TARATU-KAITANGATA RAILWAY AND COAL COMPANY.

Otago Witness, Issue 2664, 5 April 1905, Page 28

TARATU-KAITANGATA RAILWAY AND COAL COMPANY.

MEETING OF SUBSCRIBING SHARE-

HOLDERS.

An adjourned extraordinary meeting oi subscribing shareholders in the TaratuKailangata Railway and Coal Company was held on Thursday evening to consider the position of subscribing shareholders consequent upon the foreclosure on the mine and plant by the debenture-holders' tiustee. Mr C. Greenslade occupied the chair, and 11 others were present. Mr Garden Watson, formerly managing director of the oompany, said he desired to make a statement of the position. From the notices sent out, shareholders would be aware this was an adjournment of a previous general meeting; at that meeting a Special Committee of shareholders was set up to look after shareholders' interests generally.

and on going into the matter the committee was met by the promise that the shaicholders would be protected by the deben-ture-holders; at anyrate that ali those who had put capital into i-ne concern would be considered, and on the strength of these promises the committee desisted from proceeding further in the matter. They vrvie now toid that there was to be no consideration shown to the contributors, and they were now called together to discuss the position and decide what further steps should be taken. It would lie ;.s veil to go back to the position as it existed in August, 1905. The shareholders were then told that more capital was urgently required to enable the management to carry en the operations of the company successfully ; it might be as well to mention that this was seen to be necessary in consequence of some 3500 shares having to be forfeited for non-pay.-nent of calls by some of the original contributors who had left the colony. This was the first check the company net with in its operations, and the task allotted the management in carrying on output operations, providing plant, and expenditure on permanent work out of revenue required an almost superhuman effort, and, he could assure -them, it was two years of hard work. The shareholders were called together on many occasions, and the position was well known to them. At a specal meeting held in Sept-ember, 1903, it was considered that to get new capital into the concern it would be necessary to_ have the lower strata coal proved, it being freely expressed that if No. 2 seam proved superior to tho upper one there would be no •.tifficLilty in successfully floating extra capital. At that meeting the shareholders decided that it was desirable to put a shaft down to prove No. 2 seam, and the shareholders then subscribed the necessary capital for the work. But it took much longer to reach the coal than was anticipated, through the influx of water, and consequently there was greater expense. The shareholders were again called together, and after discussion it was considered that, as the original vendors had not properly prospected the field, it would only bo fair that they defer collection of interest for a time. By the shareholders' instructions a meeting of debenture-holders was called, and the shareholders' proposition put to them, to which they readily assented. The shaft was then continued, and the existence of the second seam proved beyond a doubt. At a special meeting on April 8,

1904-, the management again urged on shareholders the necessity of the finances being made more elastic so as to enable the management to largely increase the output and to cope with the demand that had arisen for the coal. After full discussion, the meeting appointed a committee to arrange the financing- of the output, and, after discussion with the directors, the arrangements, made by the Shareholders' committee were adopted, the arrangements enabling the management to increase the output from 10,000 tons to 25,000 tons per annum, and the company at this point was doing exceedingly well, but with accruing interest to vendor debenture-holders it was necessary to call shareholders together again, and the vendor debenture-holders were offered payment of their deferred interest with a request to defer that coming due. A difference of opinion existed as to what action should be taken, and the vendor debenture-holders adjourned for a

month and appointed a committee of investigation. That oommitte reported that

it was well pleased with what it had seen and with the prospects. Thi3 month's delay had put the shareholders completely into the hands of the debenture-holders. The shareholders were called together and

a committee appointed to act with the solicitor to prepare a plan for the rearranging of the capital. Schemes were submitted, and with all possible speed meetings were called p,sd tne necessary resolutions passed to enable the- committee to

carry out the rearrangements. In the meantime the debenture trustee acted. The shareholders were called together on September 20 and informed of the position, when, on the strength of the interview the committee had with ' the trustee, re-

ports were arranged for from Messrs Hay and Cochrane, and, after the committee

going to all this trouble, the debentureholders plainly showed impatience tfnd intimated that they intended to keep pos-

session and reconstruct on their own lines. This was only a month after the trustee

had acted, and the trustee acted solely on the dictation of debenture-holders!. Mr Alondy personally would have given shareholders every chance of arranging. The precipitate action taken by the debenture-

holders was largely caused by their being misinformed, and by the action of the officer temporarily appointed to the management by the debenture-holders. The original vendors, who got the £10,000 loading from the shareholders for practically nothing — for a lease they (the original vendors) now considered of no value, because the only rash that was put into the concern was the shareholders' £8000 solid cash, that being paid by the guarantors to the bank and advanced against the contractors' debentures. The original vendors were honestly treated By the contributors and had debentures given to the.m legally 6eouring their leasehold rights ; but they now pocketed £8000 capital in the hfv? company and left the* shareholders out in the cold, after giving promises that the shareholders would be considered. When it was" considered fchfif the property, with proper .handling, would become so much more valuable and the shares the original vendors were getting -would shortly double in value, he thought, if they wished to b* respected, the original vendors should halve the interest they were getting in the new company with the old shareholders.

and lost £700, and ho thought he ought to rank equally with the vendors' debentureholders, who put no money in the property. He certainly thought \endors should take into consideration those who went in first and honestly paid up the calls, and then

were squeezed out. <*« Mr Garden AVatson said the original vendors were receiving £3000 out of the new company, while they practically put nothing into the late company. Certainly they held the lease for a time, and perhaps paid the rent, but they, with the exception of Mr Greenslade, who was a contributor, put nothing into the company. In answer to questions, Mr Watson said the original vendors got debentures, and they did not take up any shai'es. They received £10.000 in debentures and they received £9000 in shares.

Mr Moir asked what had the original vendors done with their shares, had they paid up on them? Mr Watson replied that the 9000 shares were counted fully paid up ; they were not subscribing shares. Mr Moir : Did these original vendors sell the shares they received and keep the debentures?

Mr Watson : Some of them,

Mr Moir : Then the present position of the company is entirely favourable to the original debenture-holders ? Mr Watson: Yes; they practically got £10,000 for their lease. Mr Moir: Have the present debentureholders distinctly decided that nothing shall be done in the interests of- the contributing shareholders?

Mr Watson : As far as I know, they have,

A Shareholder: It was only on account of certain promises made that peaceable possession of the property was given? Mr Watson : It has been an understood thing all along that all who put money in would be protected. In answer to a remark from Mr Hudson, Mr Watson said Mr Hudson was at a meeting of debenture-holders when it was decided that 25 per cent, would be written off the shares and given to the subscribers. Mr Hudson said the new debentureholders tried to do what it could, but it simply meant jeopardising the new company to give 20 per cent, to the old company. It had not been that there was any desire to do anything that was not perfectly fair and straightforward, but the debentureholders simply could not grant the 20 per cent. ; the brokers advised that if this were done the outside public coming in for shares in the new company would require similar concessions before taking up shares.

Mr Greenslade : There were several suggestions at the debenture-holders' meeting, but no promise was made. We were told it would preclude all possibility of getting the company floated to grant the concession. Mr Watson: We have nothing to do with the new company. The position and the grievance is that the vendors' debentureholders, who put nothing into the original capital, are now squeezing out the contributing shareholders. Mr Blacker asked if Mr Wills was one of the original vendors' debenture-holders.

Mr Watson replied that Mr Wills was one of the original vendors, and whatever he sold of his shares he put back into the company, so that he received nothing. So far as the shareholders were concerned, they now had no legal right to anything, but there was a distinct moral obligation on the part of the vendors' debenture-holders to share half of their gain with those contributors who put their money into the concern. It was open to tho meeting 1 to pass a resolution of some kind in the matter. Those people who paid £11 for each of their debentures could not be expected to contribute ; it was only those who got their debentures for nothing.

Mr Line eaid, with regard to the property, the contributing shareholders had nothing. The debenture-holders now had the property, so their loss was not so great. He liad hopes that when the debentureholders got into the property they vould do something for tho shareholders who had nothing. He felt very sorry indeed to ccc that the debenture-holders could rot see their way to show consideration for the shareholders. He did not think iiiat the debenture-holders w-ere in the wrong. Lut he wa« sorry the broker's report should show so little consideration for shareholders. Shareholders all wished the new company well, and if, by any possible means, the debenture-holders could see their way to show some little consideration it would be well for both parties. He was surprised to see that the brokers conside 'ed that some small consideration shown to ihe old shareholders would jeopardise the formation of the new company. Consideration of the old shareholders need not mean money at all ; it would be only that they should get a fevv shares in place of the money they put in. Of course the shareholders had no power at all, but he did not think the debenture-holders would be so selfish as to want to keep the whole thing for themselves when they knew the shareholders' money was in the property.

Another Shareholder suggested that the best thing to do was to form a small committee to wait upon the debenture-holders and see what it could get them to do.

The Chairman : Mr Hudson and myself were prepared to do something on the lines you suggest, but we had to come to the conclusion that it would be inimical to the interests of the company.

A Shareholder : I know some of the de-benture-holders were themselves prepared to suffer a loss in order to help the shareholders.

Mr Hudson said the question had to be looked at from an outsider's point of view. If an outsider were asked to take up shares, and he knew that another man who had no legal right but had simply been a shareholder in the old company was receiving a number of paid-up shares in proportion to the shares he took up in the new company, the outsider would say, "My money is as good as his, and I want the same concession." The brokers would not attempt to float a oompany on suoh a condition.

A Shareholder: But the money paid up by shareholders has contributed some value to tEe mine.

Mr Watson said 1 the new company could not possibly take into consideration the old shareholders, and he did not think the meeting should discuss that. All he thought it should discuss was what the vendors debenture-holders w&ro getting they should share with the shareholders. In answer to a question from a shareholder, Mr Watson said it was only known that the vendors' debenture-holders cut down the capital for the new oompany and the old shareholders got nothing. At the same time he. and others considered th^t a/» th§

original vendors were getting £8000 out of the new company, the old shareholders had a moral right to one-half that amount. The new company was purchasing the property for £20,000, and the original deben-ture-holders _\vcrc cut down by 20 p&r cent. ; they rec&ivcct £8000 in paid-up shares. Ifc might do for a committee to approach the* original deb&nturc-holders, and report at; a future meeting.

Mr Hudson thought it would be found 1 that the vendors' debentures had been sold and shifted round.

Mr Watson said only two lots had been shifted as far as he knew. If the property, was properly handled it would become very, shortly a very muoh more valuable property than £1 per share. During the whole of the operations the company had been treated by its bankers always in a most proper and fair manner, and he would also like to state that the debenture-holders* trustee had always shown every consideration to the company. It was only right to state also that during th c three years the company was in existence he found all the officers and staff and workmen to be a3 good a body of men as anyone could wish to control.

Mr Henderson said the shareholders seemed to have been misled. They were a^ked to throw themselves on the debentureholders' mercy, and the committee that was set up refrained from going into details. It would be a good thing: yet if these debenture-holders could see their way to give a small concession — say 25 per cent. The shareholders had been the means o£ getting a sale for the output, and if the debenture-holders would take contributing; shareholders into their confidence it would be the means of the new company going on better. Probably many of the old shareholders would take up shares in the new company. What became of the money deposited for the shaft?

Mr Watson replied that the balance sheet was available for perusal. The money deposited for the shaft was spent on it. and a good deal more ; it ran into about £700, and most of that money was agreed! to be taken up in shares. There were some accounts for goods taken into stock, and as the debenture-holders had the use of these goods they ought to pay the accounts.

Mr Line moved — " That a committee be formed to wait on the debenture-holders to see if there is any possible way by which somo consideration can be shown to the contributing shareholders." .Mr Blacker seconded the motion, which, was carried, and it was also decided that the committee consist of any two members of the old committee, together with Mr Line.

Mr Blacker suggested that the debentureholders should be asked to meet and confer with the committee. The mine was a very valuable property to be put on the market, and it should not be put before the public with any stain on it. On the motion of Mr Hudson, it wa3 then formally resolved tliat the necessary steps be taken to dissolve the company, and that the registrar be given notice accordingly. A vote of thanks to the chair concluded the meeting.

The Waipukurau Hospital has just received a gift of a rather novel character in the shape of six Persian kittens. These the secretary of the institution intends selling 1 , the proceeds to go to the funds of the hospital.