NEW ZEALAND AGRICULTURAL COMPANY.

New Zealand Herald, Volume XXII, Issue 7415, 25 August 1885, Page 6

NEW ZEALAND AGRICULTURAL COMPANY.

Great secrecy, observes the Standard, has hitherto been maintained about what took place at the recent meeting of the unfortunate holders of debentures in the New Zealand Agricultural Company. Reporters were rigorously excluded from the meeting, and for some time no one could find out what had been done. At last it comes out that the company claims to have obtained the consent of the majority of its debentureholders to a suspension of payment, and this majority, it is further alleged, binds the minority. A hope is expressed that by calling up the remainder of the share capital meantime, payment may be resumed in three years. All this seems to us to illustrate strikingly the dangers which surround all that class of security called debentures or debenture bonds, which are such favourite modes of raising money among loan and land companies. Our impression has long been that in a vast majority of instances, if not in all, the " security" whioh these bonds are supposed to possess is at a pinch practically as useless as a dishonoured accommodation bill, and that even were it good the holder is powerless to obtain satisfaction from a defaulting company. In the present instance the uncalled capital is less than half the amount of debentures outstanding. The debentures which the company issue say not one word about the power of a majority to bind the minority. For all that the "conditions" printed on it explicitly state each holder might possess an individual right to force the oompany either to pay or to become bankrupt. _ But the last clause of all in the long list of " conditions" runs thus :—"The holders of the debentures issued under the above-mentioned authority are, and will be, entitled pari passu to the benefit of, and subject to, the ..provisions contained in an indenture dated April 25. 1879, and made between the oompany of the one part and Sir Daniel Cooper, Bart, Sir W. J. M. Cuninghame, Bart, M.P., and Sir Sydney H. Waterlow, Bart, M.P., of the other part." In has been discussed whether this agreement binds the bondholders to submit to the majority and releases the trustees from all personal liability. What this indenture contains the debenture-holder knows nothing about He comes under a secret compact that, for all he knows, may render such security as he thought be possessed utterly delusive. The whole of this borrowing system wants looking into, in fact, and the, New Zealand Agricultural Company's default has come opportunely to draw people's attention to it.