44
I am to state that except in so far as issues of this Prior Lien Deben- ture Stock may be required to meet the payments of interest and Sinking Fund on the 5 per cent. Guaranteed Debenture Stock to the extent that these payments cannot be met out of the gross income of the Company on revenue account, Their Lordships will not give Their approval in any of the matters specified above without the prior consent of the Secretary of State for the Colonies acting on behalf of the Government of the Federated Malay States.
(ii) Their Lordships undertake that any changes to be made in the Board of the Company shall be subject to the prior approval of the Secretary of State for the Colonies. This undertaking will not apply to the appoint- ment of the Treasury Director, though Their Lordships will inform the Secretary of State before any such appointment is made.
C. 82367/31 [No. 9].
No. 13.
I am, &c.,
R. V. NIND HOPKINS.
45
6. The Federated Malay States Government have. suggested by telegram* that a further stipulation should be added, namely, that there should be in Malaya a local Advisory Board or, preferably, a local Board of Management. Lord Passfield has not been able in the time available, to decide whether, and if so in what form, such a Board is desirable, but the probability of such a Board must be accepted as a part of the scheme.
7. It is a condition of assent to the scheme that the Directors shall supply the Treasury with full information as to what steps have already been taken or are being taken, and are contemplated, for the raising of the new money required. It will be noted that, under the scheme enclosed herewith, the arrangements for the placing and issue of the Prior Lien Debenture stock will be subject to the consent of the Treasury. Both Lord Passfield and the Treasury would desire to be consulted before any further steps, with the object of raising new money, are taken Information is also desired as to any steps taken or proposed in respect of arrangements with creditors, under which the latter will receive Prior Lien Stock in payment, or part payment, of their claims against the Company.
8. Lord Passfield will be glad to learn at an early date whether the Board accept the enclosed scheme of arrangement on the conditions set out in this letter.
COLONIAL OFFICE to THE PERAK RIVER HYDRO-ELECTRIC COMPANY
LIMITED.
[Answered by No. 14.]
Downing Street, 5th January, 1931.
SIE,
I AM directed by Lord Passfield to refer to your Confidential letter of the 4th December, 1930, and to the conference held on the 12th December, 1930, regarding the financial position of the Perak River Hydro-Electric Power Company Limited.
2. By the Confidential letter from this Office of the 3rd December,† the Board was informed that Lord Passfield saw no alternative to the appointment of a Receiver unless the Directors could put forward proposals for securing the necessary finance which did not depend on financial assistance from the Treasury or the Federated Malay States Government or the Colonial Development Fund.
3. At the conference held on the 12th December the Directors represented to Lord Passfield that they were able to secure the necessary finance, and suggested His Lordship's concurrence in the scheme of arrangement submitted to the Company by Messrs. Peat, Marwick, Mitchell and Company in their letter dated the 11th December, 1930. Lord Passfield stated that he was not in a position at the conference to indicate what answer he would be able to give, but undertook to give careful consideration to the suggested scheme.
4. Lord Passfield has examined the scheme in consultation with representatives of the Treasury and the Federated Malay States Government and, with their concur- rence, has decided that it cannot be accepted in its entirety. After careful considera- tion a revised scheme has been prepared, twelve copies of which are enclosed for the consideration of the Directors.
5. The Federated Malay States Government and the Treasury are prepared to consent to the adoption of this scheme on the following conditions:---
(1) The Chairman and all the Directors of the Company will write undated letters addressed to the Secretary of the Company containing their resigna- tions as Directors. These letters of resignation must be placed in the hands of the Treasury not later than the 10th instant. The Directors must undertake not to withdraw such resignation.
(2) The Treasury acting with the consent of the Federated Malay States Govern- ment will decide which of these resignations will be forwarded to the Secretary so as to become effective; and will use the resignations accord- ingly at such time or times as may be thought fit.
It is understood that two of the Directors will retire at the General Meeting and that the resignations of such of the others as may be leaving the Board will become effective at a later date. It is also understood that no addition to the Board will be made without the consent of the Treasury and the Federated Malay States Government.- It is proposed that the new Board shall consist of one Director to represent the Treasury. one Director to represent the Federated Malay States Government, and one or two others.
* C. 72367/A/30 [No. 134] not printed.
† No. 4.
No. 6.
Enclosure in No. 13.
SCHEME OF ARRANGEMENT.
I am, &c.
G. C. MILES.
(1) The holders of the 5 per cent. Guaranteed Stock
[See
No. 9].. 7 per cent. Participating Debenture Stock remain unpaid. Scheme ends. unpaid. Scheme ends.
C. 82367/31 [No. 16].
SIR,
No. 14.
THE PERAK RIVER HYDRO-ELECTRIC POWER COMPANY LIMITED
to
COLONIAL OFFICE.
3, Central Buildings, Westminster, S.W.1, 7th January, 1931. I AM desired by my Board to acknowledge receipt of your letter of the 5th January, containing proposals relating to the financial position of this Company.
2. The Board have carefully considered the terms of that letter and accept the proposed scheme of arrangement enclosed therein, on the conditions specified. doing so they desire me to submit for Lord Passfield's consideration the following observations.
3. At the end of paragraph 5 it is stated that:-
In
"It is proposed that the new Board shall consist of one Director to represent the Treasury, one Director to represent the Federated Malay States Government, and one or two others."
The Board are advised in this connexion that they have a responsibility, which they cannot disregard, to the 7 per cent. Debenture Stockholders and to the Ordinary Shareholders, who constitute between them two-fifths of the loan and share capital. to secure for them reasonable representation on the Board. The Board feel that no doubt Lord Passfield will be prepared to take this question into consideration when the reconstruction of the Board is being dealt with.
4. The Directors realize that the Government desire complete financial control and that consequently their nominees on the Board shall be in the majority. They desire me to point out, however, that of the total loan and share capital of approxi- mately £4,500,000, two-thirds has been subscribed by public money in London, and that the further amount now to be provided will likewise be there subscribed. It will be quite natural, therefore, for the subscribers of such a large amount of capital, namely, £3,000,000, to desire that an adequate Board shall be constituted in London.
+ No. 13.
* No. 8.
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C.O.882/12
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5.
46
With reference to paragraph 6 the Board feel that no step should be taken with regard to the appointment of a local board or the definition of its powers, if appointed, until after the London Board has been reconstituted and there has been opportunity to consider the whole question.
6. The Board will carefully bear in mind the conditions laid down in paragraph 7. 7. There is a financial point arising out of paragraph-5 of the scheme which it is desirable should be settled before the scheme is presented to the 7 per cent. Deben- ture Holders. This relates to the exact date upon which the Sinking Fund for the per cent. Participating Debenture Stock should commence. The Board, after con- sideration, would strongly recommend that the date for the first payment of that Sinking Fund should be the 31st July, 1940. The Board would be glad to have your formal consent to this.
7
8. The undated letters of resignation referred to in paragraph 5 (1) will be forwarded to the Treasury not later than the 10th instant in the terms desired. In this connexion two of the Directors, Sir Reginald Brade and Colonel B. C. Lockhart- Jervis, have already definitely resigned, and their resignations have been accepted by the Board.
C. 82367/31 (No. 30].
No. 15.
Yours, &c.,
D. C. BROOK,
Secretary.
A
47
(c) steps should be taken to make sure that at the meeting of shareholders nothing was done by Lord Elibank to tie the hands of the reconstituted Board. Lord Elibank's speech at the meeting should be approved by the Treasury and the Federated Malay States Government beforehand; (d) as soon as the new. Board is appointed, Mr. Balfour proposes to take immediate steps to reduce the staff in Malaya, and to make arrangements to place the London Office arrangements on a new and more economical basis. In particular, he had in mind that the fees at present payable to Directors should be halved; and that the Balfour-Beatty Organization should take over most of the London Office work.
4. The reconstituted Board should consist of say, four Directors including the Chairman. The Chairman would be Mr. Balfour with a Federated Malay States repre- sentative. Mr. Kilpatrick, representing the 7 per cent. Stockholders, and one other. Mr. Balfour would make suggestions for consideration by the two Governments as to who should be appointed to fill the last vacancy. This last appointment might, or might not be a Treasury Director. Mr. Bamford indicated that provided Mr. Balfour went on as Chairman, the Treasury might not consider it necessary to appoint a Treasury Director at present, but might leave the post open for the moment.
5. Mr. Bamford indicated that arrangements on the above lines would probably be acceptable to the Treasury, and Mr. Leonard stated that he would recommend that they should be accepted by the Federated Malav States Government. In order to get all parties agreed, however, as to the course of action to be taken. it was agreed that the Colonial Office should be approached with a view to a meeting between Lord Pass- field, Mr. Balfour, and representatives of the Treasury, and the Federated Malay States Government on the 2nd February next. At this meeting definite arrangements should be made on all outstanding points.
54
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PERAK RIVER HYDRO-ELECTRIC POWER CO. LTD. NOTE OF POINTS PROVISIONALLY AGREED at a Meeting on 13TH JANUARY, 1931, BETWEEN MR. Balfour, Mr. Sheaker, Mr. Leonard, and Mr. Bamford.
1. THE placing of the Prior Lien issue to be left to the reconstituted Board after the Shareholders' Meeting. Mr. Balfour understood that barring some abnormal collapse, he would arrange the placing of the Prior Liens on terms at least as favour- able as those now proposed by the Company. Mr. Balfour indicated that he had in mind the possibility of raising the monies immediately required on a Bank loan secured by the issue of Prior Liens as collateral.
2. It was agreed that it followed necessarily from a decision to postpone the Prior Lien issue that the Funds in the hands of the Company out of the £850,000 Loan should be utilized temporarily to meet interest and Sinking Fund on the 5 per cent. Guaranteed Stock at 1st February. Mr. Leonard stated that he saw no objection to such an arrangement. (To meet the Guaranteed Loan Sinking Fund out of the £850,000 will probably require an alteration of the present Deed of Charge which presumably can be done by an exchange of letters between the Company and the Federated Malay States Government).
3. With regard to the reconstitution of the Board it was agreed that Mr. Balfour should be asked by the Treasury and the Federated Malay States Government to go on the Board as Chairman. Mr. Balfour stated that if this invitation were extended to him, he would accept, but that he wished to make it clear that the new Board should start with a completely free hand. His conditions for effective working under the regime were as follows:-
(a) none of the existing Directors should remain except Mr. Kilpatrick, who would be regarded as representing the 7 per cent. Debenture Stockholders Mr. Balfour did not feel able to work with Lord Elibank left on the Board even temporarily. There should accordingly be a clear sweep before Mr. Balfour took over;
(b) on the question of appointing the Crown Agents as the Perak Company's buying agency, Mr. Balfour felt that he could only accept the appoint- ment if the two Governments trusted his discretion, and gave him a free hand to buy in the cheapest market. If he was satisfied that facilities offered by the Crown Agents were advantageous he would not hesitate to make use of them. Mr. Leonard stated that the buying arrangements for the Company were still in the hands of Lord Elibank's subsidiary Com- pany, and were not at present carried out by the Crown Agents;
C. 82367/31 [No. 40].
No. 16.
MR. E. ST. J. BAMFORD) (TRADE FACILITIES ACT ADVISORY COMMITTEE)
DEAR GRINDLE,
to
SIR G. GRINDLE (COLONIAL Office).
Trade Facilities Act Advisory Committee, Treasury Chambers,
Whitehall, S.W.1, 16th January, 1931.
I ENCLOSE for your information copy of a note I have drawn up of the arrangements we made to-day about the Prior Liens, together with a copy of Balfour's letter.
I have asked Baird to let me have a copy of Counsel's Opinion, and I will send this on to you in due course.
I told Balfour of what you were saying to Elibank about Meston, and he quite agreed. What he envisages is that the Directors' resignations will take effect seriatim > and that during the period before they resign they will be at the call of the reconstituted Board, i.e., they will not attend unless specially summoned. They will, however, draw their fees up to the date of resignation. I am sure that we shall be able to make satisfactory arrangements on these lines.
Yours, &c.,
Enclosure 1 in No. 16.
E. ST. J. BAMFORD.
PERAK RIVER HYDRO-ELECTRIC POWER COMPANY LIMITED.
Note of Arrangements with Regard to Prior Liens Agreed between the Colonial Office and the Treasury on 16th January, 1931.
1. Ar a meeting at the Colonial Office on 15th January, 1931, Mr. Leonard on behalf of the Federated Malay States Government agreed to leave it open for the decision of the Treasury and the Colonial Office whether Prior Lien Debenture Stock should be issued at once on the terms arranged by Mr. Kilpatrick, or whether arrange-