N.Z. DAIRY CO.

Franklin Times, Volume 9, Issue 652, 22 July 1921, Page 6

N.Z. DAIRY CO.

THE NEW ARTICLES. PAYMENTS AND RETURNS. (By W. A. Leonard, 8.A., A.P.A., N.Z.) There has always been a strong conviction in the minds of dairy farmers that in the matters of calls and payments every supplier should be treated alike. It has often been stated among shareholders that their company could not single out one man and make h'm pay fill to the exclusion of all others. But in this connection it is necessary for suppliers to consider carefully arjtiele 12 which gives the directors power to exempt certain persons from the obligation to become- shareholders, and article 25 under the heading of calls gives the authority to “call up the balance due by any member upon his share without the necessity of making a similar call on all or on any of the other shareholders.”

“Will St Be Me?”

This is a condition that few suppliers will be prepared to concede, and it is difficult to understand the reason which prompted the directors to insert the article. Why should “one” be called upon to pay and another let off. The question naturally arises in the minds of every supplier, Who. will be the first singled out; will it be me? and for what reason. There is no qualifying condition as to why this measure should be enforced but there it is plainly stated, notwithstanding any rule or law to the contrary.” It is manifestly an unfair enactment and as it is difficult to amend it to make it fair' and impartial, the best thing to (lo with it is to delete it altogether.

Payment and Returns,

Under these headings articles' 162I 168, which are very lengthy, directors j are given very wide discretionary J powers. The selling or marketing of the company’s products is done “ as the directors shall in their uncontrolled discretion consider advisable." and the. gross returns ' arising from the disposition of the aforesaid products shall at the time or times most suitable to the directors be dealt with and applied in accordance with the sub-clause of article 162. It is not at all clear, as to what is meant by the time or times most suitable to the directors, but the inference is obviously “The returns from consignments or sales may be held over from month to month if the directors think it advisable that such returns should not be dealt with.” But article 164 makes it clear that the intention is to submit an annual statement of sales on May 31 in each year. The sub-clause of article 162 enumer- [ ate the deductions to be made from ' tne gross returns. The list is a lengthy one and there is not much omitted and by the time the last line of clause “b” is reached one is left wondering where the share capital is used. Sub-clause “e” provides for “reserve funds, contingencies, etc., bonus on shares, etc., or such other purposes as the directors may think fit.”

Article 163.

[ Article 163 and its sub-clauses i“a” i to “d” govern .the method of calculat- ! ing and making progress payments on ) account of milk, cream, butter-fat or other products supplied to the company and that such progress? payments shall be made on the 20th of each month, but if the directors deem it advisable they have power | to refrain from making progress payI ments in any month or months. Article 164 is of great interest to | every supplier. 'lt deals with the i payment of the bonus—a burning question at the present time. When | arc we going to get our bonus? The i answer is, consult article 164. The financial year of the company ends on May 31 and at that date the acj counts of expenditure and returns j are made up. If the progress pay- ; merits have not absorbed all the- pro- | ceeds of sales “the directors shall I make in the month of September or I such other times as they may deteri mine,” a final payment whether by I instalments or otherwise.” Thus the ! supplier may reasonably expect at | least an instalment of the final pay- ' ment in September, but the article ; leaves the way open for the directors ■ to delay payment indefinitely. Is it j likely that supplier shareholders will ! agree to this? There should be some * “time limit” for the final payment * and to secure this an amendment to j article 164 is required. I suggest that j after the word “hereof” the followI ing should be inserted: “But such ' final payment as above-mentioned, if | pot made in the month of September, : shaii be paid by the company within 12 months of May 31 of the year in which such payment was earned.” Tins clause would assure the share- j holder that he would get his final payment within 12 months of the end «f the financial year and it would iij-v the directors a. long enough period to make ail adjnstemnts neces- .

sary to clear up the previous year’s transactions. Article 166. Article 166 refers to any surplus resulting from the operations connected with any class or group of shares issued by the company and from such surplus the directors may set aside any sum they may think proper. This is another article which requires more explanation from the directors. The manner in which surplus accounts were dealt with, in the 1920-21 balance sheet gave rise to a good deal of dissatisfaction. Some groups had substantial profits, others had no profit. The profits were transferred to the “coal property account,” which meant that certain factories contributed several hundreds of pounds to the coal field venture and others contributed nothing. There may be some valid reason for the procedure referred to, but the shareholders have been kept in the dark about it, hence the discontent.. Misunderstanding might be avoided by the accounts give clearer information and to this shareholders .are entitled.

Last Year’s “Surplus.”

It appears t© the writer from the information available that the methods of appropriating the surplus last year might be modified in the following way:—Taking it for granted that the directors require the surplus for capital and that, say, Te Kuiti casein factory has a sum of £3OO to the credit of its group of shareholders, the company should issue pro rata to the shareholders paid up shares to the value of the amount of £3OO, thus relieving that group cf the necessity of taking up new shares of the same value. Such a method would compensate the group which earned the surplus, whereas last year’s method penalised it.

The liability of the company to payincome tax is avoided by article 168 which ensures the distribution among the shareholders of the whole of the net surplus income of the company.