DAIRY INDUSTRY

Waipa Post, Volume 44, Issue 3181, 24 May 1932, Page 5

DAIRY INDUSTRY

THE CO-OPERATIVE SYSTEM. : SHAREHOLDERS' RULES. An important subject to be discussed, at the National Dairy Conference at Palmea-iston North next month will be dairy company articles of association. - ThV IV Horo Co-operative Dairy 'Co.,. IM., intends to move a remit as follows: That the Government be ttfged to bring down legislation (a) Validating the allotment of additional shares to any supplier shareholder of a co-operative dairy company made by the directors since the passing of (the Dairy Industry Amendment Act, 1924, arid made in conformity with the articles of association; (b) giving legal force and effect to provisions how in existence, or hereafter to be Included in the articles of association of any co-operative dairy company, authorising the directors to allot additional shares to any supplier-share-holder; (c) giving legal force and effect to any reasonable provisions imposing upon shareholders of a co-op. dairy company an obligation to supply toilk, cream or other dairy produce to ■the company (with a corresponding obligation expressed on the part of the company to take such supply), which may thereafter be adopted by a co-operative dairy • company in its articles of association or in any amendment thereof. DECISIONS OP COURTS. \ The Te Horo company points out that many co-operative dairy companies have adopted articles in which provision is made for the allotment of additional shares on a basis of butter fat supplied. Provisions are also frequently found in articles whereby shareholders bind themselves to supply their factory with the milk or cream produced on their farmsNumerous decisions of the New Zealand courts have cast a substantial doubt on the "validity of any attempt to attach to the holding of share capital in" a co-operative dairy company, any further liability than the payment of the share calls. The doctrine that every shareholder in a cooperative concern is bound by the articles of his company, if not shattered, has at least been severely shaken by the weight o$ judicial opinion. This unsatisfactory position was recognised by Parliament, and some measure of trjelief was given in the Dairy Industry Amendment Act, 1924. The effecti of thlis enactment was twofold: (1) To Validate allotments of "butter fat shares" made under certain conditions before the passing of the Act; (2) to make effective any provisions in articles of association obliging a shareholder to supply his dairy produce to his company.

Neither of these provisions gave permanent relief to the industry. As the law stands no co-operative dairy company can rely ton the validity of its articles dealing with the allotment of additional shares on butter fat production nor can it seek with confidence to enforce the penalties prescribed in an article purporting to bind a shareholder to supply his produce to the company. I TERMINATION OF UNCERTAINTY The remit submitted by the Te Horo Dairy Company suggests that legislation be brought down to terminate this uncertainty. In the case of the allotment of additional shares the remit suggests legislation validating allotments since 1924 and giving power to make allotments in the future in accordance with articles empowering such a course. In the case of compulsory supply it was not deemed prudent to ask for legislation giving effect to provisions having this object, at present embodied in existing articles. ■ It is comlmon knowledge that in some cases articles for compulsory supply have been framed in terms so harsh and so general as to be rightly regarded as unfair and unnecessarily restrictive. The remit proposes that legal sanction should be given only to such articles for compulsory supply as being moulded on reasonable lines should be hereafter adopted by eo-operative dairy companies as part of their articles of association.