THE Mount Ida Chronicle FRIDAY, APRIL 7, 1876.

Mount Ida Chronicle, Volume VII, Issue 370, 7 April 1876, Page 2

THE Mount Ida Chronicle FRIDAY, APRIL 7, 1876.

A registered comDany : may certainly elect fc'o keep its business confined to the minute books required by law, yet it has no right, any more. than, anariv surance company or a private bank, to consider its operations removed from the sphere of public criticism, i.e., so i long as it seeks to float its.scrip in the j general market. ; In most cases the ' premeditated ; avoidance, of criticism generaHy in. run ends irr greater publicity than even need have arinen if there.had, been no practised privacy, or than is likely to be of benefit to anybody; concerned. ; Withsome j of our local mining companies the dis- j advantage is not so apparent, for the j shareholders are mostly workir g men, their shares being their livelihood,, which they - have no inducement ;toj speculate' with, or transfer as, security for, other'investments. ' The evil becomes more marked in such companies as the Masonic Hall Company, the district Water Works Companies, the Mount Ida Pastoral Company, and the Naseby Coal Company. The three first'are veryJimitedin their* operations ; but in all, through want of proper publicity, shares have con. stantly been sacrificed below their valuelto those 'inner rings who have known at- all-.-times their true value, and eagerly have grasped them when-to be gofcbelow-such value,. Mr. George Oliver's letter and stateI ment, publishedlast week require little comment as to matter of fact. The point at issue is. clearly put, and can readily be justified or disproved by the conflicting parties on simple, reference to the hooks. The extraordinary pubT licity given by the letter is an instance of what we mean as directly resulting from unwise privacy. A-'suspicion is : at once created as to the soundness.of a Company's operations, which, in the I case of the Pastoral Company, enquiry will show to be "Without any justification. . The Company's accounts, strictly audited,'would show at least 20 per Cent, profit for each year, of its existence. The mistake leading to the inis J understanding has probably arisen from a thoroughly unsound process of valuation, which washeld last year to justify a dividend of 40 per cent. This dividend was, as we understood it, a dividend of expediency. It was arrived at in view of an extension of the proprietary list, and included an anticipation of paid up which was fdded to profits and div.ded amongst the original shareholders. The object -in view, which was made no secret of, was rore justifiable than the process adopted to carryit out. The original shareholders, i.e., participators in the first distribution, had,.run a considerable risk, and had proved to themselves and others that they held a good thing,; and although',■ for their own better mutual understanding, they wished to complete their share list, yet in permitting the reserved Bharea to be appropriated they considered the holders of the first shares should reap a preference profit. Tie preierence-profit agreed upon could only be reaped in full by paying back the amount anticipated to capital .account at the end of the second year—the first of the extended share list—from the profits of the enlarged proprietary. This repayment, if. not made, decreases the paid up.capital, while at the same time the share list is extended. If, in addition to this a dividend is declared for distribution out of the sum realised for r;-«payment, the percentage, in excess of legitimate profits declared as dividends is a stitL further deduction fr©m capital account. It is perhaps doubtful in any case whether an excessive dividend could be

sustained if the process of paying it would bring a company into the position of having to comply with the conditions of the Amendment Joint Stock Companies Act of 1868. Our New Zealand Act has followed the clumsy contradiction and confusion between excessive dividends given by solvent and insolvent companies pointed out by John It. Macculloch as existing in the 19 and 20 Vie. chap. 47, see. 14. The body of that Act states—" In the event of the directors declaring and paying a dividend when the company is known by them to be insolvent they are to repay the same out of their own property;" but in the regulations for the management of companies attached to the Act it is said—" That no dividend shall be payable except out of the profits arising out of the business of the company." Now, doesthe penalty in the body of the Act allude to directors paying excessive dividends in solvent companies ? or Is a company to be characterised as insolvent the moment its capital is trenched upon? Mr. MaccuUoch remarks "We do not pretend to decide whether this or . the other statement be the more correct, but their contradictory nature affords a curious illustration of the slovenly slipshod style in which the most important statutes are often compiled." • The New Zealand Act, while adopting exactly the same confusion specially guards shareholders by prohibiting the reduction of paid up capital. This restriction was at once found so wanting m elasticity that the Act was amended in 1868, and a reduction, of paid up capital sanctioned, when surrounded with the strongest Mafeguards. If Mr. Oliver is right—whether he is or not: makes no difference to our-oargument—- and the action lof last sreneral meeting is endorsed by the directors, the ''preference-profit on the .original;.shares[.will be lost; at the same- time the value of the shares, as a whole,: will be -depreciated by nearly ; twice the amount of the excessive dividend. Oh the other'hand, were the sh'areVolde.rs satisfied .with, the very reasonable dividend of ten per cent, this year suggested to them by the more cautious party, 1 the Company would be placed on' as sound a, footing as,"its best" friends could desire, and therewould be no'illegitimate depreciation in value of the shares. A spring of •soundness and caution would also be given to the' proceedings' of the management, which every young company should court.

The Company has nbt'lrrig' to gain by privacy j a. business that- ; for two years, in spite of a depVeciated mar ket, van fairly, claim to have given', a twenty per cent, dividend each year, and which promises an average of "from fifteen per cent, to twenty per cent, is a desirable investment, which, if generally known, would be eagerly sought after. We had hoped that the Company, when once started at so great an expense of our local capital, would have endeavored to extend, rather than : to curtail its operations. There is no reasun why such a pob'cy of extension should not be adopted. Certainly it is not wise to carry all the eggs in the one basket. With the experience gained, the directors could readily take advantage: of. the next year's- mercantile cnanges to attach more capital, and another run or two, of a safe pas itofal nature, to their Eweburn - property. The most successful iPastoral Companies in New' Zealand have taken care to study 'this, policy of distribution of risk,: To succeed in it public confidence must be courted r more than it has been, and there must be, less jealousy of legitimate criticism;',' _ :

It is aiTernarkable.thing to see men of experience going about'all times of the day and night near Naseby pegging off ground in acre','claims that they have ncrpresent intention of working, and then coming into; the Warden's Court and asking for protection. What are these msn waiting for? "What more can be done to develop these pegged-out claims than is now done? The terminating point of the ehimnel is given them : The channel itself will be completed before the claims furthest up the Main -Gully- can be opened The only answer we con get.When with perfectly unjustifiable curiosity we ask the rank and file of the army of < peg-; gists—What they mean, is " O, well we may as well have a bit ibf .groundas the Chinkees." That is hardly a; reason for paying about 30s. an acre ,to the Govern ent for nothing. It is really, nothing, in nine cases out often, because, although" it is tie duty of the; revenue .officer to grant protection for what nobody else can utilise, yet the; moment any .party is in a position to wurk these so-called protected claims the holders will; have to work "them selves; or accept summary cancellation. The channel is fit for r useiiow from its present termination, and'if claimsl were: ■pened the Engineer's .-objections.: to a usage being allowed; would be overruled, for the responsibility-he at present is under could be taken from him Any party with alitlle enterprise could open up the Main Gully in every direction before the frost. - '