FARMERS’ CO-OP.

Star (Christchurch), Issue 17570, 22 June 1925, Page 6

FARMERS’ CO-OP.

SHARE REVISION. PROPOSALS OF DIRECTORS. A circular letter has been issued bv the directors ot the New Zealand Farmers’ Co-operative Association of Canterbury, Ltd., to all classes of shareholders regarding a proposal fur a reduction of capital and elimination of accumulated preference dividends and loss. The proposals concern first preference and “ A ” and “13 ” preference and ordinary shareholders. The letter states : During the past three years the energy of the directors and management has been directed towards a thorough re-organisation and stabilisation of the Association’s business. The results for the present year so far are very satisfactory, and it is with the object of further improving the general position of the association that your directors offer certain recommendations and suggestions. The last balance-sheet disclosed an accumulated loss of £101.929 0s 2d at debit ol tiie Profit and Loss appropriation Account, to which must he added accumulated unpaid preference dividends amounting to £00.89-3 4s, making an accumulated liability of £102,824 10s 2d. The balance-sheet for the year ended July 31. 1923, showed a loss of £211.1-3-3 12s 2d, in connection with which it was proposed bv vour directo write back “ A ” and “ B” preI ore nee and ordinary share capital 10s per share. This recommendation was unanimously agreed to by shareholders at the annual general meeting held or. October 0, 1923, but has not vet been put into effect. In chid mg the preference dividend of £30,417 12s accruing at. July 31 next, the accumulated liabilities ‘under review will He as follows:—Balance P. and L. Appropriation Account £lOl 929 bs 2d. accumulated preference dividend to July 31, 1924. £00.89-3 4s. preference dividend accruing at July 31. 192-3, £30,447 125—£193.272 2s 2d. if rim association sets itself the task of liquidating this large sum over a period of five, years, it would necessitate an annual payment of £38,654 8s od. to which must be added accruing preference dividend, amounting to £3O 117 125—£60.102 0s od It must be borne in mind that such a procedure would preclude the payment of a dividend on ordinary share capital, and as the amount involved won 1 have to be provided out of profits tfc might be too heavy a burden to impose upon the association in its present position. Your directors now oiler for consideration, as a means of surmounting the problem of the present accumulated liability of £162.824 10s 2d. the following suggestions: (1) That ordinary shareholders be requested to write the sum of 15s per share off their share capital; (2) that the first preference shareholders of the association agree lo relinquish and extinguish then* cumulative rights attaching to such shares as from Julv 31. 1922, but that no effect he given to this resolution unless, and until a similar arrangement is entered into by classes ”A ” and “B ” preference shareholders of the companv at subsequent meetings. If the above suggestions are adopted your directors lee! tliiit the present year’s operations tvill be sufficiently satisfactory to warrant the payment of a year's dividend on preference capi. when the next balance-sheet conics down. In regard to the suggestion to write back ordinary share capital bv 15s per share, instead of 10s, as previously recommended and agreed to, it- has already been stressed that the value of ordinary shares is determined bv the amount of dividend and bonus’ pant thereon. The suggested alternative to preference shareholders to eliminate and extinguish their cumulative rights uc.uld b c more satisfactory than the adopted recommendation to write off a. part of their share capital, as it would be inequitable to permanentlv reduce the earning power of their holdings. ft lias net been overlooked that preference shareholders were, no doubt, persuaded to take up this class of investment by reason ot' the preference and cumulative rights attachable thereto, but the exigencies of the association are such that equality of sacrifice at the present juncture is neecsJt is quite obvious that when a. company s condition is such that it cannot pay a preference dividend, the advantage of cumulative rights is a doubtful one. and, moreover, if a company is unable to pay a preference dividend one year, there would be little prospect of it being able to pay a further accumulation in tlic following and succeeding years. The aim of your directors is to got the association Hack to such a profitearning basis as will enable it to paydividends to all classes of shareholders. The capi al commitments of the association during the next five or six years covering repayments to depositors and bond-holders call for very serious thought and consideration, butif those proposals are given effect to, together with the improving results and prospects of our business we have good reason to. expect that we shall soon be in n position to pay dividends to all classes cf shareholders, and then, confidence being restored in the association, there- should bo no difficulty in financing our liabilities to depositors and bond-holders. If the suggestions arc not agreed to., your board feels it would, lie inexpedient for the association to pay dividends to any ■ class of shareholders until it was able to meet its liability to depositors and bond-holders. The following resolution will be submitted at an extraordinary general meeting of ordinary shareholders, the date of" which will be, notified later: - “That the ordinary share capital of the New Zealand Farmers’ Co-opera-tive Association of Canterburv, Limited, bo reduced from £B-50,000 divided into 170,000 ordinarv shares of £5 Os 0d each, to £722.500 divided into 170.000 ordinary shares at £1 5s Od each, and, that such reduction be effected by cancelling paid-up capital which is unrepresented bv available assets to the. extent of 15s in respect cf each of the ordinary shares of the company, which lias been issued, and by reducing the nominal amount of such shares and all unissued ordinary shares accordingly to. £4 5s each, leaving a liability (except upon 17.19*2 ordinary shares which bare been iull\ paid up. and upon all unissued shares) of £2 5s per share as at present, which liability excludes the sum of 5s per share called up by the company on the 30lb dav of May, 1925. and such reduction to be without prejudice to the company’s right to sue for and recover all arrears of calls now outstanding and duo in. respect of the said shares or any oi them.” The following resolutions will be submitted to extraordinary general meetings of the first preference and “A” and “B” preference shareholders : - i (l) “That the first preference *A’

and B’ preference shareholders of the New Zealand Farmers’ Co-operative Association of Canterbury, Limited, relinquish and extinguish their claims to any dividends accrued or claimable up to the 31st day of January, 1925.” (2) “That the first preference ‘A’ and, ‘B’ shareholders of the company relinquish and extinguish their cumulative rights attaching to the shares held by them as from the 31st day of January, 1925.”