill. The Minister in charge said it v as quite impossible to put the finding of gold on the shoulders of a Government paid expert. The motion to go into committee was carried on the voices. The interpretation clause passed without amendment Clati" 3 sub-clause 2, was amended to read as "follows: -'A statutory declaration bv the solicitor of the Supreme Court encaned ; n the formation of the company (if anv), -the directors (if any), and the sub-

scribers of the memorandum of association of compliant* with any or all of fife said regulations shall be produced to the registrar, who may accept this declaration as sufficient evidence of such compliance."' C lause 4 was added to to provide that a director, before he can be appointed, must pay in cash the application and allotment monevs on his share qualification; also to provide a £SO penalty on any applicant for registration who submits the name of a director who has not consented. This chaise was made not applicable to the prospectus issued on behalf of a company after the expiration of three years from the date at which the company is entitled to commence business. With regard to restrictions as to allotment, the amount payable on application on each share was altered to not less than 10 (instead of 5) per cent, of the nomiml amount of the share. The. time for companies to comply with (lie restrictions was extended from forty to sixty davs.

In clause 10 (commission, discounts, etc.) sub-clause 3 was amended to provide that the clause should not affect the power of imy company to pay such brokerage as it has heretofore been lawful for a. company to pay. Clause 13 (appointment of directors) was postponed. On clause 25 (official assignee to be the official liquidator of the company ordered to be wound up) progress was reported, on the Minister's motion, and the Council rose at 4.55 p.m.

WELLINGTON, September 13. Consideration of the Companies Bill was resumed in committee of the Legislative Council yesterday afternoon. Clause' 25 provides that where a company is ordered to be wound up by the Court under the principal Act, the Official Assignee shall, without the necessity of any appointment or order, be the sole and official liquidator of such company.—The Hon. J. M. Twomey, in moving to add after the words "wound up" "or is already in course of being wound up," stated that he feared his amendment would not reach the companies he aimed at, many of which were being wound up voluntarily, and not bv the Court, Some action should be taken to deal with the scandalous proceedings of certain companies.—ln reply to a question, the Minister of Education stated that voluntary windings-up did not come under the clause.—The Hon. Mr Louisson said that the mover of this drastic amendment did not realise the effect it might have on companies being wound up. It was admitted that the amendment would not effect the mover's object, and it would probably do harm.—The amendment was carried on a division by 16 to 13. The clause was further amended to provide that the liquidator shall be the Assignee of the district (instead of the Supreme Court district) wherein the company's principal office is situate.—The clause as amended passed. The clause dealing with powers of deputy and acting-assignees was struck out. and a new clause embodying it awaits consideration.

Sections 86 to 94 of the Mining Companies Act, 1894, were added to the repeal clauses. The postponed clause 18, under the heading of " Audit." was then reverted to.-Sub-clause 4 was amended, on the. Minister's motion, to read as follows: —"The first auditors of the company may be appointed by the directors at any time before the first annual general meeting, and if so appointed shall hold office until that meeting, unless previously removed by a resolution of the members in general meetinn', in which case the members at such meeting may appoint auditors." —The Hon. J. M. Twomey moved to strike out the audit clauses o'f the Bill, and to substitute the following : —" The accounts of all companies shall be audited by the Audit Office, and the Audit Office shall have the same powers in respect to the moneys and accounts of the company and of all persons dealing therewith, and liable to account for the same, as it has in respect of the public money and all persons dealing therewith under the provisions of the Public Revenues Act, 1891." The amendment included the repeal of sections 121 and 122 of the principal Act. and 37 of the Mining Companies Act. 1894.-The Hons. G. M'Lean and C. Louisson opposed the proposal to apply the public audit to all companies.—Mr Louisson characterised the amendment as monstrous.—The Hon. G. Jones considered that past history showed the need for State audit.—The Hon. A. Lee Smith opposed the provision for a Government audit of all companies. The auditing of small companies would be an unnecessarv expense to the companies and to the co'lonv.—The Minister of Education (the Hon.* W. C. Walker) considered that the provisions of the Act of 1894 met the case of any company requiring audit by a State "officer if the shareholders made application.—The Hon. G. Jones held this provision non-effective, as the shareholders were in the hands of the directors.—The Hon. W. M. Bolt thought it woidd be senseless to send State auditors to small companies.—The Hon. G. M'Lean said that no audit would prevent hon. gentlemen from losing their money if thev speculated.—The Hon. C. C. Bowen advised caution in making radical changes in the law relating to companies. The suggestion to put all companies under the Audit Office was the most unpractical he bad heard.—The Hon. W. M. Bolt urged that the register of a company should be open to shareholders at certain times. At the evening sitting clause 18 was carried without amendment by 17 to 6, the Hon. Mr Twomey, the mover of the amendment, alone voting for State audit of all companies. . The new clause recommended by the Joint Statutes Revision Committee were then taken in their order and added to the Bill. Those are to the following effect: —Under the head of payment of calls it 's provided that it shall be obligatory on directors to pav their calls on or before the day on which' shareholders' calls are payable, and that any director failing to do so shall he liable to"a maximum penalty of £SO or a minimum of £5. in additon to his liability for payment of the amount of call ; also, if am- director fails to pay his ealls as provided, it is stipulated that, notwithstanding the Mining Companies Act, 1894, no shares except those held by directors of the company shall he liable to forfeiture under that Act for non-payment of calls. Compliance by the directors with the provision of this clause 'must also he a condition pre cedent to judgment being given against a shareholder for the amount of his calls. A new sub-section added to clause 22 (registration of mortgages) provides that in the case of debentures (containing any mortgage) issued subsequently to the coining into operation of the Companies Act Amendment Act. 1900, and prior to the coming into operation of the Bill, their registration shall be deemed to be validly effected, if the prescribed particulars us to the amount of security, dates of resolutions, deed, description of property, and names of trustees ;ue registered within twenty-eight days after tht Bill comes into operation, or within such extended period as the Supreme Court may decide. In the " winding up of companies" section a new clause is inserted to provide that on the application of the official liquidator the court may, in the course of thi winding up of ;t company, appoint the Deputy-Assignee or other fit person to act in lieu of the official liquidator, and to exercise all the hitter's liquidating powers.

Two other new clauses (inserted on the Committee's recommendation) provide thai in its statement of liabilities, as provided, for in the Mining Companies Act, 1894, a mining company must state the amount of debts it owes,'as well as the contingent liabilities mentioned in the Act of 1894 and the Companies Act of 1900. and the Bill shall apply to all companies, whether registered under the principal Act or under the Mining Companies Act, 1895.

The Council then turned its attention to the. new clauses standing on the Order Paper in the, name of the Hon. A. Lee Smith. The first was tinder the heading of " incorporation and objects," and sought to repair an omission in the Bill, which, though it mentioned a share qualification for directors, did not specifically provide for one. The clause provides that the articles of association of every company formed after the passing of the Bill shall necessitate each director holding a specified number of shares.— The Hon. G. Jones thought that the clause should go further, and state the proportion of a director's qualification to the capital of the company.—The clausepassed on the voices, without amendment. Following on this, the Hon. Mr Lee Smith moved that every person who signs the memorandum of association shall, before signing, apply in writing for not less than his share qualification (specified in the articles of association), and shall thereupon pay on each share the same amount as is payable on application on the shares intended to be offered to the public. The mover explained that under the Act of 1882 persons could legaly 'form a company by just signing their names, and his clause sought to provide that those who created the company in the first place should take as many shares as would afterwards qualify them as directors.—Colonel Pitt contended that all that was necessary to comply with these provisions was that seven persons (the stipulated minimum) should sign the memorandum, and they could fix the share qualification as low as two shares each. —The Hon Mr Louisson thought that the objection would be met by publicity, but the Hon. Mr Jones thought that even if the directors made their share qualification as low as two the public would still be blind.—The clause passed on the voices without amendment. Under the head of " statement of accounts " the following sub-clauses, originated by the Hon. Mr Lee Smith, were added: (i) In the ease of mining companies the directors shall cause to be transmitted to every shareholder at his last-known place of abode a, half-yearly statement of the receipts and expenditure of the company during the preceding six months, and of the assets and liabilities of the company at the date of the account, and showing the amount in arrears in respect of each share; (2) if default is made "in complying with this section evendirector of thecompany shall, for each offence, be liable to a penalty not exceeding £lo.—An amendment moved by the Hon. R. Reeves to alter "half-yearly" to "yearly" was rejected by 15 to 6. 'The'next and final clause of the Hon. Lee Smith's series was passed on the voices, and provides that where any property or right is acquired by a company otherwise thai* by cash, the deed (or a- true copy of it) shall lie open to the inspection of any shareholder. free of charge, during business hours at the company's registered office. The Bill was reported as amended, and its third reading made an order for the next dav.