FUTURE OF TRUST COMPANIES

Timaru Herald, Volume CXXXVIII, Issue 19961, 20 November 1934, Page 7

FUTURE OF TRUST COMPANIES

NEW SCHEME BEFORE COMMISSION TRENCHANT CRITICISM BY COUNSEL United Press Association—By Electric Telegraph—Copyright (Received November 19, 9.15 p.m.) SYDNEY, November 19. The Royal Commission, inquiring into the activities of certain trust companies, resumed this morning. Presenting a new scheme for the reconstruction of the trust companies, Dr. Louat (representing a group of companies) told the Commissioner (Mr Justice Halse Rogers) that it was proposed to eliminate all the smaller companies and to re-allocate their assets to the main companies. Certain companies must be retained, said Dr. Louat, and the British National Trust was one of them. It occupied a position of importance in relation to the two main companies, the Southern British National Trust and the Investment Executive Trust. Three courses could be adopted. Firstly, all the companies could be wound up, secondly the debenture capital could be converted into share capital, and thirdly the methods of control could be changed and it was the third course that he advocated. If this course was adopted, the gross rents of the Trust building could be managed by a board of independent directors and they could build it up into a going concern. Opposed to Crown’s Views. Mr W. Monahan, K.C. (who is assisting the Commissioner) said he had considered Dr. Louat’s scheme but it was fundamentally opposed to the views of the Crown. The Crown could not countenance any scheme that did not allow for restitution of the money to the debenture holders. It was mockery for any scheme to allow J. W. S. McArthur and C. G. Alcorn to take out £IOO,OOO, and he would not associate himself with any scheme that acquiesced to such a state of affairs. Dr. Louat said the Trust organisation would consist of the Investment Executive Trust, the Southern British National Trust, and the British National Trust. It was proposed that the articles of the Investment Executive Trust and the Southern British National Trust should be altered to provide for boards of seven directors, of whom two would be elected by shareholders and five by debenture holders. The inclusion of two shareholders’ directors was entirely calculated to serve the interests of debenture holders, in that it enabled them to retain the assistance of McArthur and Alcorn in a deliberative capacity. He said that the provision for five directors would ensure a majority of debenture holders’ directors at all meetings. In regard to the British National Trust, it was submitted that thdte should be a board of six directors, two of whom would be appointed by shareholders and two each by debenture holders of the Southern British National Trust and the Investment Executive Trust. Four directors would constitute a quorum. The last section of that plan was suggested with a view to strengthening the financial structure. A new mortgage should be raised to replace the existing mortgage on the trust building at a substantially lower rate of interest. Modification Suggested. The Commissioner remarked that it might be advisable to get what was possible by nursing the assets, rather than by running the risk of losing everything. If the debenture holders’ approved of the scheme, he could do nothing but recommend it. Perhaps the scheme could be modified a little. Mr Monaghan: If the scheme is modified, Dr. Louat will lose all interest in it. All these moves are being made to cover up your previous findings and to put the matter in a new garb. Personally I do not think there is the slightest hope of the public contributing any further money to these companies. Mr Fitt, K.C., said he represented 326 debenture holders, whose subscriptions to the companies totalled nearly £74.000. Mr Swan, of New Zealand, had handed him a proposal which he would put before the debenture holders. The New Zealand scheme was similar to that put forward by Dr. Louat, suggesting control by debenture holders, although there were certain differences respecting detail. He suggested that he should be allowed time to confer with Dr. Louat, to try to reconcile the differences. The Commissioner said that any scheme would have to be feasible, otherwise it would be idle to put it forward. A statement should be prepared, showing debenture holders the financial advantage of any particular scheme. Value of Building. The Commissioner recalled W. C. Hewitt to question him regarding rents from the Trust building. Hewitt said that they were about £SOO a month. The building was not fully let, as difficulty was being encountered by the uncertainty regarding the future of the companies. When prospective tenants realised that there would be continuity of occupation, the remainder of the building would be probably soon let. The Commissioner said that before a value of £300,000 could be placed on the building, the rents would have to aggregate about £16,000. Before adjourning the Commissioner asked that both Mr Fitt’s and Dr. Louat’s schemes should be submitted to Mr Hill, an accountant, for a report to the Commissioner. The Commissioner said he would receive counsel in his chambers if they wished to adopt the suggestion for threshing the matter out there. The inquiry was adjourned till Friday.