COMPANY LAW

Dominion, Volume 28, Issue 107, 30 January 1935, Page 10

COMPANY LAW

Investments Bureau Proposal MORE INQUIRY URGED Attitude of Chamber of Commerce The opinion that it would be most unwise to put into effect recommendations contained in the final report of the Company Promotion Commission until .they had been subjected to far more searching criticism than they had yet received, was. expressed by the 'chamber’s legislation committee, in a report presented to and adopted* hy (lie council of the Wellington Chamber of Commerce last night. The committee considered that before such proposals were presented to Parliament they should at least be referred to the special.committee of representative interests responsible for the preparation of the comprehensive amendment of the company law in 1933. The report of the legislation committee was , presented by its chairman. Mr. T. L. Ward. “The final report of the Commission of Inquiry into company promotion methods, etc., issued towards the close of last year,” says the report, “contains recommendations for the further control by legislation of companies and stock exchanges in New Zealand and the establishment of a bureau to be known as the Corporate Investments Bureau. It is suggested that this bureau be administered by a controller and a council of three members nominated by the New Zealand Law Society, the New’ Zealand Society of ' Accountants, and the New Zeaiand Stock Exchange Association respectively and appointed by the Gov-ernor-General in Council. "That this bureau is to be invested with very wide powers, is evident from the summary of its functions, powers and duties contained in the summary of the commission's report. The comjnission’s report has not previously been referred to Ibis committee for consideration of its recommendations, and no considered opinion can be given by the legislation committee in regard to them, but quite recently information was received that it was likely an attempt would be made to have the recommendations of the commission put into effect by Parliament early in the next session. Bureaucratic Control. “This committee;" the report proceeds, “joins in lhe general tribute which hits been paid to the commissioners for (lie industry and ability displayed in their report and recognises that any recommendations which they have seen fit to make cannot be lightly dismissed, but are entitled to receive the fullest consideration. In view, however, of the serious consequences that might result from the far-reai-hing effects of the proposed legislation, in directions other than those intended, this committee is definitely of the opinion that it would be most unwise to put into effect the recommendations of this commission before they have been subjected to far more searching criticism than they have yet received. No one will question the wisdom of legislation, that is proved to be necessary in order to bring men guilty of gross malpractices before our courts of law which are charged with the administration of justice, but there is a very real distinction between the passing of laws that create bureaucratic control and the passing of laws, to make certain malpractices criminal offences. “In the past amendments to the law of companies have been regarded both in England and New Zealand as being of sufficient importance to demand the most careful consideration before being put into effect by law. Before the passing of the last Imperial Statute of 1929,. the British Government sought the advice of a committee specially selected from leaders in the commercial, legal and accountancy world in Expand, and in New Zealand similar safeguards were adopted by our own Government before the passing of the Companies Act, 1933, which came into operation loss’ than a year ago. The passing of liiis statute in New Zea la ml brought our company law very large y into line with company law in England, and constituted a step forward towai;ds the ideal of co-ordination of company law throughout the British Commonwealth. “Light on Dark Places.”

"It is suggested that as a result of the light which lias already been turned on to dark places and the publicity which has recently been given to tiie practices oE some company promoters. the public of New Zealand are likely for the next: year or two at any rate to exercise more care before venturing their capital or savings in investments which profess to offer unusually attractive prospects for future profits' or high rates of interest. The year or two suggested would afford a valuable interval during which to recover our equilibrium, after the shock of the recent disclosures, and enable us to avoid the grave mistake of passing what may pqjhaps be characterised as ‘panic’ legislation. "It may be that in the case of those companies referred to in the commission’s report as ‘laud-utilisation companies’ a situation has arisen that is peculiar to New Zealand, and which calls for special treatment. A draft Bill, entitled ’The Land-Utilisation Companies Empowering Bill. IH3-I,’ is included in' the commission's report. This Bill provides for the appointment by the Governor-General of a commission of three persons 'to be called The Land-Utilisation Companies Commission, which shall have and may from time to time exercise the jurisdiction and powers conferred upon it by this Act.’ x Law I nto Itself. ■■'t'lie powers conferred on (his commission by the Bill are so complete that, once constituted, it would be a law unto itself, as there is apparently no provision made in the Bill for any appeal from its decisions. Its proceedings are to be conducted on ‘star chamber’ methods as they ‘shall not be open to the public or to the Press and no report or account of the evidence or other proceedings before it shall be published save with the consent of the commission.’ It is possible under the Bill for supreme power to be exercised by a single individual, the chairman.” "This Bill would, in our opinion, qreate bureaucratic control of the most extreme type. It affords a striking illustration of the usurpation by bureaucracy of the functions of the administration of justice whiel.i should lie entrusted only Io our courts of law.” The committee, said Mr. Ward, had carried the following resolution: "The legislation committee of the Welling-

ton Chamber of Commerce is of opinion that, (a) any proposals for amendment Of the Companies Act, 1933, should be referred to tlie special committee to which was referred, the preparation of the 1933 Legislation; and (b) before any such amending proposal are presented to Parliament, such proposals should be' reported upon by that special committee.” General Principles First. In moving the adoption of Hie report Air. AVard said the fact that there had been trouble in connection with'certain companies was quite secondary to the general principles involved. The fundamental principle of the legislation was bail. Mr. J. 11. Aleyer seconded the adoption of the report. Great credit, lie said, was due to tlie legislation committee and Air. AVard. "The question is one of the utmost importance to the future of commercial life in New Zealand,” said the chairman, Air. AL G. C. AleCaul, who presided in tlie absence, of tlie president, Air. D. J. AlcGowan. The encroachment of Government on the privileges of Hie people, he added, was exercising the miiids of thoughtful men. The latest proposal would give to a small body of men powers which appeared to him unduly wide and not altogether safe. Air. P. E. Pattrick said lie took it that the committee bad recommended that the council should pass the resolution expressing the opinion that before any definite action were taken the proposals should be carefully examined. If that were so the report had his support. Aleutian was made by Air. A. beed of the position of afforestation companies. He stated that these were now reaching a stage where under the original intention of tlie promoters the original organisation would be jettisoned to the bondholders, who constituted the real shareholders, without there being any machinery for them lo manage their allairs. lie thought legislation was necessary to enable the bondholders to carry on the work commenced by .the parent companies. All Penalised for Few. Mr. J. Pearce Luke said that 99 per cent, of the public was going lo be penalised because a few had done something that was wrong. These people should be dealt with by a court of law and not by any bureau. The establishment of a bureau would lead to a worse state-of affairs than there existed at the present time. . q Replying to tlie discussion, Air. AVard said a'distinction must be drawn between genea icrlrplesivbgqkj vbgkqoo tween general principles and particular cases. Attention should be called to legislation which was so seriously deficient in general principles. If they were going to alter the Companies Act they were going to do something far more serious than they could comprehend. for I hey bad now reached the stage when they had obtained practically complete co-ordination with English law, and that was a distinct advantage to New Zealand. In attempting to put right some little trouble infinitely more harm might be done in cl her directions. The report was then adopted.