In January the addresses were to the effect that so and so would be done, and among other things it was indicated that no par value shares would be done away with. May I ask the Secretary of State what he thinks personally about it. Was he of the opinion that they should be abolished?
recommendations of the price spreads commission would be given effect to. I assumed, as I said the other day, that they would be within the law, and to the extent that we are advised they are we have endeavoured to give effect to them. The commission put no par value shares in the alternative. Had they suggested, as 1 understood the views of many of the commission were, that they should be abolished, certainly it would have been so found.
I do not think that is the effect of the bill. That is only as it applies to capital paid in before the passing of this legislation. It is possible under this legislation for part of the capital to be carried to distributable surplus.
No. I think I can assure my hon. friend that the process, which has been carried on whereby from time to time directors, with the approval of a majority of the shareholders-I think it is a three-quarter majority-can set aside as distributable surplus that which has been received as capital, is abolished.
Section 2 commencing at line 15 on page 2 of the bill reads:
And in fixing the amount of such consideration, the board, subject to the provisions of this part, may provide in the contract of subscription for such shares that the consideration received therefor shall be deemed to be capital, excepting a part, if any, not exceeding twenty-five per centum thereon, which shall be set aside as distributable surplus.
It is not then received as capital at all. Under this bill if it becomes law, it will be impossible for a company to set aside as distributable surplus anything which it has received as capital; but in the initial subscription it may make a contract with its subscriber as to what part of the consideration shall apply to capital, and that a certain percentage may apply as distributable surplus, not necessarily for dividends but for carrying on the company without impairment of its capital, because this percentage is no longer capital. I think this bill under the circumstances goes very far in the way of reform. We have abolished this practice which has been going on with regard to setting aside from time to time a certain portion of the capital of the company as distributable surplus.
In early times I believe there were certain fixed assets that were set aside as distribut-
Companies Act Amendment
able surplus, but under the regulations which have prevailed in the department for a number of years now, nothing can be set aside as distributable surplus except it be a portion of the liquid, realizable assets. I think we have gone a long way in reform by providing that if a shareholder wishes to put up, in addition to his subscription to capital, a certain sum as distributable surplus to ensure the stability of the company, we will not prohibit him. I douibt if we could. I think that, if I am a shareholder of a company, it would be very difficult to prohibit me from making a contribution to its treasury to enable it to carry on whether the company called that contribution distributable surplus or anything else. I think the hon. gentleman will find we are going a very long way to meet the views of the commission.
2 should be "more." How it got in in that form I do not know. I think the clause should read:
In no case shall any shares, whether common or preferred, or whether with or without nominal or par value, be issued and allotted as fully or partly paid up for more than what may justly be deemed to be-
I fancy in an early draft, that was drafted in another way and the word "less" was retained inadvertently. I suggest that the change I have indicated should be made.
I cannot agree with the minister. The clause reads:
In no case shall any shares, whether common or preferred, or whether with or without nominal or par value, be issued and allotted as fully or partly paid up for less than what may justly be deemed in all the circumstances of the case adequate consideration therefor.
As it reads now, it means that the company is not able to issue shares unless they have been paid for. According to my interpretation the word should be "less" instead of "more."
There is just one other question in connection with the section. It reads:
For less than what may justly be deemed in all the circumstances of the case adequate consideration therefor in cash, property or services.
Then in section 96B, under section 15 of the bill at page 9 these words are used:
It shall not be lawful for the directors or promoters of a company to authorize the issue and allotment of any shares of the capital stock of the company as fully paid up unless the company receives, or is to receive what may justly be deemed, in all the circumstances of the case, adequate consideration therefor in cash, property or services.
Just taking those two sections together, I am wondering whether, under section 5 when reference is made to adequate consideration in services, that may be services to be rendered as referred to in the new section 96B, because it seems to me that section 96B will have to be changed, as under the section as I read it no company is able to issue shares for services to be rendered in futurity.