Secretary of State used the word " affected," and if that word were here I should be satisfied. I am pleased to move therefore that the words " dealt with " be struck out and the word " affected " be substituted therefor after the word " thereby."
I suggest that there will be some difficulty if you make that substitution. There is this difference: "shares dealt with" means the shares referred to in the subclause; "shares affected" might be other shares that might be affected. The change suggested is a dangerous one. The subclause had better be left alone.
I think the words "dealt with" are really more specific; in my statement I used the word "affected," but there has to be the vote of two-thirds of the shares dealt with in the reorganization. I would like to meet the hon. gentleman's wishes.
In the case I mentioned, which shares would the Secretary of State say were being dealt with-the common stock or the preferred shares? I would submit in the case I mentioned the preferred shares are not dealt with but they are affected.
They were certainly dealt with in the reorganization of the company. The hon. member was complaining that although the preferred shares were dealt with, the preferred shareholders did not have a vote. All I say to the hon. gentleman is this, that in drafting legislation each draftsman prefers his own words as he is accustomed to use them and it is very difficult to find words which are acceptable to all parties. I think on reflection the words "dealt with" are probably well selected. I am not obstinate about this matter; I am subject to the approval of hon. members of the legal profession but their real safeguard in this is that no scheme of that kind can get through unless it is authorized by a by-law which has been confirmed by the vote of two-thirds majority of each class of shares thereby dealt with. I think "dealt with" is the proper term because there may be classes of shares which are not dealt with and the holders of which have therefor no interest in attending a special general meeting for the purpose of confirming the by-law. I prefer the words "dealt with," but I am in the judgment of the committee.
Would the minister tell us what is the practice of his department in just such a case as has been set forth by my hon. friend opposite? If voting power is not given to the preferred shareholders until a certain contingency arises in the way of passed dividends and if before that happens an application of the common shareholders comes before the department for an increase in the number of shares or a subdivision of them, would the department consider the application of the shareholders who have the right to vote?
The object of this clause is this: although the by-laws of the company provide that preferred shareholders shall vote only in certain contingencies, and although this may not be one of the contingencies under which they would ordinarily vote, I wish to provide in this clause that they shall have a vote for this particular confirmation, and that if two-thirds of them do not vote for this particular purpose, then the Secretary of State would not even consider their petition. as after all that is done, they have to petition for supplementary letters patent when the whole matter must be reviewed by the Secretary of State before such supplementary letters patent are granted.
Just a moment. I was going to ask the Secretary of State: Can it be said that in the case I mentioned the preferred shares are being dealt with? They are affected but in my opinion they are not dealt with; the only shares that are dealt with are the common shares. Could the matter be handled in this way-"thereby dealt with or affected"?
I do not keep in mind the particular case referred to by the hon. gentleman and I do not think I should be asked to give an opinion as to the effect of a reconstruction under another companies act with which I am not familiar and one which has not come to my attention.
like to make an observation. Anything that will be detrimental to the reorganization of companies now in difficulties and undergoing reorganization, short of providing against fraud and that sort of thing, ought not to be imposed in this clause. That is a sound principle. Parties engaged in reorganization of companies have to meet very difficult situations; they weigh the balance of equity as between different classes of shareholders and they make the best proposal that can be put forward having regard to all interests. If you impose too many obstacles, you just make the burden that much greater in the effort to put a company back on its feet. If the provision is for another purpose, for preventing manipulation of shares for gain, that is a horse of another colour.
It seems to me that in this clause provision is made against what happened in the case to which the hon. member for Last Mountain referred. In that particular case 3,000 shares of common stock of a par value of S100 each were changed into 15,000 shares of no par value. The original incorporation of the company called for 4,500 preferred shares of S100 each with a provision that when dividends on the preferred stock became in arrears for one year the preferred shareholders then had a vote in the management of the affairs of the company.