RURAL CREDITS ACT

Sun (Auckland), Volume II, Issue 359, 21 May 1928, Page 12

RURAL CREDITS ACT

ASSOCIATION’S LIABILITIES (Special to THE SUN) TE AROHA, To-day. A question as to whether in the event of the liquidation of the Rural Intermediate Credit Board each association’s assets would be separately covered; and whether the share capital of a co-operative rural intermediate credit association could be used to cover the liabilities of the board, was raised at a meeting of Te Aroha farmers last week. It was referred to the commission, who has replied to Mr. C. E. MacMillan, M.P. The commissioner says section 48 of the Act contemplates that the relation between an association and the board will be that the board is a secured creditor of the association, the intention being that each member of the association will borrow from the association the amount which it requires to lend to its members. The moneys advanced by the board will be secured by an actual assignment to the board of the security given by each member to the association, and also by one debenture given by the association to the board when

the first advance is made to the association, creating a floating charge over all its assets to secure present and future advances. The position will therefore be that, in the event of the beard going into liquidation, which contingency is remote, the liquidator of the board’s assets will be legally bound to reassign to the association all the securities held by the board, upon receiving from the association the amount to which the association is indebted to the board. The liquidator will also, on receiving such payment, have to discharge the debentures given by the association to the board. “It is thus quite clear,” concludes the letter, “that the only circumstances in which an association would have to call up its share capital from its members would be for the purpose of meeting its own liabilities to the board, and that its members are in no way responsible for the general liabilities of the board.” ( 1 j j