Look Before You Leap.

New Zealand Mail, Issue 869, 26 October 1888, Page 28

Look Before You Leap.

As there appears likely to bo a revival of "interest in mining speculations, which possibly lead to the formation oi new companies to undertake mining enterprises, it may be worth while to direct attention to the provisions of the latest legislation on this

subject. The Mining Companies Act of 1886 is a large consolidation measure occupying forty-nine pages of the Statute Book. It repeals the six Acts previously in force, viz., those of 1872, 1875, 1877, 1882, 1833 and 1885, and in addition to consolidating and simplifying their provisions, contains many important new enactments framed with the object of removing the openings for the fraudulent shirking of just liabilities, which existed under the repealed laws- It is needless to specify in detail the numerous ingenious expedients by which reckless gamblers in running stock contrived to evade the responsibilities which they had undertaken with a light heart aud lighter head. Bogus transfers and voluntary forfeitures were among the favourite devices. On the other hand there were cases in which the letter of the law was found to sanction proceedings against shareholders on the part of directors and managers, which, to say the least, involved very grave hardship to individuals. The Act of 1886 aims at reforming these abuses, and guarding against their recurrence. For our present purpose it will be sufficient to consider the provisions dealing with the position and responsibilities of shareholders, their powers in regard to the transfer of shares, and the nature and extent of their liabilities in respect of calls. In the first plahe it is enacted that every person in whose name a share in a company is registered (in the register of members) shall, so long as such registration in his name continue, be liable to contribute up to the amount of his share toward the assets of the company for its purposes, debts, liabilities, and obligations, and for adjusting tho rights of the shareholders among themselves, but not in the way of providing increased capital beyoud the value of tho share. All shares in any company registered under the Act (or those which it repeals) are created “ chattel interests ” assignable aud transferable and liable to seizure and sale under any writ of execution or warrant. Tho transfer of shares, unless fully paid up, is prohibited after any petition ha 3 been presented for tho winding-up of the company, unless such petition shall have ' been dismissed or proceedings stayed. It is declared that no transfer shall be legally complete unless the name of the transferee shall be entered as such on tho shareholders’ register, and until this shall have been done, and it is directed that the true date of transfer is to be attached to the transferor’s signature, and is to be taken as the date of transfer. A penalty of £lO is prescribed for neglect to register a transfer, and blank forms of transfer are absolutely prohibited. Next we come to two very stringent provisions against the fraudulent disposal of shares with the object of evading just liabilities. The Act provides that, notwithstanding any transfer of shares not fully paid up, the transferor is t u continue chargeable for six months after the transfer (but no longer) with any debt or liability incurred prior to such transfer, and tbe transferor is to remain a contributory in cases where it may be necessary to determine who are contributories. It is further enacted that if any shareholder, with tbe view of evading his liabilities, transfers his shares upon a trust or understanding that he is to be entitled at some future time to have his shares, or the interest iu them, transferred back to him, he is to be disabled from legally enforcing the execution of such an agreement to retransfer the shares. This apparently bars all the ingenious proceedings of which so much was heard a few years back.

Equally stringent are the provisions in respect of calls. Under the old law, if no proceedings were taken within fourteen day 3 after a call was made payable, then at the end of 21 days after the date on which the call was made payable the shares became ipso facto forfeited to the company, and the liability on the forfeited shares also lapsed to the company. This afforded wide scope for the evasion of responsibility, to the serious prejudice of the just claims of a company’s creditors. The present provisions are devised to meet this difficulty. it is enacted Ihaj when a call is made it i 3 to be advertised (with the date and place of payment) at least twice,in a newspaper locally published, and notice of the call is to be immediately sent by postcard to every shareholder. Any share upon which a call remains unpaid for twer: • . -.••• «l.»ys after the date on which it iVU . u • s to be absolutely ’ forfeited ipso facto provided that no proceedings lor the

recovery of the call shall have been begun within a fortnight after the due date of payment) bub should such proceedings have been taken, and judgment obtained against the defaulting shareholder, if such judgment is not satisfied within three weeks the share is then to become ipso facto forfeited—no resolution of Directors being required in either case —and notice of forfeiture is to be sent to the holder. But—and this should be carefully noted—forfeiture does not cancel prior liability, for section 54 runs thus: — u Notwithstanding any forfeiture whatever of any share, the holder thereof at the time of its forfeiture shall continue and be chargeable for twelve months thereafter, but no longer, with any debt or liability incurred prior to such forfeiture; . and, in so far as respects any such debt or liability, the holder shall be deemed to be a contributory uuder this Act in cases where it may be necessary to determine who are contributories. Bub if an order to wind up a company shall have been granted before die expiration of the said twelve mouths, the holder at the time of forfeiture of any forfeited share thereiu shall continue to be liable as a contributory until the final distribution.” Forfeited ahares are to be offered at auction after notice, by registered letter, has been sent to the last known abode of the shareholder, but the shares are not to be sold after 42 days from the date of forfeiture and nob earlier than 28 days after notice of the intention to sell has been posted to the shareholder. The sale is to be without reserve and is to be adequately advertised. The proceeds are to go toward defraying the call and all expenses incurred, any balance of liability still remaining against the shareholder to. be recoverable with costs and interest at 6 per cent, per annum. Dividends are to be payable only o.ut of profits, and Directors paying dividends from any other source are liable to heavy penalties. The above are among the most important provisions of the law relating to mining companies as it exists at the present time ; but it is very desirable that all who contemplate embarking in mining investments should make themselves thoroughly acquainted with every part of the Mining Companies Act, 1886.