The Treasurer asks for advice on the questions raised in the following letter by Messrs Snowball and Kaufmann:

We have had a difficulty in advising our clients on their rights and duties under Statutory Rules 49D of 1916 No.ll:

1. A company registered several months previously with a nominal capital of £100,000 has been from time to time selling and allotting its shares and has now issued about half its authorised shares.

Further applications have been received, but the doubt has arisen that they are prohibited from allotting any further share as by so doing they may be guilty of 'raising capital by means of the issue of shares'.

Personally we are of opinion that the original issue having been authorised the balance of shares can be issued.

2. A registered company requiring time for payment of a debt proposes to give its creditor debentures as security to cover its debt to him.

We take it that the company here is not 'raising capital by the issue of debentures', but is staving off the payment of a present indebtedness.

3. A firm is being pressed for the liquidation of an existing mortgage and for that purpose proposes to grant another mortgage and with the proceeds of the new mortgage pay off the existing mortgage.

This we take to be simply changing the secured creditor-without increasing the capital.

4. A firm is being pressed for payment of a large debt [and for that purpose proposes to] raise funds for payment of the debt by mortgaging its land. On this point we have been unable to advise.

We humbly ask that you will kindly inform us what we may lawfully do in the above cases.

1. War Precautions Regulation 49D forbids a company, without the consent of the Treasurer, to 'raise capital by means of the issue of shares, debentures or bonds, or in any other manner'.

In my opinion this regulation extends to the issue of shares notwithstanding that the issue had been authorised prior to the passing of the regulation.

In my opinion the issue of debentures, to an unsecured debtor, in the manner mentioned amounts to the raising of capital within the meaning of the regulation. (3 and 4) I do not think that the mortgage transactions mentioned are a raising of capital.

[Vol. 14, p. 269]