DIRECTORS’ GUARANTEE.

Waikato Times, Volume 104, Issue 17485, 20 August 1928, Page 9

DIRECTORS’ GUARANTEE.

BACON COMPANY FAILURE. AN UNFAIR BURDEN. REPAYMENT PROPOSED. Notice of motion “ That out of the profits derived from the sale of coal from the Glen Afton Collieries, to other than the company’s suppliers, £4IG2 a year for three years be set aside for the purpose of repaying the three Waikato Guarantors of the New Zealand Co-operative Meat Packing and Bacon Company, Messrs. J. Barugh, E. C. Banks and the estate of the late Mr. T. Paterson,” will be discussed at the annual meeting of the New Zealand Co-operative Dairy Company, on Wednesday. The notice of motion emanates from Mr. S. H. Judd, of Cambridge, who considers that the debt to the three guarantors is one of honour. It will be remembered that the three gentlemen named, along wirii the seven other directors to a joint and several guarantee were oalled upon to find £50,000 when the Packing Company was forced into liquidation, following the 1922 slump. At the annual meeting of the dairy company two years ago the directors were asked to call a meeting of all the co-operative dairy companies in South Auckland with a view to .evolving- a scheme whereby voluntary contributions. could be collected to liquidate the liability. It was found, on investigation, later, that reckoning on allround support, a contribution of 3s Od per 10001 b of butter-fat a year for two years would liquidate the debt, and it was decided to ask ail co-operative dairy companies in South Auckland and the Bay of Plenty to support a scheme. The proposal, however, resulted in the collection of only £ISOO. The proposal Explained. Explaining the new proposal, Mr. Judd says the sum so obtained will amount to one-half of the principal, plus accrued interest, found by the three Waikato directors, an amount Mr. Judd suggests is a fair one for the suppliers of the New Zealand Dairy . Company to take over. “By so doing we will remove the slur that undoubtedly rests on us to-day in this matter.” Mr. Judd asserts in a circular: — “These gentlemen were our elected representatives on the board, and the company could not have been slarted without sucli guarantee being undertaken by the directors. For 10 years material benefits were undoubtedly derived from liie operations of the bacon company, and, as we have benefited, so should we unquestionably shoulder our share of the losses.

“ Practically every co-operative company in the Waikato has been started by a joint and several guarantee. Th’c Waikato Farmers’ Bacon Go. had to start with a capital of £6OOO, and a guarantee of £25,000 from the directors, as it took £31,000 to run the business. Therefore, the directors had really to guarantee four-fifths of the required capital. Had the venture proved a success they would not have received a pennypiece for the liability they had undertaken. Later, when the Waikato company amalgamated with Dymock’s and the Taranaki farmers’ co-operative concern, the directors’ liability under the joint and several guarantee was increased to £50,000. “ Everything went well until the world-wide slump in 1922, when the company lost £85,000 on consignments, and at a time when practically every other commercial firm in New Zealand was in financial difficulties. Subsequently the company was forced into liquidation, and the 10 directors (seven farmers and three Wellington business men) were compelled to find £50,000. The Taranaki dairy farmers immediately found the money for their three directors, it costing the individual farmers six times as much a head as the sum I am now proposing, which sum was paid out of butter-fat.” Should Mr. Judd’s proposal he carried, he will then move that at! contributions already received from suppliers to the New Zealand Co-opera-tive Dairy Company be refunded in order that every supplier will be placed on an equal footing.