COMMERCIAL.

Press, Volume LXI, Issue 18414, 22 June 1925, Page 10

COMMERCIAL.

♦— FAKMERS' CO-OP. IMPORTANT FINANCIAL PROPOSALS. % SHARE REVISION SCHEME. The directors of the New Zealand Farmers' Co-operative Association of i Canterbury, Ltd., have issued a letter to all classes of shareholders relating to a proposal for a. reduction of capital and elimination of accumulated preference dividends and loss. The proposals concern first preference and "A" and "B" preference and .ordinary shareholders. The letter states:— During the past three years the Energy of tho directors and management bas been directed towards a thorough' re-organisation and stablisation.of the Association's business. Tho 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 I accumulated loss of £101,929 6s 2d at i debit of the Profit, and Loss Appropria- j lion..Account, to which must be added | accumulated', unpaid preference dxvi- , •dends amounting to £60,895 4s, making an accumulated liability, of. £162,824; 10s 2d. ' ' The balance-sheet for th.e year ended j July, 31st, 1923, showed a loss of £214,155 12s 2d, in connexion with whicji it was proposed by your directors to wite back "A" and "B" preference and ordinary share capital 10s pelshare. This recommendation was unanimously agreed to by shareholders at the annual general meeting hold on October , 6th, .1923, but has not yetljeen .put. into effect.; Including' tho preference dividend of £30,447 12s accruing at July 31st next, the accumulated liabilities under review will be as follows: —Balance P. and L. Appropriation Account £101,929 Cs 2d, accumulated preference dividend to July 31st, 1924, £60,895. 4s, preference dividend accruing .at July 31st, 1925, £30,447 125—£i93,272 2s 2d. If the Association Bets itself the task of . 'liquidating this large sum. over a period of years> it^^would necessitate an annual payment o£. £38,654 8s to Which must be added acciuing preference dividend, 1 amounting to £30,447 12s— £69,102 0s sd. It must be borno in mind that such a procedure would preclude the payment of a dividend on ordinary, share, capital, and as the amount involved would have to be provided out of profits, it might . be too heavy a burden to impose upon the Association in its present position. Your/directors now offer for consideration; isl a means of surmounting the problem of the present accumulated liability,-erf £162)824 10s 2d, the following suggestions(l) That ordinary shareholders be re- ; quested to .write the sum of 15s per share off' thpir share capital; (2) that - the first, preference shareholders of the Association agree to relinquish and ■ extinguish their, cumulative rights attaching , to , such : shares, is from- July 31st. 1922, but that no effect be given fo 'this resolution unless, and until a similar arrangement is entered into by classeß "A" and "B" preference ~ shareholders of the company at subse- *. queht meetings. - If the above sugges- ■ tiota's are' adopted ybtir, directors feel that the present year operations will be -sufficiently satisfactory to warrant 1 the payment of a 'half-year's :dividend on preference . capital when the next balanco-sheet comes' down. In regard to the suggestion to write back'ordinary share capital by 15s per share, instead of 10a, as previously • recommended :and agreed .to, it ' has 1 v already been stressed that the value of • ' ordinary shares •ia determined by the , amount ;of dividend . and bonus paid thereon. . : „ The suggested" alternative; to prefer- ■ encb shareholders to eliminate and extinguish thqir cumulative rights would ■ be more satisfactory than tho adopted j f recommendation to ..write off &' P®rt their share capital, a? it -would be inequitable to permanently reduce; the '■"> earning power-.of their holdings.. It has not been overlooked that preference Bharehblderswwere, no" doubt, persuaded ' to take up this class of Investment by reason* of tibia preference and cumulative ': , • rights attacaablo thereto, but cxig- • encies 'of the Association aro such that ■ equality of sacrifices at the . present < -juncture is necessary. It is' quite obvious that when a com- - Tpany's condition is such that it cannot ' pay a preference dividend; the advan1 tago of cumulative rights is a. doubtful C one, and, moreover, if. a company is v . unable to pay a preference dividend one year. there would be , little .prospect of it being able to pay tft'further accumu- ' " Itttion' in tho following and succeeding aim of your. is to get the Association back to a profitearning basis as will-enable it to . pay dividends to all classes of shareholders. '• ~, The • capital commitments or tne Association during the next five or six years .covering repayments to depositors 'and bond-holders call for' very • -serious thought• and consideration, but ! 'proposals arec given-; effect- to, together.with the improving results and prospects of our business we have goqd rfeason to expwjt';that>wo 'Bhall soon bo in a-position to payi dividends to all 1 ■ , classes of jsharejujldersj jand. conndenco beingirestorediin-the .Association, there shouldbenO our' Ua^iities ; \to"'dep'tisit"orß - and bond- -". holders.- ¥tSe'J'suggestions, V are not agreed to,. your Bpard feels it would be ' inexpedientfor the Association to pay •'dividends to,;any 'class' of shareholders , . "untfi it "was able to nie'et'-ita 5 liability to depositors and bond-holders. ; . I' - 4 , The following be sub- , - .nutted at ■ an extraordinary general * meeting of ordinary-; shareholders, tho t date of which will be'notffied later:— : *' -."That;the ordinary 'share capital of ' * the New Zealand Fanners'- Co-operativo -i M Association of ; Canterbury, Limited, be :i reduced from •. £JBSO,OQO L.divided into V- ■' 3,70,000' ordinary; shares- of< ; £s 0s 0d > ileach, to. £ ■ dividody^|ol7o,ooo 'Ordinary., shares of .£4 5s Od Teach, and eduction be effected by W-'- 'i.<jan<ielling' paid-up"capital .which is unff.'. f Represented by available assets to the I' ■ ir Extent of .15s in respect of each of the s. ordinary share 3 «f the company, which MsvVe'en. issued,' and by reducing tho w shares .accordingly Jto &.;i|:u|bh 17>402 ordinary shares which have ftuly paid up,.and v %pon allun.of ; £2- sb : as at yrMdi liability «xdudes the sum fe ; of /8a per share called up by the comon the 30th day of May, 1925, and uuch reduction to be without prejudice 'i.'tb^the-company's right to sue for and / <outdf tho said l^-Vliha^s,'of} of'them.." . •: and shareholders:— .. first- preference T of : the Earmers' Co-operative