Preferences

Morris Hedstrom Preferences To Get Full 6 Per Cent.

From Our Own Correspondent SUVA, March 20. rE holders of Morris, Hedstrom, Ltd., 219,206 fully paid £1 preference shares, last quoted at 23/6 in Sydney, are henceforth to get their 6 per cent, free of tax.

Although the terms of their issue did not entitle the company to deduct tax, the Colony’s 1921 Income Tax Ordinance provided that companies should deduct tax—that is, at the rate for companies— from their preference share dividends unless the conditions governing the issue of the shares provided to the contrary.

This provision enabled Morris, Hed strom, Ltd., to reimburse itself propor tionately from its preference share divi dends, to the benefit, of course, of its ordinary shareholders.

In December last the law was altered to provide that nothing in the Ordinance should be construed to prevent a com pany from deducting tax from dividends payable to shareholders or to a particu lar class of shareholders.

Being doubtful as to whether to pay the preference shareholders their 6 per cent, dividends less tax, or tax free, the directors recently called in the lawyers and 'a friendly action was accordingly staged between the preference and ordi nary shareholders and the company.

The Court has decided that as the law now is, “the company is neither obliged nor has it the power to deduct income tax from the dividends of its preference shareholders.” The Chief Justice Sir Claud Seton, MC, heard the argument.

There is some local speculation as to whether the company will pay off the £219,206 preference share capital out of its abundant funds; but it is doubtful whether the directors have the power to do this, even if they wished.

MH ordinary shares are under a “ceil ing” of 30/- in Australia; but they have sold lately in New Zealand at 55/-.