TIGHTENING UP.

Taranaki Daily News, 23 June 1920, Page 5

TIGHTENING UP.

BANKS AND DAIRY FACTORIES. AN IMPORTANT DECISION. (By Telegraph.—Special Reporter.)' i Palmerston North, Last Night. The associated banks recently decided that any new dairy factory company being formed, or any existing company, requiring further accommodation in connection with land t buildings, and equipment must at the outset put up 2r> per cent, in cash before a bank will make an advance. The following provisions in regard to subscribed capital, depreciation, and annual reductions were ako mnde:— Capital to be subscribed to the extent of at least two-thirds of the amount of the advance asked, and that this proposition be maintained of the issue of further shares if the bank advance should subsequently be increased. Before the distribution of the year's profits, depreciation be written off all assets to the extent of at least the amount permitted by the income tax department to ordinary companies doing similar business. Tip is at present 5 per cent, on power driven plant and machinery, 2J on truck and 4 per cent, on wooden buildings. The amount so written off is to be applied in the permanent reduction of the overdraft limit. That as long as the company is indebted to the bank there should bo withheld from distribution to the suppliers at least Id per lb. of butter-fat supplied. This is to be cither applied in payment of the suppliers' liability for unpaid capital, or written off the companies' assets (in addition to the depreciation), or credited to a reserve fund, or some internal account. Thus if a farthing per lb. is being held from the milk money and being credited to the suppliers share accounts, Jd is to be held back before payment of the bonUB. All accounts to be secured bv joint and several guarantees of suppliers, and by security over all the assets of the company. Existing companies rearranging their capital or reconstructing are to be required to do so on a basis not less adequate than that laid down for new companies. Touching on this, the president of the National Dairy Association (Mr. A. Morton) said to-day at the conference that unless the conditions were made easier they would have a serious effect on the dairy industry. ' They were such that would make it almost impossible for small communities in a scattered backblocks district to erect and equip factories. It would not be so difficult in the case of factories in a good financial position to make alterations or additions, but those not so sound would have exceeding difficulty. Mr. Marx (Mangatoki) thought they had leaned too much on the banks in the past. While the conditions were to some extent unreasonable, he thought it was the best thing that could have happened. Had factories placed a J / 2 d per lb. to reserve in past years they would have been in a much better position.