COMPANY LAW.

Manawatu Times, Volume XLIX, Issue 2505, 24 October 1924, Page 8

COMPANY LAW.

INTERESTING POINTS FOB BUSINESS MEN. ADDRESS AT COMMERCE LUNCHEON. “Points of Interest in Company Law,” was the title of an address delivered by Mr M. H. Oram at the Palmerston North Chamber of Commerce luncheon yesterday. Mr G. I. McGregor presided over a very meagre attendance of members. The speaker commenced by explaining that businesses were divided into three sections —private or proprietary concerns, partnerships, and companies—a’nd it was interesting to recall how each had evolved. A private company must not comprise more than 25 members, all the capital must bo subscribed, and it must not Issue a prospectus. The lastnamed difficulty could not be oveicome, though the other two were liable to circumvention, for one member may hold shares for someone else. It was not generally known that a private company could have unallotted shares; after the formation of the concern its capital may be increased and not fully issued. As far as companies generally were concerned, several documents were the! preliminary essentials in the formation. First, there was the original agreement prior to the actual flotation i of the company, then the memoran-j dum of association, the articles ofj association, and the prospectus would | follow. The memorandum of association was the most important, and it was actually the charter and defined what the company could and could not do. It was unalterable and irrevocable,, and once a company was formed for a specific purpose it could carry out that function, and that alone. Its methods of manufacture or production could not be altered after one process had been proved a failure. Great care was, therefore, essential in the drafting of this document. Minor exceptions, of . course, there were, but these remained at the jurisdiction of the Supreme Court. The articles of association affected the general government and internal management of a concern, and dilfercd from the memorandum in so far as they could be altered from time to time. In the preparation of the prospectus, the minutest care must be exercised that no untrue statement be made which would induce anyone to buy shares upon grounds which might later b 0 construed as misrepresentation. In some cases a definite stipulation was made as to the period Rl which profits would be available, but the speaker instanced a case in point in which an Orchards Company had been proceeded against in respect to a declaration that had been made as to when the apple trees would bear fruit and return profit to the shareholders of the concern.

Various details as to the drafting’ of the prospectus wore also explained by the speaker, who proceeded to say that, although great care was essential, it was possible to convert a private concern into a private company in forty-eight hours. The advantages of a private company over those of a public ono were enumerated —chief among these being the freedom that was granted in the general government of its affairs- —Mr Oram explaining the provisions which guided tlio concerns in winding up their operations. In summarising the positions of the throe classes of business concerns—proprietary, partnership,and company —the speaker gave a lucid explanation as to the formation, conduct, and cessation of each, a’nd said many advantages in income tax and stamp duty could be secured by judicious [arrangement of the various officials and directors. The disadvantages of a private company, as compared with a partnership, were few, and were practically confined to having to adhere to its memorandum and the matter of publicity. On the whole, the advantages of the private company wore great. The speaker wan accorded a vote o* thanks.