17817-1910-Supplementary-Bills-read-a-first-time--Companies — Page 123

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Commissions and Discounts.

Authority is given to companies to pay commission on taking, underwriting, or placing shares, provided that the rate of com- mission paid is authorised by the articles and is disclosed in the prospectus, statement in lieu of prospectus, circular inviting shares, etc. Any other payment out of capital moneys by way of com- missions, discount, or allowance for taking or placing of shares is expressely prohibited. This latter provision, which was introduced in the United Kingdom by the Companies Act 1900, was intended to stop the practice, formerly very common, of adding large amount to the price payable to the vendors, who then arranged the underwriting, giving large blocks of shares to financiers, who guaranteed that sufficient shares should be taken to provide work- ing capital.

When a company has paid any sums by way of commission in respect of any shares or debentures, the total amount so paid must be stated in every balance sheet of the company until the whole amount has been written off. (Act of 1907.) Ordinance, Nil; Act, Sections 89, 90; Bill, Clauses 90, 91.

Payment of Interest out of Capital.

Where shares are issued to raise money to defray the expense constructing works, buildings, or plaut, which cannot be made profitable for a lengthened period, the company may pay interest on the amount paid up, provided the payment is authorised by the articles or by special resolution, is sanctioned by the court, and does not exceed a certain rate. This provision was first introduced in the United Kingdom by the Companies Act 1907. Ordinance, Nil; Act, Section 91; Bill, Clause 92.

Information as to Mortgages, Charges, etc.

The Companies Ordinance 1865 requires every limited com- pany under the Ordinance to keep a register of all mortgages and charges specifically affecting property of the company. The Bill continues this provision, and also provides that every mortgage or charge created after a certain date (in the United Kingdom, 9 months before the commencement of the Act), and falling within a certain defined and comprehensive class, shall, so far as any se- curity on the company's property or undertaking is thereby con- ferred, be void against the liquidator and any creditor of the com- pany, unless the prescribed particulars of the mortgage or charge are given, and the instrument by which the mortgage or charge is created or evidenced is produced, to the registrar of companies within five weeks after the date of its creation. It also provides that if a receiver or manager be appointed under any such instru- ment, notice of his appointment shall be given to the registrar of companies, and that such receiver or manager shall file with the registrar of companies accounts of his receipts and payments. The penalties for default are heavy. These provisions were introduced in the United Kingdom by the Companies Acts of 1900 and 1907.

A floating charge created within 3 months of a winding up is made invalid unless it can be proved that the company was solvent immediately after the creation of the charge. Ordinance, Section 102; Act, Sections 93 to 102, 212; Bill, Clauses 94 to 103, 202.

Auditors.

At present there are no statutory provisions with regard to auditors, nor were there any in the United Kingdom prior to 1900. The Bill requires the company to appoint auditors, and provides that in case of default the Governor may appoint them. Every auditor has a right of access at all times to the books and accounts and vouchers of the company, and is entitled to require from the directors and officers all necessary information and explanation. The auditors must make a report to the shareholders on the ac- counts examined by them, and on every balance sheet laid before the company during their tenure of office, and the report must state whether they have obtained all the information and explana- tions they have required, and also whether, in their opinion, the