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5.
Against a rate being fixed it is argued that where
part of the Companies' assets have been lost or destroyed a
conversion at the fixed rate might require, to set the Companies'
finances in order, a subsequent application for a reduction of
capital even though the conversion and reduction in capital
constituted in the final result an increase in capital in view
of the present low value of the Chinese dollar. Further, it
is pointed out that so long as the conversion constitutes
virtually an increase and not in fact a reduction of capital
there is no justifiable reason for interfering with the
Company's own discretion as to the extent to which its capital
should be increased. To do otherwise, in fact, would be to
encourage Companies to give their shareholders and the general
public a false impression as to their Companies' accounts and
finances. It has accordingly been suggested that a Company'
should be allowed to convert its capital so long as such
conversion will not in fact amount to a reduction and provided
that the Company produces and files a certificate by the Directors
and the Company's auditors to the effect that a conversion at
the rate proposed is justified by the assets and liabilities of
the Company as existing at the date of the conversion.
advised that with the exceptions referred to in paragraph 8 of
this despatch, this suggestion is reasonable. If, however,
you are still of the opinion that a rate should be fixed, I am
advised that it would be sufficient to prescribe that the rate
should be one not less advantageous to the value of the Chinese
dollar than that prevailing on the date of the conversion.
6.
I am
In those cases where ordinary shares only have been
issued by the Company, it would not appear unreasonable that
the conversion should take place at such rate as the Directors
themselves by resolution appoint without the necessity of
calling formal meetings of shareholders at an extraordinary
meeting. It is felt that so long as the conversion does not
amount to a reduction, creditors and shareholders of the Company