In the first place, the company has no knowledge of each individual slockholder's income for tax purposes Secondly, were the company to ask the stockholders to disclose this. information, many of them would refuse and, as regards those who did not refuse, it would be found that the actual rate of tax payable would vary almost with each stockholder owing to the different reliefs to which the individual stockholders would be entitled and to the different rates of sur-tax which they would be lable to pay-For all practical purposes, there fore, there were only two alternatives which could be adopted:
To issue to the Preference stockholders Funded income stock to a nominal amount either equal to the gross or the net amount of the arrears.
As it is probable that the vast majority of the Preference dtock-Lolders of the company are liable to pay income-tax, it was felt that, to adopt the first alternative would, looking at the position as a whole, be unfair to the company and in particular to the holders of the A and 'B Ordinary stocks. It was. therefore, decided to take the net arrears as the basis of the compensation; indeed, your company's legal advisers informed the directors that in their opinion the company was clearly entitled to adopt this course which in the circumstances was the proper one.
Text read from the printed page and cleaned; old type leaves the occasional error.