FORESTRY SHARES

Taranaki Daily News, 13 February 1935, Page 7

FORESTRY SHARES

CONVERSION OF BONDS COMPANIES BILL TERMS PLAN FOR INCORPORATION BILL IN HOUSE TO-DAY By Telegraph—Press Association. Wellington, Feb. 12. A memorandum relating to the Companies Bill, which is to be introduced in the House of Representatives to-morrow, states: — Th& Bill arises out of the report of the Companies Promotion Commission and as a remedy for legal difficulties encountered by existing bond-issuing companies to which attention has been drawn in the report of the commission. . There are probably 45 bond-issuing companies operating ■ more or less actively in New Zealand at the present time. It would seem that many of these companies, particularly when formulating their realisation 'schemes, did not realise that such large' numbers 'of the ‘public would favour this type of investment, or- consequently the extent to . which planting operations would grow. The appointment of .trustees was no doubt a reasonable element in the scheme for protecting bondholders while trees were growing, but, when the directors sought to take practical steps towards milling operations arid other activities for realising the companies’ assets they found serious difficulties in the way, primarily due to the fact that trustees had limited jjowers of realisation, and that‘the bondholders were widely dispersed and art unincorporated body. •In the case of some companies a combination of different bond issues is desirable, as it yroiild be uneconomical to plan and create several, similar operating plants where one could do the necessary work. The existing trust deeds do not provide satisfactory machinery for any such combination. INCORPORATING BONDHOLDERS. The commissioners came to the conclusion that there was no practical method of enabling companies to carry out major realisation schemes except by incorporating bondholders and converting bonds into- shares. The object of the Bill is to provide machinery for facilitating the incorporation of bondholders in companies incorporated in New Zealand. It is necessary if this is to be done on an equitable basis that there should be some independent scrutiny of. the basis of incorporation, of the basis of substitution of shares for bonds and of the terms and conditions on' which a newly-incorporated body of bondholders is to carry out the projected realisation

scheme. The Bill seeks to provide'these features by setting up a commission to be called the Bondholders Incorporation Commission. After receiving information which the companies are bound to give the commission may order that a scheme be submitted providing for the incor- . poration of bondholders of ' any given / company on a basis that each bondholder will receive, st share or shares for his bond dr bonds, and that existing rights

among , bondholders . will be preserved relatively' ‘among them in their new characters, of shareholders as nearly-as possible. The scheme will then be carefully considered by the .commission, which: Will settle the terms on which . the bondholders are .to be incorporated, but'^'Ribpw^i£sibh ; will not necessarily be bound by the scheme submitted. After a statutory meeting of the sharehas been held the directors of the .new company may formulate their realisation scheme and apply to the commission for assistance to resolve any difficulties that may arise. In deciding such difficulties the commission may hear the evidence of shareholders and, if it thinks necessary, order meetings of shareholders to be held or postal ballots to be conducted for the purpose of ascertaining the wishes or procuring the acquiescence of shareholders. PROVISION FOR OBJECTION. If a dissentient body of bondholders should object to taking shares in a new company they may demand to be.left as bondholders, in which case power is provided for toe commission to cut' themout of the. shareholding scheme and .to apportion an appropriate part of the company’s land or products to such a body of bondholders for the preservation of their rights; under the original bonds. The cost of the commission is to be borne by the companies that receive the benefits of’ its; 'provision, and the commission has power to make a levy on the companies. Accordingly it is important to note that the State undertakes no responsibility for any of the projects regarding which bonds have been issued, nor does it give any warranty or assurance. It passes no judgment on the commercial prospects of the ' land utilisation projects. These remain purely a matter between bondholders and •the company they originally contracted with, and the Government has never taken and now takes no responsibility in the matter. Overseas bondholders are benefited also. By converting them into shareholders it secures to them the privileges and rights of shareholders in a company, and these rights are much more easily capable of ascertainment and exercise than are the rights of bondholders. The commission may be relied upon to guard carefully the interests of overseas bondholders, take all necessary steps to see that they are kept advised of all terms and details of realisation schemes, and ithat their views and wishes are ascertained. The Bill relates only to companies incorporated in New Zealand, as only those companies are amenable to New Zealand laws to the'extent required by the Bill. Sittings of the commission will be in camera, as private matters may have to be discussed. No appeal against the ■> commission’s orders will be allowed.