FINANCE-PUBLIC AND PE ATE
AMENDING THE COMPANY LAW
By ARTHUR W. KIDDY.
NOT by any means for:the 'first cline, certain_reforms are- contemplated in the Law affecting Public Companies. Probably few among the general public are aware of the infinite pains which have - been taken • from- tune iminemO-rial to protect the investor 'against lcses,in so tar'as it is possible to do so, by the framing of laws de- signed to prevent unscrupulous company promoters and others from Setting -.traps for „the unwary. It is true-. that experiebceluis shown - how difficult it is to make the mesh fine enough to keep out those who would prey upon their fellow-men, either through the specious prospectus Or some other financial device, but nevertheless it is also true that, thanks very, largely to successive amend- ments of the Companies Acts, financial losses by the; investor are becornalg fewer and Certainly the protective: barrieiS have been constantly strengthened within recent years. • '
GENERAL STANDARD SATISFACTORY.
Indeed, I am glad to note that in the Report which has just been issued by the Company Law Amendments' Committee, the members testify -unanimously to the fact "that the great Majority of liMited companies, both Public and Private,- are honestly and :conscientiously managed. Cases in which fraud or lesser forms of dis- honesty or improper dealings occur are comparatively few, and the public interest which such cases naturally - arouse tends to divert the attention from the vast number Of honestly conducted concerns; and to create an exag- gerated idea of the evils connected with limited com- panies, and their activities."
:A -PRACTICAL REPORT.
Nevertheless, with the passing- of time, defects are almost inevitably detected in our Company Laws and the Committee - recently appointed by the Board of Trade to consider What amendments are desirable in the Companies Acts have produced a thorOugliIY.practical Report. Indeed, it is generally understood - that the Government is prepared to accept the Committee's proposals and therefore it seems likely that an Amending Bill may be introduced in thepresent sesSion Of -Parlia- ment .._ *any; if not mast, of the Committee's recoth mend ations are Of a very technical and "seVerely legal character and I propose, therefore, only to refer to one Or two with which the general public is mOre2paitienlarly concerned, and these recommendations tiaye; for the most part, to do with the published prospectus. , ' PROSPECTUSES AND THE PUBLIe.
It is, I am afraid, a regrettable fact that in spite the care which has been taken to safeguard the invistot in the matter of carefully defining the provisions of a prospectus, that important document is :Often far too hurriedly perused by the intending applicant.:In "boom" times especially, there is far more. anxiety as to whether the shares are likely to go to a big premium than to weigh carefully the statements iii thC proipectus, and see whether they are of a charactet justifying /con fidence in the proposals. Of course, true that-even in the case of companies where the prosPectusilat fulfilled all requirements, misfortune may still befall the,company, but I think it is more often true that in the case of those ; companies where there has been d speedy-collapse it will be found-that a more careful perusal Ofthe prospectus would have made the investor hesitate before parting with his CashV - - THE "OFFER FbR • " There is one partieular form of prospectus Concerning which the Committee on Amending the Company Laws has made • some important recommendations. It is the prospectus comprising What is known at " an "offer for sale.' In the -case of the prospectuses of most public loans, or issue of company's shares, the proposals consist of a direct request- from the Government, Cor- poration or Company, for capital from the investor Sometimes, however, a loan or an issue of capital is sold privately and the individual or the institution acquiring it resells the same to the general public and this is called "an offer for Sale.". There is nothing in the transaction that is inherently- incorrect. in any way• and the reader must not suppose -that an " offer for sale " may not constitute quite as _attractive an in Vestment as the direct issue by the original company. For certain reasons; .however,-. into which it is not necessary to enter, the requirements -of-the law. with- regard to these offers for .sale are somewhat ,less exacting than in the case of - the ordinary prospectus. A certain amount of detailed information which insisted- Upon- in the general pros- pectus-may be- omitted from the :offer for sale" and in some instances there • are good reaSons • for the greater latitude. As usually • hap,pens; howe Cr, ,in- such cases, the latitude is . sometimes abused, and sometitnesiot often, perhaps—refuge is sought in the "offer for sale" method to Offer securities in a- forth- where the require-. mentS of the Jaw are less :exacting • with regard tothe detailed hit's:in-nation:. 2 "Therefore; the Committee has made: recommendations that .where the resale is effected within a brief period of the first purchase or acquirement by' the Middleman, 'practically all the requirements incidental to the ordinary general prospectus should be insisted upon. The proposal is manifestly intended, not to check the legitimate use of the • offer for sale prospectus,' "hilt its occasional. abuse.
SHARE "HAWKING."
Again, some practical recommendations are made with regard to rendering it impossible for undischarged bankrupts to act as directors of public companies, while a recommendation is made with regard to private com- panies and also its regards what is sometimes described as "share hawking." This latter point refers, of course, to the offers of shares made broadcast by letter or by personal hawking from. house to house. With regard to the .actual personal hawking of shares by house to house calle s, the Committee recommend that the same shall be made an offence punishable on summary con- viction by a heavy fine or in the ease of a second or sub- sequent offence by imprisonment. With regard to the hawking by circular, the recommendations are chiefly in the nature of requiring such circulars to give a vast amount of explicit information. • ' - A FURTHER RECOMMENDATION.
Finally, although to some the- point may seem to be a small one, I am glad to note that the Committee recom- mend "that no company •should, without the consent of the Board of Trade, be registered with a name including the words" Royal " or " Imperial," orthe words" Bank" or " Banking. :Especially, perhaps, as regards the term " Bank'. a good dealof trouble has-been occasioned in the past by. the ,very ,free. and loose use of the term.
Previous page
