Auditors : by Francis W. Pixley

              AUDITORS:
THEIR DUTIES AND RESPONSIBILITIES
UNDER THE
JOINT STOCK COMPATsIES ACTS
AND THE
BUILDING SOCIETIES, FEIBNDLY SOCIETIES, AND
INDUSTEIAL AND PEOVIDENT SOCIETIES ACTS,
BY
FRANCIS W. PIXLEY,
A FELLOW AND JIEMBEK OF THE C0T:NCIL OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS IK ENGLAND AND WALES,
AUTHOR OF
•• THE DIRECTOR'S IIAXDBOOK." " THE SHAREHOLDER'S
HANDBOOK," ETC.
SIXTH EDITION.
Io«b0«:
HENRY GOOD & SON, 12, MOORGATE STREET, E.G.
1891.
PREFACE
To THE FIRST EDITION.
ALTHOUÜII for many years it has been the custom
for the Accounts of Joint Stock Companies to be
examined and certified by Auditors before they are
presented to the Shareholders for their approval and
adoption, there has not hitherto appeared any work
embracing the principles, practice, and general informa­tion
relative to their duties.
This Treatise has therefore been \\'ritten A\'ith the
hope that it will supply a want to those who ])erio<lically
audit the Accounts of I'ublic Companies registered under
the various Acts of Parliament.
As almost every description of business is transacted
by these Companies, it woidd be impossible to discuss
all the items which appear in their published Accounts.
In the following pages, therefore, a selection has been
made of those Avhich most frequently come under the
observation of Auditors, the remarks relative to which
Avill be of assistance when an Auditor recjuires inf)rmation
respecting those items whicli have not been separately
treated.
The method of performing an audit cannot be
arbitrarily prescribed by rules to be followed by Auditors
vi • PREFACE.
as a class. It must necessarily vary according to the
exj)erience of the Auditor and the nature of the business
of the Company whose Accounts it is his duty to investigate.
In all cases, however, the audit should be conducted on a
system, and the author has, therefore, considered it necessary
to enter into certain details with the object of guiding an
Auditor throughout the prosecution of his audit. The
remarks, however, must be looked upon as merely sugges­tions
which experience has shown are practicable, and it
must be understood the author has not any intention ot
appearing to instruct* j'l'ofessional Auditors as to the
manner in which their duties should be performed.
He trusts, nevertheless, this Avork will be acceptable
to members of his own profession, and that it will not only
be useful as a book of reference to them, but also to
others A\'hü fill the responsible, onerous, and highly important
appointments of Auditors of Joint Stock Companies.
F. W. P.
LONDON,
nth January, 1881.
PREFACE
To THK FIFTH EDITION.
SINCE the Issue of the Fourth Edition several important
decisions have been given in the Law Courts which have been
incorporated in this Work.
The most imj^ortant ai'e those in the Leeds Estate
Building and, Investment Company v. Shepherd, where an
Auditor was held liable with the Directors for assenting to
the payment of dividends out of Capital, and in L^ee V; The
Neuchatel Asphalte Company, where it was decided there is
nothing in the Companies Act, 1862, and subsequent Acts,
to require Companies registered under these Acts to set
apart a sinking fund to meet the depreciation in the value
of wasting properties, to acquire which . subscriptions for
Capital were received from its Shareholders.
This decision, although reliewng Auditors from responsi­bility,
should not of course prevent them from pointing out
to Directors and Shareholders the suicidal policy of not
providing a sinking fund to replace the wasting security.
Lo]^DOX, p. w . P.
30i!A Septembei- 1889.
CONTENTS.
CHAPTEK I.
INTEODIJCTOEY.
l'AGE
History of Statutory Law relating to Joint Stock Companies—
General Management of Companies in hands of the Directors-
Periodical Meetings of the Shareholders — Statement of
Accounts laid before these Meetings—^Accounts previously
audited by Eepresentativo of the Shareholders—Known as the
Auditor—Position of Auditor as regards Directors—How far
Auditors Agents of the Shareholders—Eesponsibility in connection
with issue of Prospectus 1—10
CHAPTER 11.
APPOINTMENT AND EEMUNEBATION OF AUDITORS.
Audit of Accounts of Companies registered under Companies Act,
1862, not compulsory, except those registered under Table A—
Appointment under Table A—Under Companies Act, 1879—
Under Companies Clauses Consolidation Act, 18-1Ö—By Board
of Trade—Audit of Accounts of Life Assurance Companies
not compulsory—Aijpointment of Auditors under Building
Societies Act, 1874—Under Priondly Societies Act, 1875—
Under Lidustrial and Provident Societies Act, 1876—Auditors
occasionally appointed to guard special interests—Opinion of
Counsel on the appointment of firms as Auditors—Eemuneration
—Decision of Court—Scale of Eemuneration 11—23
A 3
X CONTENTS.
CHAPTER III.
SECTIONS OF THE STATUTES RELATING TO THE BOOKS, ACCOUNTS,
AND AUDITORS OF JOINT STOCK COMPANIES, BUILDING SOCIETIES,
FRIENDLY SOCIETIES, AND INDUSTRIAL AND PROVIDENT SOCIETIES.
The Companies Act, 1S62—The Companies Act, 1879—The Companies
Act, 1880—The Companies (Colonial Eegisters) Act, 1883—The
Companies Clauses Consolidation Act, 1845—The Companies
Clauses Act, 1863—The Eaüway Companies Securities Act, 1866—
The Eailway Companies Act, 1867—The Eailway Companies
(Scotland) Act, 1867—The Eegulation of Eailways Act, 1868—
The Gasworks Clauses Act, 1847—The Gasworks Clauses Act, 1871
—The "Waterworks Clauses Act, 1847—The Metropolis Water Act,
1852—The Metropolis Water Act, 1871—The Life Assurance
Companies Act, 1870—The Building- Societies Act, 1874—The
Friendly Societies Act, 1875—The Industrial and Provident
Societies Act, 1876—The Falsification of Accounts Act, 1875. . 24—89
CHAPTER IV.
PRINCIPLES OF BOOK-KEEPING IN USE BY JOINT STOCK COMPAIOES.
Auditor should understand Book-keeping—Eegistry or Statistical
Books—Application for, and Allotment of. Shares Book—Eegister
of Members—Eegister of Shareholders—Shareholders' Address
Book—Eegister of Holders of Consolidated Stock—Eegister of
Mortgages—Eegister of Transfers—Eegister of Debenture Stock—
Eegister of Directors and Managers—Annual List of Members—
Miaute Books—Financial or Account Books—Cash Book—Petty
Cash Book—Day Book—Invoice Book—Bills Eeoeivable Book—
Bills Payable Book—Journal—Ledger—Trial Balance—Difference
between Trial Balance and Balance Sheet . . . . . 90—103
CONTENTS. XI
CHAPTER V.
NATURE AND PRINCIPLES OF AN AUDIT.
Nature of an effective Audit—Errors of Omission—Errors of Commission
—Errors of Principle—A List of the Books of Assistance to the
Auditor—Auditor should be provided with the Regulations-
Investigation of the Cajiital Account—Prospectus—Application for
Shares—Letters of Allotment—Share Certificates—Entries in the
Books of the particulars of the Purchase—Examination of the
Cash Book—Of the Vouchers—Documents should be arranged for
the Inspection of the Auditor—Eeconciliation of the Balances of
the (^ash Book and Bankers' Pass Book—Examination of the
Subsidiary Books 104—112
CHArTER \'I.
POEMS OF ACCOUNTS PUBLISHED BY COMPANIES.
Variety in Eorms of Accounts published by Companies—Home prescribed
by Act of Parliamout—Balance Sheet prescribed by Companies
Act, 1862, Table A—Eorms prescribed by Life Assurance Com­panies
Act, 1870—By Regulation of Railways Act, 1868—By
Gasworks Clauses Act, 1847—By Metropolis Water Act, 1852—
Revenue Account and Balance Sheet usually issued alone when
Forms not prescribed—Statement of Receipts and Expenditure or
Cash Account—Difference between Revenue Account and Cash
Account—Receipts and Exjienditure Account should show Total
Receipts and Expenditure to date—Balance Sheet—The Statements
which afford the Shareholders all the requisite information . . 113—118
X l l CONTENTvS.
CHAPTER VIL
fi
THE REVENUE ACCOUNT.
Exijlanation of the Bevenuc Account—Difference between Revenue
Account and Cash Account—Trading Account—Profit and Loss
Account—Best method of stating a Eevenue Account—Stock in
hand at commencement of the i^eiiod—Purchases—Claims under
Policies—Interest on Debentures—Interest on Mortgages—Amount
written off Leasehold Property—Royalties—Dead Rent—Expenses
of Management—Resolution of the Council of the Institute of
Actuaries—Directors'Pees—Salaries—Wages—Commission—Rent,
Rates, Taxes, &c.—Repairs and Renewals—Amount written off for
Depreciation—Loss on Realisation of Securities—Debts irrecover­able—
General Expenses—Amount wiitten ofP Preliminary Expenses
—- Interest to Shareholders — Dividends on Preference Shares —
Auditor should resist pro230sal to pay Dividends out of Cajiital—
Income side of the Revenue Account—Sales—Premiums—Interest
on Investments—Transfer Pees—Traffic and other Receipts — Stock
in hand at end of the period—Premiums on Shares—Balance of the
Revenue Account . . . . . . . . . . 1 1 9 - 1 48
CHAPTER VIII.
THE BALANCE SHEET.
Explanation of the Balance Sheet—Should be carefully examined by
the Auditor—Liabilities—Capital—Preference Shares—Debentures
—Railway Debentures—Creditoi's—Amount due to Mortgagees—
Liability on.Bills Receivable Discounted—Shareholders' Intei'est
outstanding—Claims admitted but not paid—Amount due on
Current and Deposit Accounts—Reserve—Reserve Eund—Balance
of Revenue Account (Surplus)--Assets—Government Securities-
Shares and Debentures in Joint Stock Companies—Investments
should stand in Names of the Trustees—Preehold and Leasehold
Property—Mortgages—Loans—Debtors^Bills Receivable on hand—
Agents' Balances—Company's own Shares—Interest on Investments
due and accrued-Cash—Stock-in-Trade—Office Eurniture—Pur­chase
of Business, &c.—Purchases on Hiring Agreements—Preli­minary
Expenses—Balance of Eevenue Account (Deficiency)—
Balance Sheet should be so explicit as to be understood by every
Shareholder 149—170
CONTENTS. Xlll
CHAPTEK IX.
FUETHEU KEJIAKKS ON THE DUTIES AND RESPONSIBILITIES OF
AUDITORS.
Auditors should be trained for their duties—Fallacy of insisting on a
Share Qualification—Liability of Auditor for assenting to innjroper
payment of dividends—Liability for Calls in winding vq>—Auditors
should be able to suggest impi-ovements in mode of keei)ing the
books—An efficient audit should embrace all the transactions of the
Comjiany—Necessitj' for providing against bad debts—Inspection
of the securities—Audit of a Company having branches—Power of
Auditor to omi^loy a professional Accountant—Auditor's certificate
—Position of the Auditor when the Accounts are incorrect-His
difficulty in deciding the course to adopt—May be obviated by
means of a Sjieoial Eeport—Auditor has inanj' ojijjortunities of
suggesting improvements—Eeal value of a thorough audit not yet
ajiin-Gciated by shareholders-Institute of Chartered Accountants
in England and Wales 171—189
APPENDIX A.
Balance Sheet proscribed by Companies Act, 1862, Table A—Foion of
Accounts prescribed by Ecgulation of Eailwaj^s Act, 1S6S—Form
of Annual Accounts prescribed by Gasworks Clauses Act (1847)
Amendment—Form of Annual Acooimts prescribed by Life
Assurance Companies Act, 1870—Annual Eeturn as prescribed by
the Chief Eegistrar under the Friendly Societies Act, 1875. Forms
A, and B—Eeceipts and Ex2ienditui'e Account (Pro Forma.)—
Eevenue Account (Pro Forma)—Balance Sheet (Pro Forma) . . 191—216
xiv CONTENTS.
APPENDIX B.
Form required to be made annually by every Company registered
under the Companies Act, 1862, having a Capital divided into
Shares—Foim of Statement required to be made twice a ycai- by
every Limited Banking or Insurance Company, and every Deposit,
Provident, or Benefit Society, registered under the Companies Act,
1862—Form of Statement prescribed by the Industrial and
Provident Societies Act, 1876, for every Society carrying on the
Business of Banking—Extracts from the Conditions under which
Public Auditors hold their appointments under the Friendly
Societies Acts, and the Industrial and Provident Societies Act,
1876—Table for ascertaining the Amount to be written ofï a Lease
Account annually, in order to exhaust the same at the Expiration
of the Lease, also for ascertaining the present value of a Ijcase—
Ledger Account (Pro ForniaJ of a Lease from Date of Purchase
until its Expiration—Model Clauses for A.rti('les of Association . 217—229
INDEX 231—245
TABLE OF CASES.
ALMADA & TiRiTo COMPANY, IN RE
AKGLESEA COLLIEHY COMPANY
AsHBURY V. W A T S ON
ASPINALL'S CASE ...
BASS V. OLIVE
BILL V. T H E DARENTII VALLEY RAILWAY CO>[PAXY
OAERUTHERS r. SHEDDON
DENT V. T H E LONDON TRAMWAYS COMPANY
FAURE ELECTRIC ACCUMULATOR COMPANY, IN RE
HAY'S CASE
HOLGATE V. RHUTT
LEEDS ESTATE BUILDING & INVESTMENT COMPANY r. SHEPHERD
L E E V. T H E NEUCHATEL ARPHALTE COMPANY . ..
MATLOCK OLD BATH HYDROPATHIC COMPANY, LIMITED, WHEAT-CROFT'S
CASE
NICOL'S CASE
OXFORD BENEFIT BUILDING & INVE.STJIBNT SOCIETY, IN RE
PAGE & BISHOP V. T H E EASTERN & MIDLANDS RAILWAY' COMPANY
SPACKMAN V. EVANS
STEELE V. T H E SUTTON GAS COMPANY
STUDDERT V. GROSVENOR
TAYLOR V. BREWER
TREVOR I;. WHITWORTH
WiNCHAM SHIPBUILDING, BOILER AND SALT
HALLMARK'S CASE
COMPANY, IN RE
1
i
I
10-
.10 &
c.
INDEX OF SECTIONS OF THE STATUTES.
S Vict.
C. 16,
10 Vict
C. 15
13.
S.
s.
s.
.s.
.'^.
.s.
s.
g.
a.
s
s.
s.
s.
s.
s
s
s
, s
s
s
s
s
s
s
9
10
45
48
61
63
91
101
102
103
104
lor,
106
107
108
115
116
118
120
121
122
123
2
4
30
31
32
33
34
38
10 & 11 Vict.
c. n , s
s
s
ri
4
75
76
77
41
42
42
42
42
43
43
43
44
44
44
44
44
45
45
45
45
46
46
40
47
47
61
61
61
61
62
62
62
63
04
05
65
65
60
10 & 11 Vict.
C. 17, s. 79
B.S-i
15 & 10 Vict.
C. 84, s. 19
s. 28
25 & 20 Vict.
C 89, s. 1
R. 3
s. 15
s. 25
.'<. 20
s. .30
.s. 43
s. 44
s. 45
s. 49
s. 07
First Schedule
Second Schodule
20 i: 27 Vict.
0. 118, s. 1
K. 14
s. 24
.s. 28
,s. .33
29 & 30 Vict,
0. 108, s. 1
s. 2
•s. 4
s. 5
s. 0
Fir.st Schedule
3 0 & 3 1 Vict.
0. 126, s. 1
s. 2
s. 23
s. 30
06
06
67
67
25
25
25
26
26
27
27
28
28
28
28
29
33
47
47
48
48
48
49
49
49
50
50
50
53
53
53
54
XVUl INDEX OE SECTIONS OF THE STATUTES.
80 & 81 Viot.
C. 127, s.
s.
s.
1
23
80
31 & 32 Vict.
C. 119, s
s.
s.
s.
fi.
s.
s.
s.
s.
33 & 34 Vi(
C. Gl, s.
1
2
3
4
5
11
12
13
38
t
1
s.
s.
10 .
11 .
12 .
34 & 35 Vict.
0.41 s.
B.
2
35 .
34 & 35 Vict.
C. 113 S.
s.
s.
s.
s.
s.
s.
s.
s.
s.
1 .
2
3 .
37 .
38 .
•39 .
40 .
41 .
42 .
44 .
37 & 88 Vict.
C. 42, s.
s.
s.
s.
s.
1 .
2 .
15 .
16 .
25 ..
51
51
52
55
55
55
56
56
57
57
58
59
71
71
72
72
73
73
74
74
74
74
64
64
68
68
68
69
69
69
70
70
70
71
75
75
75
76
77
87 & 88 Vict.
C. 42, s. 37
s. 40
38 & 39 Vict.
C. 24, s. 1
s. 2
s. 3
s. 4
88 & 39 Vict.
C. 60, s. 1
s. 3
s. 6
s. 14
s. 16
s. 18
P. 30
s. 32
s. 35
.•19 & 40 Vict.
C. 15, s. 1
s. 2
s. 5
s. 10
s, 12
s. 18
s. 21
42 & 43 Vict.
C. 76, s. 1
R. 2
R. 3
s. 7
43 Vict.
C. 19, R. 1
s. 2
R. 3
R. 4
s. 5
R. 6
46 & 47 Vict.
C. 30, H. 1
s. 2
s. 3
52 & 58 Vict.
C. 57, s. 3
77
78
89
89
78
79
79
79
80
82
83
84
84
84
84
85
85
86
87
34
34
34
34
36
86
36
87
37
37
38
38
39
60
AUDITORS
THEIK
DUTIES AND RESPONSIBILITIES.
CHAPTER I.
INTKODUOTOEY.
History of Statutory Law relating to Joint Stock Companies —
General Management of Companies in hands of tlie Directors
—Periodical Meetings of the Shareholders—Statement of
Accounts laid befoi'o these Meetings—Accounts previously
audited by Eepresentative of the Shareholders—Known as the
Auditor—Position of Auditor as regards Directors—How far
Auditors Agents of the Shareholders—Eesponsibility in con­nection
with issue of Prosjtectus.
Since the 2nd day of ]Si"ovember, 1862, the day increase of
•^ 5 7 ^ Joint Stock
on Avhich the Companies Act, 1862, came into Companies
•*• _ since 2nd
operation, there has been a marked increase in November,
. . . 1862.
the number of Associations formed for enabling'
persons of all classes, trades and denominations to
combine together for the purpose of carrying on to
their mutual advantage a single trade or any
enterprise for the development of which the joint-stock
principle, as amended by the new Act, offered
increased facilities.
For a considerable time previous to the passing
of this Act these Associations had been in existence,
but until 1844 they were subject to the law which
gos'erned ordinary partnerships of two or three
B
2 AUDITORS.
Joint Stock
Companies
B,egistration
Act, 1844.
Joint Stock
Companies
Act, 1856.
Companies
Act, 1862.
persons, and the Promoters of Railway and other
Companies had the entire charge of their under­takings,
made contracts with landowners and others,
and issued prospectuses, on the faith of w^hich
subscriptions were received and certificates of shares
issued without interference or control on the part of
the legislature.
The first Joint Stock Companies Act (called the
Joint Stock Companies Registration Act) was passed
in 1844, and it remained in force until 1856, w^hen
it was repealed, except with regard to Insurance
Companies, for which Companies it remained in
force until the Companies Act, 1862, came into
operation.
The first Act of Parliament making limited
liability attainable by Joint Stock Companies was
passed in 1855, but this was not brought forward as
an independent measure, and was, in fact, merely
a graft on the Act of 1844.
In 1856, however, Mr. Robert Lowe (now Lord
Sherbrooke), who was at that time the Vice-
President of the Board of Trade, brought into the
House of Commons the Joint Stock Companies
Act, 1856, which repealed the previous Acts
referred to, and reduced their provisions into a
practical system. In 1857 and 1858 four additional
Acts were passed, and in order to consohdate the
Acts relating to Joint Stock Companies Lord
Chelmsford brought a fresh one in twice in 1859,
but it did not pass, neither was Lord Campbell
more successful in 1860. In 1862, however, the
Act now in force (25 and 26 Vict., c. 89) was
passed which has given so great an impetus to
Joint Stock enterprise.
INTRODUCTION. 3
Several Acts have subsequently been passed which
are supplemental to the Act of 1862, and Companies
registered under that Act are subject to the pro­visions
of the supplemental Acts, which are styled as
the Companies Acts 1862 to 1890.
The most important of these Acts for Chartered
Accountants is the Act of 1879, which enacted that
the Accounts of every Banking Company registered
after the passing of this Act should be examined by
an Auditor, and, as a few years later many of the
leading Joint Stock Banks registered under this Act,
they took the opportunity of displacing the share­holder-
auditor and elected Chartered Accountants to
the office.
In addition to the Companies registered under' the Companies
••• " _ incorporated
Acts of 1862 to 1890, there are those registered under by special
. . ^ Acts.
various other public Acts (including Life Assurance
Companies, Building Societies, Friendly and
Industrial and Provident Societies), as also those
incorporated by special Acts of Parliament. The
latter are, of course, subject to certain public
Acts in addition to their own private ones.
The first Building Society was founded in 1809, Building
and Avas followed by many others. Previously to
1836, however, no special legislation existed for
them, and they were considered ordinary Joint
Stock Companies. About this time a proposition
was made by the Chancellor of the Exchequer to
charge a duty on shares in Joint Stock Companies
which were transferable. This alarmed the Buildinsf
Societies, who protested so successfully against the
proposed duty being apphed to them, that an
Act was passed for their regulation, and although
this Act was described by the Royal Commissioners
B 2
4 AUDITORS.
as " one of the worst drawn which yet remain in
the statute book," it remained in force for nearly
forty years.
In 1874 the Building Societies Act, 1874 (37
and 38 Yict., c. 42), was passed, under which most
of the Building Societies now in existence are
incorporated, but as it does not affect Societies
registered under the Act of 1836 unless they
become incorporated under the new Act, the
provisions of the Act of 1874 do not apply to all
Building Societies.
Limited The majority of Companies now in existence
are registered under the Act of 1862 ; and these
Associations, known generally under the name of
Limited Companies (although the Act of 1862
provides for the incorporation and management of
unhmited Companies), have invaded almost eveiy
department of commerce and trade, and the capital
embarked in these undertakings is enormous.
All classes of persons who have either inherited
or acquired means, even the artizan, who out of his
wages has saved a few pounds, is interested more
• or less in the management and welfare of these
Associations, and every person holding a share is
f consequently a partner in each one in which he is a
! Shareholder.
; Directors. ^.g^ however, it would be impossible for each of
the partners in these undertakings to have a voice
in the general management of the business, in the
I same manner as have the partners in a private firm,
I it is the practice to delegate this power to a few
(varying according to the size and the nature of the
business of the Company) of their number, now
I generally styled Directors, who undertake the
INTRODÜCÏIOX. O
superintendence and the administration of the
affairs of the Company on behalf of themselves
and of their co-partners.
The Directors have periodically to meet the gifai-eüoidors
general body of shareholders, for the purpose of
accounting to them the manner in which they have
fulfilled their duties. If these have been performed
to the satisfaction of the shareholders, they usually
continue the Directors in their position, but should
the former be dissatisfied with their representatives,
they elect others out of their body to take the place
of those Directors AVIIO retire by rotation, it being
the custom for about a third or a quarter of the
Board to vacate their seats annually, in order tt)
give the shareholders the opportunity of introducing
fresh representatives should they consider a change
in the administration desirable.
The meetings of the shareholders are idniost y^^^^^^ ^j,'j°||^_
invariably held yearly or half-yearly, and it is now '^^•^l^l' "'^
the recognised practice for accounts to be prepared g^S"^™ted™
showing the result of the transactions of the Com­pany
since the previous meeting (or, if the Company
be a new one, since its incorporation), and for these
accounts to be printed and sent to all the share­holders,
in conjunction with a Report of the Directt^rs
and a notice convening the meeting.
The shareholders have, therefore, the opportunity
of ascertaining what have been the transactions of
their undertaking since its incorporation, or their
last meeting, and of considering, before they are
brought together, what steps, if any, they shall take
at the meeting, supposing the facts as disclosed hj
the accounts, and the report of the Directors, are
not satisfactory.
6 AUDITOES.
Accounts j(^s it would be impossible in many instances, and
previously -•• •'
examined by very iiiconvenieiit in all, for each partner to examine
represeuta- '' -^
tiveoftiie these Statements of Accounts with the Books kept
Shareholders. /> n
at the offices of the Company, and frequently
elsewhere, their correctness is usually certified by
their representative or representatives, elected
annually, for the purpose of ascertaining that
the funds of the Company have been properly
accounted for, that such of them as have been
expended have been applied in the manner
indicated in the Accounts, that the unexpended
portion is invested as stated in the Accounts, and
generally that, in their opinion, the Accounts, as
put forward by the Directors for adoption by their
co-partners, are accurate in every respect, and to be
relied on as showing the result of their management
and the true position of their Company, as set forth
in the statement of its liabilities and assets.
Knomiasthe TMs representative of the shareholders is known
Auditor. -^ _
as the Auditor of the Company, and the object of
this treatise is to point out the duties and
responsibilities of those who have to investigate
the books and affairs of a Company, before the
Accounts, as prepared by the Directors, are placed
before the shareholders at their periodical meetings
for their approval, confirmation and adoption.
Position of It is evident that the duties of an Auditor are
the Auditor
as regards not oiily oncrous and responsible, but frequently
the Directors. . . "^ ^ . ^ ^. ^ . ^ ''
intricate, and at times even disagreeable. It may
happen that he differ mth the Directors as to the
marnier in which the Accounts should be stated, or
as to other matters connected with his office. As
the representative of the shareholders, his principal
obligation is, of course, to have regard to their
INTRODUCTION. 7
interests, and though he may be accused by the
Directors of interfering with what they may
consider their own particular duties, he should
not allow their arguments to persuade him when
he feels sure his suggested alterations would, if
carried out, be beneficial to the general body of
the shareholders.
As a rule, however. Directors are men of honour Usually on
' ' good terms
and integrity, and when this is the case an with them.
Auditor will find his occupation easy and pleasant
to perform. He Avill obtain ready access to all
books, documents, and securities, and every facility
will be afforded him in the prosecution of his audit.
Any questions he may ask will be immediately and
satisfactorily answered, and any suggestions he may
make for an alteration in the mode of keeping the
Books or in the Accounts submitted to him for
confirmation, will be carefully considered, and if
approved, as being likely to prove advantageous on
adoption, will be directed to be carried out.
If, on the other hand, the Directors have J^'^'^'^P^ ^^'^^^
' ' they have
neglected their duties or have intentionally prepared ^,^^}ff°f-false
Accounts to be laid before the shareholders,
the Auditor has not only a very responsible, but
also a very unpleasant and difficult task before
him. Every possible obstacle is thrown in his
way to prevent his discovering and exposing their
intended deceptions, but the Auditor should be
firm, should require all his questions answered, and
each unsatisfactory item explained before he afiixes
his Certificate to the Accounts. He should not
allow himself to be tired out and hurried into
signing them before he is thoroughly satisfied they
are absolutely and entirely correct. The Directors
8 AUDITOKS.
are in his power if he be hrni, as they would be
placed in an embarrassing position if they attempted
to face the meeting of the shareholders without
the Auditor's Certificate.
Shareholders The shareholders of a Company may, therefore,
have two . I J J^ ^ '
representa- be Said to havc two representatives of their
tives.
mterests, the one administrative, as rejjresented
by the Directors, the other critical, in the person
of their Auditor. The latter is therefore a kind
of check on the former, and frequently prevents
the Directors from acting impulsively or recklessly,
they knowing their transactions will ultimately be
reviewed calmly and impartially by the Auditor,
who will communicate the result of his investiga­tion
and criticism to the shareholders, to be acted
upon by them as they may think proper at their
Meeting.
It is apparent, therefore, as before stated, that
the Auditor has it in his power to render great
and important services to the shareholders, and the
object of the author is to provide those appointed
to this office with a handbook for reference on
those points which most frequently require their
attention and examination.
Auditors, ^g -^Q J^Q^ f^p the Auditors are the Ag'ents of the
how tar ~
Shareholders' Shareholders, Mr. H. Burton Buckley, Q.C., in his
Agents. ' J ^ ~u 1
work on the 'Companies Acts' (6th edition, ^. 521),
makes the following remarks :—
" The Auditors are Agents of the Share-
" holders so far as relates to the audit of the
" Accounts, and for the purpose of the audit
"they will bind the Shareholders. But they are
" not the Agents of the Shareholders, so as to
" conclude the Shareholders by any knowledge
INTKODUCTXON. 9
" which in the course of the audit they may have
• "acquired of any unauthorised acts on the part
" of the Directors. It is no part of their office to
" inquire into the vahdity of any transaction
" appearing in the Accounts of the Company
" (Spackman v. Evans, L.R. o, H.L. 171, 196,
"236)."
" It was said by Lord Justice Turner, in Lord'justice
"Mcol's case (3 De G., and J. 387, 441), with Turner.
" respect to fraudulent representations made by
" the Directors as to the position of the Company,
" that ' there were Auditors of the Company
" appointed by the Shareholders. These Auditors
" were within the scope of their duty, at least as
"much the Agents of the Shareholders as the
" Directors were, and the false and fraudulent
" representations were discoverable by them.'
" But Lord Chelmsford, in Spackman v. Evans ^ord'cheiins
"(L.R. 3, H.L. 171, 236), exi^ressed himself as f°°d.
" unable to concur with the Lord Justice in
" treating the Auditors as the Agents of the
" Shareholders for that purpose."
Until the passing of the Directors' Liability Act,
1890, it was never considered that Chartered
Accountants or others who allowed their names to
appear on the prospectuses of new Companies as
Auditors incurred any liability by reason of untrue
statements in the prospectus. Section 3, Subsection
1, of this Act, however, throws responsibility on
persons who have authorised the issue of a prospectus,
and consequently, as Chartered Accountants are fre­quently
in the course of their practice brought into
connection with the prospectus of an intended
company, it was suggested that their professional
10 AUDITORS.
employment might bring them within the category of
persons who have authorised the issue of a prospectus.
The Council of the Institute of Chartered Account­ants,
deeming the matter of the greatest importance,
submitted a very full case to Counsel, who gave their
opinion that a Chartered Accountant can only be
liable under the Directors' Liability Act, 1890, if he
so conducts himself as to become a promoter, or to
authorise the issue of a prospectus or notice inviting
subscriptions. Counsel also gave as their opinion
that a Chartered Accountant does not authorise the
issue of a prospectus or notice within the meaning of
the Act by merely permitting his name to be men­tioned
in the prospectus or notice as Auditor ; or by
merely permitting a professional report made by him
to be referred to in i t ; or by merely preparing or
advising upon it, or assisting in its preparation
professionally.
APPOINTMENT AN]J REMUNERATION OF AUDITORS. 11
CHAPTER 11.
APPOINTMENT AND REMUNERATION OF AUDITORS.
Audit of Accounts of Companies registered under Companies Act,
1862, not compulsory, except those registered under Table A—•
Appointment under Table A—Under Companies Act, 1879—
Under Companies Clauses Consolidation Act, 1843—By Board
of Trade—Audit of Accounts of Life Assurance Companies
not compulsory—Appointment of Auditors under Building
Societies Act, 1874—Under Friendly Societies Act, 1875—
Under Industrial and Provident Societies Act, 1876—Auditors
occasionally appointed to guard special interests—Opinion of
Counsel on tbe appointment of firms as Auditors—Eemunera-tion—
Decision of Court—Scale of Eemuneration.
THE Companies Act, 1862, does not make it ^°y',,y''P'^-
compulsory upon Companies registered under that Compames^^
Act to have Auditors, but in the first Schedule iia^yèAuditors
' unless repis-appended
to that Act (usually known as Table A), teeciirnder
which contains a number of regulations applicable
to Companies which do not possess their own
Articles of Association, it is laid down that once
at least in every year the Accounts of these
Companies shall be examined, and the correctness
of the Balance Sheet ascertained by one or more
Auditors.
These Auditors are, in the first instance, to be
appointed by the Directors, and they remain in
oifice until the first General Meeting of the Share­holders,
when they retire, but are immediately
eligible for re-election by the shareholders, in
12 AUDITORS.
Appointment
of Auditors
under Tabic
A.
Banking
Companies
registered
under
Companies
Act, 1879,
obliged to
have Auditors
Companies
Act, 1862.
whose hands the right of election of the Auditors
thenceforward rests.
Should a casual vacancy occur in the office of
Auditor, it is the duty of the Directors to forth­with
summon an Extraordinary General Meeting
for the purpose of supplying the same, and should
neither the Directors nor the shareholders make
any appointment of Auditors, the Board of Trade
may, on the apphcation of not less than five
members of the Company, appoint an Auditor for
the current year, and fix the remuneration to be
paid to him by the Company.
The Sections (83—94) of Table A which especi­ally
refer to the Auditors are set forth in detail
hereafter, as are also the five preceding Sections
(78—82), which prescribe what Accounts have to
be kept by the Directors.
The Companies Act, 1879, which received the
royal assent on the 15th August of that year, has
made it compulsory upon every Banking Company
registered since that date as a limited Company
to have its Accounts examined by one or more
Auditors, who are to be elected annually by the
Company in General Meeting. An Auditor, on
quitting office, is at once eligible for re-election.
If any casual vacancy should occur, the surviving
Auditor or Auditors may act alone, but should
there be no surviving Auditor the Directors have
to forthwith call an Extraordinary General Meeting
for the purpose of supplying the vacancy or
vacancies.
When Companies registered under the Act of
1862 have Articles of Association, the Sections in
them which refer to the Auditor vary, as a rule,
APPOINTMENT ANB REMUNERATION OF AUDITORS. 13
A'ery little from the Sections in Table A already
referred to.
The first Auditors are usually appointed by the ^/|°^^*™g"*
Directors, and they remain in office until the first
Meeting of the shareholders, when they retire,
but being eligible for re-election are, as a rule,
continued in their appointments.
The custom of electine- the same Auditors Advantages
o of re-electuig
annually is a very sensible one. It is a great '.''*')'?;^^,^
mistake to change the Auditors as long as the
shareholders are satisfied they do their duty
properly. The longer an Auditor is in office the
more familiar he becomes with the business of
the Company, and consequently the more likely
to detect any inaccuracies in the Accounts, either
accidental or intentional.
When a Company has been incorporated by 1^°™^ ^at^od
special Act of Parliament, such Act is incorporated ^y special
with the Companies Clauses Consolidation Act,
1845 (8 Vict. cap. 16), whose clauses and pKmsions,
save so far as they are expressly varied or excepted
by the private Act, apply to the Company
incorporated by such Act, and to the undertaking
for carrying on which such Company has been
incorporated, so far as the same are applicable
thereto respectively ; and such clauses and provisions,
as well as the clauses and provisions of every other
Act which are incorporated with the private Act,
form part of such Act, and are construed together
therewith as forming one Act.
With respect to the appointment of Auditors Appointment
r f^ . . of Auditors.
ot Companies incorporated by special Act of
Parhament, it is enacted by the Companies Clauses
Consolidation Act, 1845, that, unless by the special
14 AUDITORS.
Act, Auditors are directed to be appointed otherwise
than by the Company, the shareholders present,
personally or by proxy, shall, at the first Ordinary
Meeting after the passing of the special Act, elect
the prescribed number of Auditors, and if no
number is prescribed, two Auditors ; and at the first
Ordinary Meeting of the Company in each year
thereafter the Company shall elect an Auditor to
supply the place of the one retiring fi-om ofiice.
An Auditor once elected, unless he be removed or
be disqualified or resign, continues to be an Auditor
until another is elected in his stead.
Qualification. Where no qualification is prescribed by the
special Act, every Auditor is obhged to hold at least
one share in the undertaking, but he is not allowed
to hold any of&ce in the Company, or be in any
other manner interested in its concerns, except as a
shareholder.
Mode of One of the Auditors (to be determined in the first
re-election. ^
instance by ballot among themselves, unless they
otherwise agree, and afterwards by seniority) goes
out of ofiice at the first Ordinary Meeting in each
year, but he is at once eligible for re-election, and
after any such re-election he is, with respect to the
going out of ofiice by rotation, deemed a new
Auditor.
Should a vacancy occur among the Auditors
during the current year, then, at any General
Meeting of the Company, the vacancy may, if the
Company think fit, be supplied by election of the
shareholders,
auonimat jf ^t any meetinof at which an election of
meeting. •' °
Auditors ought to take place the prescribed quorum
are not present within an hour of the time appointed
APPOINTMENT AND. REMUNERATION OF AUDITORS. 15
for the meeting, no election of Auditors shall be made,
and the meeting stands adjourned to the following
day at the same time and jAace ; and if at such
adjourned meeting the prescribed quorum are not
present within an hour from the time appointed for
the meeting, the existing Auditors shall continue to
act until new Auditors are appointed at the first
Ordinary Meeting held in the following year.
With reference to the appointment of Auditors to Auditors of
-•- J- Hallway
Railway Companies, the Reo-ulation of Railways Companies
• ' • ' - ' " *' need not be
Act, 1868, enacts that the sections in the Companies shareiioiders.
Clauses Consohdation Act, 1845, which makes it
necessary for an Auditor to hold at least one share
shall not apply, and consequently their Auditors
need not be shareholders.
The Regulation of Railways Act, 1868, also Board of
° .; ' ' Trade may
enacts that the Board of Trade may, upon appoint
Auditors of
application made in pursuance of a resolution passed Railway
Companies.
at a meeting of the Directors, or at a General
Meeting of the Company, a2:)point an Auditor in
addition to the Auditors of such Company, and it
shall not be necessary for any such Auditor to be a
shareholder in the Company.
Under the Metropolis Waterworks Act, 1871, an Auditor
. . _ appointed
Auditor IS appointed by, and is removable by, the by Board of
Board of Trade (Local Government Board), whose Metropolis
T . . T i « • T r^ • Waterworks
duty it IS to audit the Accounts ot the Companies Act, 1871.
once in every half year. This Auditor, who is
usually known as the Government Auditor, performs
his duties independently of the Auditors appointed
by the shareholders.
The Life Assurance Companies Act, 1870, which I'ife
•*• Assurance
enacts that the Accounts of all Life Assurance Companies
^ . Act, 1870,
Companies shall be deposited amiually with the does not
16 AUDITORS.
pro\dde for
audit of
Accounts.
Auditors of
Building
Societies.
Auditors of
Friendly
Societies.
Auditors of
Industrial
andProvident
bocieties.
Board of Trade, does not jjrovide that such Accounts
shall be submitted to any Auditors. This was
certainly a grave omission, and will no doubt be
rectified in a future Act, as there is no class of
Company which so imperatively demands a strict
investigation of its Accounts. It is true that nearly
all Life Insurance Companies have Auditors, but
their names show that their qualification for these
important appointments is less considered than the
fact of their being men of position and influence.
The Building Societies Act, 1874 (37 and 38 Vict.,
cap. 42), contains a clause requiring a statement of
receipts and expenditure, and a statement of the
funds and effects, habilities and assets, to be attested
by the Auditors, but does not prescribe how they are
to be appointed. It, however, enacts that the rules
of every society established under the Act shall set
forth the manner of appointing and removing its
Auditors.
The Friendly Societies Act, 1875 (38 and 39 Vict.,
cap. 60), enacts that all Societies registered under
this Act shall submit their Accounts for audit either
to one of the Public Auditors referred to below, or
to two or more Auditors appointed by the Society ;
but it does not lay down any rule as to their mode
of election, beyond stating they shall be appointed
as the rules of each particular Society provide.
The Treasury may from time to time appoint Public
Auditors for the purposes of this Act, but it is
optional with the Societies whether they employ
any of these Public Auditors, or choose others to
fill the appointments.
The Industrial and Provident Societies Act,
1876 (39 and 40 Vict., cap. 45), prescribes that
APPOINTMENT AND REMUNERATION OF AUDITORS. 17
the Accounts of all Societies registered under this
Act shall be audited, and the regulatifjns respect­ing
the Auditors are almost identical with those
of the Friendly Societies Act.
Althouo-h manv Chartered Accountants and P"^^iio
" - Auditors.
others have been appointed by the Treasury
Public Auditors under these Acts, the Societies
have not hitherto taken advantage of these
appointments, and seem to prefer Auditors chosen
out of their members.
In a few Companies, Auditors are appointed to ^^^'^it'^rs
'• ' >- '- occasionally
look after the interests of a particular class or appointed to
••• gunrd speciiU
section of those concerned in their welfare. interests.
For instance, some Assurance Companies have
Auditors for the Assured as well as for the
Assurers or shareholders. Occasionally the Deben­ture
Holders of a Company have their own
• Auditor, as have also the Preference Shareholders.
Within the last few years. Companies have been
formed Avith ' Founders' Shai-es,' the holders of
which are entitled to a proportion of the profits after
the other shareholders have received a minimum
dividend. In all these cases their specially appointed
Auditors have to ascertain their clients receive their
full privileges, and that the reserves for depreciation,
for loss on realisation of debts, and general reserve,
are not unduly high.
These cases are, however, exceptional ; in nearly
all Companies the Auditors are the representatives
of the general body of the shareholders, and it is
their duty to require the Accounts presented to them
for signature to be prepared in the interests of all the
parties concerned.
The question haraig arisen as to whether the Appointment
C
18 AUDITORS.
'A* ^}™^^ ^^ appointment of a firm of Chartered Accountants
Auditors. •>- J-by
name was in compliance with the Companies
Act, 1862, and Table A., the following' case was
submitted in May, 1882, by the solicitors of the
Institute of Chartered Accountants in England and
Wales for the opinion of Counsel.
Case for
opinion of
Counsel.
CASE.
The Articles of Association scheduled to the
Companies Act, 1862, Table A, Clause 83, provide
as follows :—
" Once at the least in every year the Accounts
of the Company shall be examined and the
correctness of the Balance Sheet ascertained bj' one
or more Auditor or Auditors."
Clause 81. " The first Auditors shall be appointed
by the Directors. Subsequent Auditors shall be
appointed by the Company in General Meeting.
Substantially for the present purpose these clauses
have been adopted in the Articles of Association
of the great majority of Companies established
since the passing of the Act."
Last year a question was raised before the
Directors of a large Company whether the appoint­ment
of a firm of Accountants ccmsisting of four
persons, not severally named in the title of the
firm, was a legal appointment in conformity with
the clauses above mentioned, and this year the
same question has again been raised.
Counsel will please advise on the following
questions, viz. :—
1. If a resolution be passed appointing ' Smith,
Jones and Co.' Auditors of a Company,
would that resolution be a legal appoint-
APPOINTMENT AND REMUNERATION OF AUDITORS. 1 9
ment of an Auditor within the meamng
of the Act ?
2. Would such resolution naming the firm of
' Smith, Jones and Co.' include Robinson
and Brown, they being members of the
above firm ?
OPINION.
On the points submitted to me I am of opinion Counsel's
i ^ opmion.
1. Yes. The name or style under whicli a
firm carries on business is merely a
conventional name applicable to those
persons only who are members of the
firm on each occasion when the name is
used. If, therefore, one person. Smith,
is trading under the firm of " Smith,
Jones and Co.," he will be one Auditor
within the meaning of Clause 83, Table
A, of the Act of 1862. If two persons.
Smith and Jones, are carrying on business
under that style, they will be " more
Auditors" •\\dthin the meaning of the
clause.
2. Such resolution as referred to would include
Robinson and Brown, if they were mem­bers
of the firm at the time the resolution
was passed. It could always be shown in
evidence that they were at that time
partners in the firm of " Smith, Jones
and Co." Carruthers v. Sheddon (6 Taunt.
1.5), Bass V. Clive (4 M. & S. 13).
R. B. FiNLAY, Q.C.
ARTHUR L. ASHTON.
c 2
20 AUDITORS.
Eemtxnera- 'J^]JQ remuneration of the first Auditors of a new
tion 01
Auditors Company reoistered under the Act of 1862, and
under Act of •• *' °
1862. Table A., is fixed by the Directors, that of Auditors
appointed subsequently, by the Shareholders in
General Meeting. When a Company is registered
with special Articles of Association, a clause is
usually inserted to the same effect. The remunera­tion
of Auditors of Banking Companies appointed
under the Act of 1879 has to be fixed by the
General Meeting appointing them.
Under Section 91 of the Companies Clauses Consolidation
Compnmes . ••-
Clauses Act, 1845, provides that the remuneration of the
Consolidation
Act, 1845. Auditors shall, tinless otherwise provided by the
special Act of Parliament, be settled by a General
Meeting of the Company, and it has been decided
by the Court in Page and Bishop v. Eastern and
Midlands Railway Company, that Auditors
appointed under this section cannot recover any
other remuneration than that fixed upon at a
General Meeting of the Company.
Action by In this case the Plaintifi's had been appointed
Auditors for . . . . . „ -, . , . 0 1 1 11
additional Auditors m terms oi a resolution oi Shareholders
remimeratiou n -^ T r\ ^ -inrrn • f n
01 oth (Jctober, 1878, at a remuneration oi five
guineas each per annum.
Nothing was said definitely as to the character
of the work to be done, and for some time the
Plaintifis only audited the Capital Account of the
Company. When required to audit the Revenue
Account also they declined to do so without an
order from the Directors directing them to audit
both the Capital and Revenue Accounts, and the
Directors thereupon passed a resolution to this
efi'ect.
The Plaintiffs audited the Revenue Account and
APPOINTMENT AND REMUNERATION OF AUDITORS. 21
claimed to be paid in respect of it an additional fee
to the five guineas payable under the resolution of
the 7th October, 1878. This the Directors refused
to agree to.
Counsel for the Plaintitfs relied on Bill v. The Ai-g""ieut of
Counsel.
Darenth Valley Railway Company (26 L.J. Ex. 81)
to show that a resolution at a General Meeting was
not necessary to entitle the Plaintiffs to maintain an
Action.
Counsel for the Defendants contended the case
was distinguishable, as there the Directors had power
to appoint a Secretar}^, and the fixing of his
remuneration was incidental to the apj)ointment, but
that the choice of Auditors was expressly confined
by Section 91 to a General Meeting of the Company.
Tmjlor V. Breiver (1 M. & S. 290) cited.
Mr. Justice Grove, after stating the facts, and c^irt in °^
sayinff that it was doubtful whether the communica- ^'^°^"'°*,
tion of the resolution was intended to bind the
Company, continued " But even if it was intended
"to bind the Company, I am of opinion that the
Company Avould not be legally liable. To hold that
they were would be to repeal the express provision
of Section 91. Bill v. The Darenth Valley Railivay
Company was relied on for the Plaintiffs, but I think
that case is distinguishable on the ground mentioned
in the argument, namely, that there the Directors
had the power of appointing the Secretary, and the
remuneration ^vas fixed as one of the terms of his
appointment. In this case the Company alone had
the power of appointing Auditors, they exercised
that power, and at the same time determined the
Auditors' remuneration. There must be judgment
for the Defendants."
22 AUDITORS.
Kemunera- Althouffh the remuneration of the Auditors has to
tion usualJy o
agreed witii ]^Q formally votcd by the shareholders in General
Directors. •' •'
Meeting, yet it is usual for the fee to be previously
agreed between the Directors and the Auditors, the
amount being calculated according to the time
occupied on the audit.
Scale of Xhe Institute of Chartered Accountants have not
charges or
Chartered prescribed any scale of charges, but the foUowmg
Accountants. '• . "^ . . °
scale is adopted by the ma,jority of the Members
practising in London :—
Per day of Seven hours.
Principals £3 3s. to £10 10s.
First Class Clerks, if Chartered
Accountants ... ... £2 2s.
First Class Clerks (if not) ... £1 l i s . 6d.
Other Clerks £1 Is
Exclusive of disbursements.
Fees of "pjjg fggy payable to public Auditors appointed by
Auditors. ^j^^g Treasury for auditing the accounts of Friendly
Societies and specially authorised Societies granting
Friendly Society benefits are
£ s. d.
For societies consisting of not more than
100 members ... ... . . . 1 1 0
For societies with over 100 members,
but not exceeding 500 members, in
respect of each 100 members or
part thereof ... ... ... 1 1 0
For societies consisting of over 500
members, in respect of the first
500 members ... ... ... 5 5 0
with an additional 10s. 6d. in respect of each
additional 100 members or part thereof. No fee,
however, to exceed £52 10s. unless by special
arrangement.
The scale of fees payable to public Auditors for
auditing the accounts of all other societies registered
APPOINTMENT AND REMUNERATION OE AUDITORS. 23
under the Friendly Societies Acts, viz., cattle insu­rance
societies, benevolent societies, wt)rking men's
clubs, specially authorised societies (except such as
grant Friendly Society benefits), is as follows :—
éé s. d.
For societies whose total gross receipts
do not exceed £2,000 per annum 1 1 0
For societies whose total gross receipts
exceed £2,000, but do not exceed
£10,000 per annum, in respect of
each £2,000 or fracticm thereof ... 1 1 0
Where the gross receipts exceed £10,000 per
annum, the fee is to be fixed by private arrange­ment.
The fees for auditing the accounts of Industrial
and Provident Societies are
' £ s. d.
For societies whose total sales do not
exceed £2,000 per annum ... 1 1 0
For societies whose total sales exceed
£2,000, but do not exceed £10,000
per annum, in respect of each
£2,000, or fracticm thereof ... 1 1 0
For societies whose total sales exceed
£10,000, but do not exceed £25,000
per annum, in respect of the first
£10,000 5 5 0
with an additional 10s. 6d. in respect of each
additional £2,000, or fracticm thereof.
When the sales exceed £25,000 per annum the
fee to be fixed by special arrangement.
The v^'ord " sales " in the case of societies for the
buying and selling of land to include instalments
in repayment of advances.
The Auditor may accept audits on terms lower
than those of the above scale.
24 AUDITORS.
CHAPTER III.
SECTIONS OF THE STATUTES RELATIKa TO THE BOOKS,
ACCOUNTS, AND AUDITORS OF JOINT STOCK COMPANIES,
BUILDING SOCIETIES, FRIENDLY SOCIETIES, AND INDUS­TRIAL
AND PROVIDENT SOCIETIES.
The Companies Act, 1862—The Companies Act, 1879—The Comjianies
Act, 1880—The Companies (Colonial Registers) Act, 1883—The
Companies Clauses Consolidation Act, 1845—The Companies
Clauses Act, 1863—The Eailway Companies Securities Act,
1866—The Eailway Companies Act, 1867—The Eailway
Companies (Scotland) Act, 1867—The Eegulation of Eailways
Act, 1868—The Eegulation of Eailways Act, 1889—The Gasworks
Clauses Act, 1847—The Gasworks Clatises Act, 1871—The
Waterworks Clauses Act, 1847—The Metropolis Water Act,
1852—The Metropolis Water Act, 1871—The Life Assurance
Companies Act, 1870—The Building Societies Act, 1874—The
Friendly Societies Act, 1875—The Industrial and Provident
Societies Act, 1876—The Falsification of Accounts Act, 1875.
siiouicibe ao- "^^ ^* ^^ very necessary that every one holding
Acts^of Par-^^ an officc of a public nature should clearly under-ft
™?"t^'^" ^'tfii^d his legal responsibilities, an Auditor should
Company. \)Q acquainted with the Acts of Parliament under
which his apjaointment is made.
It is, of course, desirable he should be familiar
with all the Acts regulating the Company or
Society of which he is the Auditor, and special
attention should be given to those sections relating
to the Books and Accounts, and to the appoint­ment
and duties of the Auditors.
When a Company has been incorporated by
SECTIONS OF THE STATUTES. 2o
Special Act of Parliament, or if registered under
the Companies Act, 1862, has Articles of Associa­tion,
the Auditor should be provided with a copy
of the Private Act or the Articles of Association,
and these should be read in conjunction with the
Public Acts as explained in the first chapter.
The present chapter contains the sections of
the Public Acts having reference to the Books,
Accounts, and the appointment and duties of
Auditors. The Acts of Parliament from which
they are taken do not follow in chronological
order, but for convenient reference are so arranged
that the Acts referring to the same class of
Companies will be found together.
THE COMPANIES ACT, 1862.
(25 & '26 Vict., c. 89.)
[7th August, 1862.]
1. This Act may be cited for all Purposes as ^^ort Title.
" The Companies Act, 1862."
3. For the Purposes of this Act a Company ücfinition of
-"• _ _ . Insurance
that carries on the business of insurance in Company.
C(.)mmon with any other business or businesses
shall be deemed to be an Insurance Company.
15. In the case of a Company limited by Application
'^ -^ . . . "^ of Table A.
shares, if the Memorandum of Association is ncrt
accompanied by Articles of Association, or in so
far as the Articles do not exclude or modify the
regulations contained in the Table marked A in
the First Schedule hereto, the last-mentioned
regulations shall, so far as the same are applicable,
be deemed to be the regulations of the Company in
the same manner and to the same extent as if they
26 AUDITORS.
Register of
Jlembers.
Annual List
of Members.
had been inserted in Articles of Association and the
Articles had been duly registered.
25. Every Company under this Act shall cause
to be kej^t in one or more books a Register of
its Members, and there shall be entered therein
the following particulars :
(1.) The names and addresses, and the occupa­tions,
if any, of the members of the
Company, with the addition, in the case
of a Company having a capital divided
into shares, of a statement of the shares
held by each member, distingTiishing each
share by its number: and of the
amount paid or agreed to be considered
as paid on the shares of each member :
(2.) The date at which the name of any person
was entered in the Register as a member :
(3.) The date at which any person ceased to
be a member :
26. Every Company under this Act, and having
a capital divided into shares, shall make, once at
least in every year, a list of all persons who, on
the fourteenth day succeeding the day on which
the Ordinary Genera,l Meeting, or if there is more
than one Ordinary Meeting in each year, the first
of such Ordinary General Meetings is held, are
members of the Company: and such list shall
state the names, addresses, and occupations of all
the members therein mentioned, and the number
of shares held by each of them, and shall contain
a summary specifying the following particulars :
(1.) The amount of the capital of the
Company, and the number of shares
into which it is divided ;
SECTIONS OF THE STATUTES. 27
(2.) The number of shares taken from the
commencement of the Company up to
the date of the summary ;
(3.) The amount of calls made on each share ;
(4.) The total amount of calls received ;
(5.) The total amount of calls unpaid ;
(G.) The total amount of shares forfeited ;
(7.) The names, addresses, and occupations of
the persons Avho have ceased to be members
since the last list was made, and the
number of shares held by each of them.
The above list and summary shall be contained
in a separate part of the register, and shall be
completed within seven days after such four­teenth
day as is mentioned in this section, and
a copy shall forthwith be forwarded to the
Registrar of Joint Stock Companies.
30. Xo notice of any trust, expressed, implied, -^^^^J °*
or constructive, shall be entered on the register, or be Register,
receivable by the registrar, in the case of Compani(;s
under this Act and registered in England or Ireland.
[It will he observed this section does not apply to
Companies registered in Scotland.]
43. Every Limited Comi^any under this Act shall Register of
*' _ >- J Mortgages.
keep a register of all mortgages and charges
specifically affecting property of the Company,
and shall enter in such register in respect of
each mortgage or charge a short description of
the property mortgaged or charged, the amount
of charge created, and the names of the
mortgagees or persons entitled to such charge:
If any property of the Company is mortgaged or
charged without such entry as aforesaid being made,
every Director, Manager or other officer of the
28 AUDITORS.
Certain Com­panies
to
pnblisli State­ment
entered
in Sclieclule.
List of
Directors to
be sent to
Registrar.
G-enertil
Meeting of
Company".
Evidence of
Proceedings
at Meetings.
Company who knowingly and wilfully authorises or
permits the omission of such entry shall incur a
penalty not exceeding fifty pounds.
44. Every Limited Banking Company and every
Insurance Company, and Deposit, Provident, or
Benefit Society under this Act shall, before it
commences business, and also on the first Monday
in February and the first Monday in August in every
year during which it carries on business, make a
statement in the form marked D (see Appendix)
in the First Schedule hereto, or as near thereto
as circumstances will admit, and a ct)py of such
statement shall be put up in a conspicuous place
in the registered office of the Company and in
every branch office or place where the business of
the Company is carried on.
45. Every Company under this Act, and not
having a capital divided into shares, shall keep
at its registered office a register contaimng the
names and addresses and the occupations of its
Directors or Managers, and shall send to the
liegistrar of Joint Stock Companies a copy of
such register, and shall from time to time
notify to the Registrar any change that takes
place in such Directors or Managers.
49. A Greneral Meeting of every Company under
this Act shall be held once at least in every year.
67. Every Company under this Act shall cause
minutes of all resolutions and proceedings of
General Meetings of the Company, and of the
Directors or Managers of the Company in cases
where there are Directors or Managers, to be duly
entered in books to be from time to time provided
for the purpose.
S E C T I O I V S O F T H E S T A T U T E S . 29
FIRST SCHEDULE.
TABLE A.—REGULATIONS FOR MANAGEMENT OF A
COMPANY LIMITED BY SHARES.
Dividends.
{12). The Directors may, with the sanction of^™'^'^"'^^
the Company in General Meeting, declare a
dividend to be paid to the members in pro­portion
to their shares.
(73.) No dividend shall be payable except out
of the profits arising from the business of the
Company.
(74.) The Directors may, before recommending
any dividend, set aside out t)f the profits of the
Company such sum as they think proper as a
reserve fund to meet contingencies, or for
equalising dividends, or for repairing or main­taining
the works connected with the business
of the Company, or any part thereof; and the
Directors may invest the sum ^o set apart as
a reserved fund upon such securities as they
may select.
(77.) JSTO dividend shall bear interest as against
the Company.
Accounts.
(78.) The Directors shall cause true Accoimts to Accounts,
be kept—
Of the stock-in-trade of the Company;
Of the sums of money received and expended
by the Company and the matter in respect
of which such receipt and expenditure
takes place ; and
Of the credits and liabilities of the Com­pany,
Jl
30 AUDITORS.
The Books of Account shall be kept at the
registered office of the Company, and, subject to
any reasonable restrictions as to the time and
manner of inspecting the same that may be imposed
by the Company in General Meeting, shall be open
to the inspection of the members during the hours
of business,
incomcfaud* C'^-) Oiicc at Icast in every year the Directors
Expenditure. p]^all lay before the Company in General Meeting a
Statement of the Income and Expenditure for the
past year, made up to a date not more than three
months before such Meeting.
(80.) The Statement so made shall show, arranged
under the most convenient heads, the amount of
gross income, distinguishing the several sources
from Avhich it has been derived, and the amount t)f
gross expenditure, distinguishing the expense of
the establishment, salaries, and other like matters :
Every item of expenditure fairly chargeable
against the year's income shall be brought into
account, so that a just balance of Profit and
Loss may be laid before the Meeting ; and in
cases where any item of expenditure which may
in fairness be distributed over several years has
been incurred in any one year the whole amount
of such item shall be stated, with the addition
of the reasons why only a portion of such
expenditure is charged against the income of
the year.
Balance (81.) A Balance Sheet shall be made out in every
Sheet. ^ ^ . . "
year, and laid before the Company in General
Meeting, and such Balance Sheet shall contain a
summary of the property and liabilities of the
Company arranged under the heads appearing in
SECTIONS OF THE STATUTES. 31
the form annexed to this Table, or as near thereto ^
as circumstances admit. i
(82.) A printed copy of such Balance Sheet shall,
seven days previously to such meeting, be served
on every member in the manner in which notices
are hereinafter directed to be served.
(83.) Once at the least in every year the
Accounts of the Company shall be examined, and
the correctness of the Balance Sheet ascertained,
by one or more Auditor or Auditors.
(84.) The First Auditors shall be appointed ^PP°^*^^^"*
by the Directors: subsequent Auditors shall be
appointed by the Company in General Meeting.
(85.) If one Auditor only is appointed, all the
provisions herein contained relating to Auditors
shall apply to him.
(86.) The Auditors may be Members of the
('ompany ; but no person is eligible as an Auditor
who is interested otherwise than as a member in any
transaction of the Company ; and no Director or
other officer of the Company is eligible during his
continuance in office.
(87.) The election of Auditors shall be made by
the Company at their Ordinary Meeting in each
Year.
(88.) The remuneration of the first Auditors ^emunera- ,
^ ' _ tion.
shall be fixed by the Directors ; that of subsequent
Auditors shall be fixed by the Company in General
Meeting.
(89.) Any Auditor shall be re-eligible on his
quitting office.
(90.) If any casual vacancy occurs in the office
of any Auditor appointed by the Company, the
Directors shall forthwith call an Extraordinary
32 AUDITORS.
General Meeting for the purpose of supplying the
same.
(91.) If no election of Auditors is made in
manner aforesaid the Board of Trade may, on the
application of not less than five members of the
Company, appoint an Auditor for the current year,
and fix the remuneration to be paid to him by the
Company for his services.
Auditor (^^0 Every Auditor shall be svipplied with a
copy of the Balance Sheet, and it shall be his duty
to examine the same with the Accounts and
Vouchers relating thereto.
(93.) Every Auditor shall have a list delivered
to him of all books kept by the Company, and shall,
at all reasonable times, have access to the Books and
Accounts of the Company. He may, at the expense
of the Company, employ Accountants or other
persons to assist him in investigating such Accounts,
and he may in relation to such Accounts examine
the Directors or any other officer of the Companj".
AudSorf (^"^O ^^'^^ Auditors shall make a Report to the
Members upon the Balance Sheet and Accounts,
and in every such report they shall state whether
in their opinion the Balance Sheet is a full and fair
Balance Sheet, containing the particulars required
by these regulaticms, and properly draAvn up so
as to exhibit a true and correct view of the state
of the Company's affairs ; and in case they have
called for explanations or information from the
Directors, whether such explanations or informa­tion
have been given by the Directors, and whether
they have been satisfactory ; and such Report shall
be read, together with the Report of the Directors,
at the Ordinary Meeting,
SECTIONS OF THE STATUTES. 33
SECOND SCHEDULE.
FORM B.—MEMORANDUM AND ARTICLES OF ASSOCIATION
OE A COMPANY LIMITED BY GUARANTEE, AND NOT
HAVING A CAPITAL DIVIDED INTO SHARES.
Accounts.
(29.) The Accounts of the Company shall be Audit
^ ^ _ X ./ Committee.
audited by a Committee of five Members, to be
called the Audit Committee.
(30.) The first Audit Committee shall be
nominated by the Directors out of the body of
Members.
(31.) Subsequent Audit Committees shall be
nominated by the Members at the Ordinary
General Meeting in each year.
(32.) The Audit Committee shall be supj)lied
with a copy of the Balance Sheet, and it shall be
their duty to examine the same with the Accounts
and Vouchers relating thereto.
(33.) The Audit Committee shall have a list
delivered to them of all books kept by the
Company, and they shall at all reasonable times
have access to the Books and Accounts of the
Company : They may, at the expense of the
Company, employ Accountants or other persons to
assist them investigating such Accounts, and they
may in relation to such Accounts examine the
Directors or any other officer of the Company.
(34.) The Audit Committee shall make a Eeport
to the Members upon the Balance Sheet and
Accounts, and in every such Report they shall state
whether in their opinion the Balance Sheet is a full
and fair Balance Sheet, containing the particulars
required by these regulations of the Company, and
D
34 AUDITORS.
properly drawn up, so as to exhibit a true and
correct view of the state of the Company's affairs,
and in case they have called for explanation or
information from the Directors, whether such
explanations or information have been given by the
Directors, and whether they have been satisfactory,
and such Report shall be read together with the
Report of the Directors at the Ordinary Meeting.
THE COMPANIES ACT, 1879.
(42 & 43 Vict, c. 76.)
[15th August, 1879.]
Short Title. ]_ This Act may be cited as the Companies Act,
1879.
Act not to 2. This Act shall not apply to the Bank of
apply to Jiank ir J
of England. England.
Act to be con- 3. Xhis Act shall, so far as is consistent with the
strued •with '
25 & 26 Vict., tenor thereof, be construed as one with the
e. 89, '
30& 31 Vict., Companies Acts, 1862, 1867, and 1877, and those
c. 131, and ^ . .
40 & 41 Vict., Acts together with this Act may be referred to as
c. 26. ° •'
the Companies Acts, 1862 to 1879.
AcTOunts of ^* (•'••) öi^cö ^* 'ttis least in every year the Accounts
Banking Q£ evcrv Banking Company registered after the
Companies. -^ o r ./ ö
passing of this Act as a Limited Company shall be
examined by an Auditor or Auditors, who shall
be elected annually by the Company in General
Meeting.
(2.) A Director or Officer of the Company shall
not be capable of being elected Auditor of such
Company.
(3.) An Auditor on quitting office shall be
re-eligible.
(4.) If any casual vacancy occurs in the office of
SECTIONS OF THE STATUTES. 35
any Auditor, the surviAdng Auditor or Auditors (if
any) may act, but if there is no surviving Auditor, the
Directors shall forthwith call an Extraordinary
General Meeting for the purpose of supplying the
vacancy or vacancies in the Auditorship.
(5.) Every Auditor shall have a hst dehvered
to him of all books kept by the Company, and shall
at all reasonable times have access to the Books and
Accounts of the Company ; and any Auditor may,
in relation to such Books and Accounts, examine the
Directors or any other Officer of the Company:
Provided that if a Banking Company has branch
banks beyond the limits of Europe, it shall be
sufficient if the Auditor is allowed access to such
copies of and extracts from the Books and Accounts
of any such branch as may have been transmitted
to the head office of the Banking Company in the
united Kingdom.
(6.) The Auditor or Auditors shall make a I^eport ^®P9^*
to the Members on the Accounts examined by him
or them, and on every Balance Sheet laid before the
Company in General Meeting during his or their
tenure of office; and in every such Report shall
state whether, in his or their opinion, the Balance
Sheet referred to in the Report is a full and fair
Balance Sheet, properly drawn up, so as to exhibit
a true and correct view of the state of the Company's
affiiirs, as shown by the Books of the Company ; and
such Report shall be read before the Company in
General Meeting.
(7.) The remuneration of the Auditor or Auditors
shall be fixed by the General Meeting appointing
such Auditor or Auditors, and shall be paid by the
Company,
D 2
36 AUDITORS.
sSoeSheet ^^'^ Every Balance Sheet submitted to the Annual
or other Meeting of the Members of every Banking
Company registered after the passing of this Act as
a Limited Company shall be signed by the Auditor
or Auditors, and by the Secretary or Manager (if
any), and by the Directors of the Company, or
three of such Directors at the least.
THE COMTANIES ACT, 1880.
(43 Yict., c. 19.)
[24th March, 1880.]
Short Title. 1. This Act may be cited for all purposes as
the Companies Act, 1880.
Construction 2. This Act shall, so far as is consistent with
of Acts. '
25 & 26 Vict., the tenor thereof, be ccmstrued as one with the
30& 31 Vict., Companies Acts 1862, 1867, 1877, and 1879, and
40 & 41 Vict., the said Acts and this Act may be referred to as
c. 26. -^
42 4 43 Vict., the Companies Acts, 1862 to 1880.
0. 76. ^
Accumulated 3- When any Company has accumulated a sum
reTume^To''^ of Undivided profits, which with the consent of
i^'reductior t^^^ shareholders may be distributed among the
Capitair^^ shareholders in the form of a dividend or bonus,
it shall be lawful for the Company, by Special
Resolution, to return the same, or any part
thereof, to the shareholders in reduction óf the
paid-up capital of the Company, the unpaid
capital being thereby increased by a similar
amount. The powers vested in the Directors of
making calls upon the shareholders in respect of
moneys unpaid upon their shares shall extend to
the amount of the unpaid capital as augmented
by such reduction.
SECTIONS OF THE STATUTES. 37
4. No such Special Resolution as aforesaid shall ^°^^^°^^^^°^
take effect until a Memorandum, showine; the }^^^ partiou-
' o lars have Deeii
particulars required by law in the case of a registered,
reduction of ca2)ital by order of the Court, shall
have been produced to and registered by the
Registrar of Joint Stock Companies.
5. Upon any reduction of paid-up capital made |i°^f 110°/"^
in pursuance of this Act, it shall be lawful for within one
J- ' mouth after
any shareholder, or for any one or more of Passing of
, Eesohition to
several ioint shareholders, within one month after require Com­pany
to retam
the passing of the Special Resolution for such moneys paid
, . • m • upon Shares
reduction, to require the Company to retain, and held by such
T)crsoii«
the Company shall retain accordingly, the Avhole
of the moneys actually paid upon the shares held
by such person, either alone or jointly with any
other jjerson or persons, and which, in consequence
of such reduction, would otherwise be returned to
him or them, and thereupon the shares in respect
of which the said moneys shall be so retained
shall, in regard to the payment of dividends
thereon, be deemed to be paid up to the same
extent only as the shares on which payment as
aforesaid has been accepted by the shareholders
in reduction of their paid-up capital, and the
Company shall invest and keep invested the
moneys so retained in such securities authorised
for investment by Trustees as the Company shall
determine, and upon the money so invested, or
upon so much thereof as from time to time
exceeds the amount of calls subsequently made
upon the shares in respect of which such money
shall have been retained, the Company shall pay
such interest as shall be received by them from
time to time on such securities, and the amount
38 AUDITORS.
so retained and invested shall be held to represent
the future calls which may be made to replace
the capital so reduced on those shares, -whether
the amount obtained on sale of the whole or such
proportion thereof as represents the amount of any
call when made, produces more or less than the
amount of such call.
S r ^ * ° 6. From and after such reduction of capital the
whicTshai-e- Company shall specify in the amiual Lists of
re^uiredtiT^ Members, to be made by them in pursuance of
undei^s^s- *^® Twcnty-sixth Section of the Companies Act,
also to 1862, the amounts which any of the shareholders
specify •'
amounts of of the Company shall have required the Company
profits re- i. J \. i. u
turned to to retain, and the Company shall have retained
Shareholders, _ _ i ./
25 & 20 Vict., accordingly, in pursuance of the Fifth Section of
this Act, and the Company shall also specify in
the Statements of Account, laid before any General
Meeting of the Company, the amount of the
undivided profits of the Company which shall
have been returned to the shareholders in reduction
of the paid-up capital of the Company under this
Act.
THE COMPANIES (COLONIAL REGISTERS) ACT, 1883.
(46 & 47 Vict., c. 30.)
[20th August, 1883.]
Short Title 1. This Act may be cited for all purposes as the
and construe- \A IT-tion.
Companies (Colonial Registers) Act, 1883 ; and this
Act shall, so far as is consistent with the tenor
thereof, be construed as one with the Companies
Acts, 1862 to 1880, and the said Acts and this Act
may be referred to as the Companies Acts, 1862
to 1883.
2. In this Act the term " Company" means a
Company Registered under the Companies Act,
SECTIONS- OF THE STATUTES. 39
1862, and ha^dng a capital divided into shares ; the
term " Shares" includes Stock ; the term "Colony "
does not include any place within the United
Kingdom, the Isle of Man, or the Channel Islands, Definitions,
but includes such territories as may for the time
being be vested in Her Majesty by virtue of an Act
of Parliament for the Government of India, and
any plantation, territory, or settlement situate
elsewhere within Her Majesty's dominions.
3. (1.) Any Company whose objects comprise the com'^anies to
transaction of business in a colony may, if ^/'^P poio^iiai
•' •' ' liegisters.
authorised so to do by its regulations as originally
framed or as altered by Special Resolution, cause to
be kept in any colony in which it transacts business
a branch Register or Registers of members resident
in such colony.
(2.) The Company shall give to the Registrar of
Joint Stock Companies notice of the situation of the
office where any such Branch Register (in this Act
called a Colonial Register) is kept, and of any
change therein, and of the discontinuance of any
such office in the event of the same being
discontinued.
(3.) A Colonial Register shall, as regards the
particulars entered therein, be deemed to be a part
of the Company's Register of Members, and shall
be prima facie evidence of all particulars entered
therein. Any such register shall be kept in the
manner provided by the Companies Acts, 1862 to
1880.
(4.) The Company shall transmit to its registered
office a copy of every entry in its Colonial Register
or Registers as soon as may be after such entry is
made, and the Company shall cause to be kept at its
40 AUDITORS.
registered office, duly entered up from time to
time, a duplicate or duplicates of its Colonial
Register or Registers. The provisions of Section
Thirty-two of the Companies Act, 1862, shall apply
to every such duphcate, and every such duplicate
shall, for all the purposes of the Companies Acts,
1862 to 1880, be deemed to be part of the Register
of Members of the Company.
(5.) Subject to the provisions of this Act with
respect to the duplicate register, the shares
registered in a Colonial Register shall be distin­guished
from the shares registered in the principal
register, and no transaction with respect to any
shares registered in a Colonial Register shall,
during the continuance of the registration of such
shares in such Colonial Register, be registered in
any other register.
(6.) The Company may discontinue to keep any
Colonial Register, and thereupcm all entries in that
register shall be transferred to some other Colonial
Register kept by the Company in the same colony,
or to the Register of Members kept at the registered
office of the Company.
(8.) Subject to the provisions of this Act any
Company may, by its regulations as originally
framed, or as altered by special resolution, make
such provisions as it may think fit respecting the
keeping of Colonial Registers.
THE COMPANIES CLAUSES CONSOLIDATION ACT, 1845.
(8 Vict., c. 16.)
[8th May, 1845.]
to''aii°COTa-''' This Act shall apply to every Joint Stock
poratedby"^' Company which shall by any Act which shall
SECTIONS OF THE STATUTES. 41
hereafter be passed be incorporated for the purpose ^ be^^Ssed'^
of carryhag on any Undertaking, and this Act shall
be incorporated with such Act; and all the Clauses
and Provisions of this Act, save so far as they shall
be expressly varied or excepted by any such Act,
shall apply to the Company which shall be
incorporated by such Act, and to the Under­taking
for carrying on Avhich such Company shall
be incorporated, so far as the same shall be
apphcable thereto respectively ; and such Clauses
and Provisions, as well as the Clauses and
Provisions of every other Act which shall be
incorporated with such Act, shall, save as aforesaid
form part of such Act, and be construed together
therewith as forming one Act.
9. The Company shall keep a book to be called fijfrehJi^ers
the " Register of Shareholders ; " and in such book
shall be fairly and distinctly entered, from time to
time, the names of the several Corporations, and
the names and additions of the several persons
entitled to shares in the Company, together with
the number of shares to which such shareholders
shall be respectively entitled, distinguishing each
share by its number and the amount of the
subscriptions paid on such shares, and the
surnames or corporate names of the said share­holders
shall be placed in aljjhabetical order ;
and such book shall be authenticated by the
common seal of the Company being affixed
thereto ; and such authentication shall take place
at the First Ordinary Meeting, or at the next
subsequent Meeting of the Company, and so from
time to time at each Ordinary Meeting of the
Company.
42 AUDITORS.
auirehoiders ^^' ^^^ addition to the said Register of Share­holders,
the Company shall provide a book, to be
called the " Shareholders' Address Book," in which
the Secretary shall from time to time enter in
alphabetical order the corporate names and places
of business of the several shareholders of the
Company, being Corporations, and the surnames
of the seA'sral other shareholders, with their
respective christian names, places of abode, and
descriptions, so far as the same shall be known
to the Company.
Register of 45. ^ ReOTster of Mortffa^es and Bonds shall be
Mortgages ° 00
and Bonds, kept by the Secretary, and within fourteen days
after the date of any such mortgage or bond an
entry or memorial, specifying the number and
date of such mortgage or bond and the sums
secured thereby, and the names of the parties
thereto, with their proper additions, shall be made
in such Register.
Payment of 4g_ 'j'jjg interest of the money borrowed upon any
-Interest on j i ^
Moueys bor- g^c]! mortraffe or bond shall be paid at the periods
rowed. . . .
appointed in such mortgage or bond, and if no
period be appointed, half-yearly, to the several parties
entitled thereto, and in preference to any dividends
payable to the Shareholders of the Company.
Power to gi_ Jt shall be lawful for the Company from
consolidate ••- •'
Shares into time to time, with the consent of three-fifths of
btook.
the votes of the shareholders present in person or
by proxy at any General Meeting of the Company,
when due notice for that purpose shall have been
given, to convert or consolidate all or any part of
the shares then existing in the capital of the
Company, and in respect whereof the whole money
subscribed shall have been paid up, into a General
SECTIONS OF THE STATUTES. 43
Capital Stock, to he divided amongst the share­holders
according to their respective interests
therein.
63. The Company shall from time to time cause |f&i^ter of
the names of the several parties who may be
interested in any such Stock as aforesaid, mth the
amount of the interest therein possessed by them
respectively, to be entered in a book to be kept for
the purpose, and to be called " The Register of
Holders of Consolidated Stock."
91. Except as otherwise provided by the special Jo'^e's of the
^ J. ./ i Company to
Act, the following powers of the Company (that is be exercised
to say), the choice and removal of the Directors, General
. . . . Meeting.
except as hereinbefore mentioned, and the increasing
or reducing of their number where authorised
by the special Act, the choice of Auditors, the
determination as to the remuneration of the
Directors, Auditors, Treasurer, and Secretary, the
determination as to the amount of money to be
borrowed on mortgage, the determination as to the
augmentation of Capital, and the declaration of
dividends, shall be exercised only at a General
Meeting of the Company.
And with respect to the appointment and duties
of Auditors, be it enacted as follows :
101. Except where, by the special Act, Auditors Election of
shall be directed to be appointed otherwise than by
the Company, the Company shall, at the First
Ordinary Meeting after the passhig of the Special
Act, elect the prescribed number of Auditors, and
if no number is prescribed two Auditors, in like
manner as is provided for the election of Directors ;
and at the First Ordinary Meeting of the Company
in each year thereafter the Company shall in like
44 AUDITOES.
manner elect an Auditor to supply the place of the
Auditor then retiring from oifice, according to the
provision hereinafter contained ; and every Auditor
elected as hereinbefore provided, being neither
removed nor disqualified nor having resigned, shall
continue to be an Auditor until another be elected
in his stead.
S^Auditorr -'-^^- Where no other qualification shall be
prescribed by the special Act, every Auditor shall
have at least one share in the Undertaking ; tmd he
shall not hold any office in the Company, nor be in
any other manner interested in its concerns, except
as a shareholder.
Rotation of ^Oo. One of such Auditors (to be determined in
Auditors. ^
the first instance by ballot betAveen themselves,
unless they shall otherwise agree, and afterwards by
seniority) shall go out of office at the First
Ordinary Meeting in each year ; but the Auditor so
going out shall be immediately re-eligible, and after
any such re-election shall, with respect to the going
out of office by rotation, be deemed a new Auditor.
office^of^^ "1 104. If any vacancy take place among the Auditors
Auditor. i^ the Course of the current year, then at any
General Meeting of the Company the vacancy may,
if the Company think fit, be supplied by election of
the shareholders.
Failure of 105. The provision of this Act respecting the
Meeting to . . • r^ • in- • • T^•
elect Auditor, failure of an Ordinary Meeting at which Directors
ought to be chosen shall apply, mutatis mutandis, to
any Ordinary Meeting at which an Auditor ought
to be appointed.
DeHvery of 106. The Directors shall deliver to such Auditors
Balance Sheet
&o., by the half-yearly or other periodical Accounts and
Directors to ,
Auditors. Balance Sheet fourteen days at the least befoi'e
SECTIONS OF THE STATUTES. 45
the ensuing Ordinary Meeting at which the same are
required to be produced to the shareholders as
hereinafter provided.
107. It shall be the duty of such Auditors to Duty of
Auditors.
receive from the Directors the half-yearly or other
periodical Accounts and Balance Sheet required to
be presented to the shareholders, and to examine
the same.
108. It shall be lawful for the Auditors to employ Powers of
- Auditors.
such Accountants and other persons as they may
think proper, at the expense of the Company, and
they shall either make a Special Report on the said
Accounts, or simply confirm the same ; and such
Report or Confirmation shall be read, together
with the Report of the Directors, at the Ordinary
Meeting.
And with respect to the keeping of Accounts,
be it enacted as follows :
115. The Directors shall cause full and true Accounts to
Accounts to be kept of all sums of money
received or expended on account of the Company
by the Directors and all persons employed by or
under them, and of the matters and things for
which such sums of money shall have been
received or disbursed and paid.
116. The books of the Com25any shall be Boots to be
balanced at the prescribed periods, and, if no
periods be prescribed, fourteen days at least
before each Ordinary Meeting ; and, forthwith on
the books being so balanced, an exact Balance
Sheet shall be made up, which shall exhibit a
true Statement of the Capital Stock, Credits, and
Property of every description belonging to the
Company, and the debts due by the Company at
46 AUDITORS.
the date of making such Balance Sheet, and a
distinct view of the Profit or Loss which shall
have arisen on the transactions of the Company
in the course of the preceding half-year ; and
previously to each Ordinary Meeting such Balance
Sheet shall be examined by the Directors, or any
three of their number, and shall be signed by the
Chairman or Deputy Chairman of the Directors.
Balance Sheet ng. The Directors shall produce to the share-to
be pro- ••-
ducedatthe holders assembled at such Ordinary Meetino^ the
Meeting. _ ^ . .
said Balance Sheet, applicable to the period imme­diately
preceding such Meeting, together with the
Report of the Auditors thereon, as hereinbefore
provided.
And with respect to the making of dividends,
be it enacted as follows :
Previously to 120. Previously to every Ordinary Meeting at
Declaration of _ . . .
Dividends a which a dividend is intended to be declared the
Scheme 1o be
prepared. Directors shall cause -a scheme to be prepared,
shomng the profits, if any, of the Company for
the period current since the preceding Ordinary
Meeting at which a dividend was declared, and
apportioning the same, or so much thereof as
they may consider applicable to the purposes of
dividend, among the shareholders, according to
the shares held by them respectively, the amount
paid thereon, and the periods during w^hich the
same may have been paid, and shall exhibit such
scheme at such Ordinary Meeting, and at such
Meeting a dividend may be declared according to
such scheme.
?^?^®'^^"°* 121. The Company shall not make any dividend
to be made so r j j
as to reduce whereby their Capital Stock will be in any
degree reduced : Provided always that the word
SECTIONS OF THE STATUTES. 47
" Dividend" shall not be construed to apply to a
return of any portion of the Capital Stock, with the
consent of all the Mortgagees and Bond Creditors
of the Company, due notice being given for that
purpose at an Extraordinary Meeting to be
convened for that object.
122. Before apportioning the profits to be ï!?'^^ï *° ^
'- '• ~ ^ Directors to
divided among' the shareholders the Directors ^^^ ^'P^^ ^
° , Fund for Con-may,
if they think fit, set aside thereout such tingencies.
sum as they may think proper to meet contin­gencies,
or for enlarging, repairing, or improving
the works comiected with the Undertaking, or any
part thereof, and may divide the balance only
among the shareholders.
123. No dividends shall be paid in respect of Dividend not
-•• _ '- to be paid
any share until all calls then due in respect of unless all
•^ ^ Calls paid.
that and every other share held by the person to
whom such dividend may be payable shall have
been paid.
THE COMPANIES CLAUSES ACT, 1863.
(26 & 27 Vict.,c. 118).
[28th July, 1863.]
1. This Act may be cited as The Companies Short Title.
Clauses Act, 1863.
14. The Preference Shares or Preference Stock Preference
Shares to be
shall be entitled to the preferential dividend, or entitled to
^ ' Dividends
interest assigned thereto, out of the profits of each ouiy out of
• • /^ T CM the Profits of
year, m priority to the Ordinary Shares and each Year.
Ordinary Stock of the Company ; but if in any
year ending on the day prescribed in the Special.
Act, and if no day is prescribed, then on the
thirty-first day of December, there are not profits
48 AUDITORS.
Interest on
Debenture
Stock to be a
primary
Charge.
Debenture
Stock to be
registered.
Separate
Accounts of
Debenture
Stock.
available for the payment of the full amount of
preferential dividend or interest for that year, no
part of the deficiency shall be made good out of
the profits of any subsequent year, or out of any
other funds of the Company.
24. The interest on Debenture Stock shall have
priority of payment over all dividends or interest
on any Shares or Stock of the Company, whether
Ordinary, or Preference, or Guaranteed, and shall
rank next to the interest payable on the Mortgages
or Bonds for the time being of the Company legally
granted before the creation of such stock ; but the
holders of Debenture Stock shall not, as among
themselves, be entitled to any preference or
priority.
28. The Company shall cause entries of the
Debenture Stock from time to time created to be
made in a register to be kept for that purpose,
wherein they shall enter the names and addresses
of the several persons and corporations from time
to time entitled to the Debenture Stock, with the
respective amounts of the stock to which they are
respectively entitled.
33. Separate and distinct Accounts shall be kept
by the Company, showing how much money has
been received for or on account of Debenture Stock,
and how much money borrowed or owing on
Mortgage or Bond, or which they have power so to
borrow, has been paid off by Debenture Stock, or
raised thereby, instead of being borrowed on
Mortgage or Bond.
SKCTTOXS OF T H E S T A T Ü T I ' : S . 4-9
THE RAILWAY COMPANIES SECURITIES ACT, 1866.
(29 & 30 Vict., c. 108).
[10th August, 1866.]
1. This Act may be cited as the Railway siwrt Title.
Companies Securities Act, 1866,.
2. In this Act—
The Term " Railway " includes a Tramway JJ^^of i^gr'
authorised by Act of Parliament incorpo­rating
The Companies Clauses Consolidation
Act, 1845, but not any other Tramway ;
The Term " Railway Company " includes every
Company authorised by Act of Parliament to
raise any loan capital for the construction
or working of a Railway, or for any
purposes comaected with the conveyance by
such Company of traffic on a Railway either
alone or in conjunction with other pui'poses ;
The Term " Debenture Stock " includes Mortojao^e
Preference Stock and Funded Debt, and any
Stock or Shares representing Loan Capital
of a Railway Company, by whatever name
called.
4. Half-years shall, for the purposes of this Act, Half-Years
•' ' r r ' tor purposes
be deemed to end on the thirtieth day of June °* ^'^*-
and the thirty-first day of December ; and the first
half-year to which this Act applies shall be that
ending on the thirty-first day of December, One
thousand eight hundred and sixty-six ; but the
Board of Trade, on the application of any Railway
Company, may (by writing under the hand of one
of their secretaries or assistant secretaries, which
shall be registered by the Railway Company at the
office of the said Registrar) appoint, with respect to
50 AUDITORS.
that Company, other days for the ending of half-years
(including the first).
Loan Capital 5. Within fourteen days after the end of each
Accounts to . ^
be made half-half-year every Railway Company shall make an
account of their Loan Capital authorised to be
raised and actually raised up to the end of that
half-year, specifying the particulars described in
the First Schedule to this Act, Part I. (which
Account for each half-year is in this Act referred
to as the Loan Capital half-yearly Account).
Form of g_ Jhe Board of Trade may from time to time.
Half-yearly •' '
Account. by notice pubhshed in the London, Edinburgh, and
Dublin Gazettes, prescribe the form in which the
Loan Capital half-yearly Account is to be made.
THE FIRST SCHEDULE.
PART 1.—PARTICULARS TO BE SPECIFIED IN LOAN
CAPITAL HALF-YEARLY ACCOUNT.
A. Every half-yearly Account to show—
(1.) The Act or Acts of Parliament under the
powers of which the Company have contracted any
Mortgage or Bond Debt existing at the end of the
half-year, or have issued any Debenture Stock
then existing, or the Act or Acts of Parliament by
or under which any Mortgage or Bond Debt or
Debenture Stock of the Company then existing has
been confirmed, and the Act or Acts of Parliament
under which the Company have any subsisting
power to contract any Mortgage or Bond Debt, or
to issue any Debenture Stock (either on fulfilment
of any condition or otherwise) ;
(2.) The amount or respective amounts of
Mortgage or Bond Debt or Debenture Stock
thereby authorised or confirmed ;
SECTIONS OF THE STATUTES. 51
(3.) Whether or not by any such Act or Acts the
obtaining of the certificate of a Justice or Sheriff
for any purpose, or the obtaining of the assent of
a Meeting of the Company, has been made a condi­tion
precedent to the exercise of the power thereby
conferred of borrowing on Mortgage or Bond, or of
creating and issuing Debenture Stock ;
(4.) The date at which such condition has been
fulfilled ;
(5.) The amount or the aggregate amount, tuider
the powers of such Act or Acts, actually borrowed
up to the end of the half-year on Mortgage or
Bond (distinguishing them), and then being an
existing debt, and of Debenture Stock actually
issued up to that time and then existing ;
(6.) The amount or the aggregate amount
remaining to be borrowed.
B. The second and every subsequent half-yearly
Account to show also—
(7.) The items described in paragraphs (2) and
(o) of this part of the present Schedule for two
consecutive half-years, and the increase or decrease
of any of those items in the second of those half-years
as compared with the first.
THE RAILWAY COMPANIES ACT, 1867.
(30 & 31 Vict., c. 127).
[20th August, 186 7.J
1. This Act may be cited as The Railway Short Title.
Companies Act, 1867.
23. All money borrowed or to be borrowed by a Priority of
n TIT - n i T ^ i Mortgages.
Company on Mortgage or Bond or Debenture Stock,
under the provisions of any Act authorising the
E 2
52 AUDITORS.
borrowing thereof, shall have priority against the
Company, and the property from time to time of
the Company, over all other claims on account of
any debts incurred or engagements entered into by
them after the passing of this Act: Provided always,
that this priority shall not affect any claim against
the Company in respect of any rentcharge granted
or to be granted by them in pursuance of The
Lands Clauses Consolidation Act, 1845, or The
Lands Clauses Consolidation Acts Amendment Act,
1860, or in respect of any rent or sum reserved by
or payable under any lease granted or made to the
Company by any person in pursuance of any Act
relating to the Company which is entitled to rank in
priority to, or j,9«rz' passu with, the interest or
dividends on the Mortgages, Bonds, and Debenture
Stock.
30. No dividend shall be declared by a Company
until the Auditors have certified that the half-yearly
Accounts proposed to be issued contain a full and
true statement of the financial condition of the
Company, and that the dividend proposed to be
declared on any shares is hond fide due thereon after
charging the revenue of the half-year mth all
expenses which ought to be paid thereout in the
judgment of the Auditors : but if the Directors differ
from the judgment of the Auditors with respect to
the payment of any such expenses out of the
revenue of the half-year, such difference shall, if
the Directors desire it, be stated in the Report to
the Shareholders, and the Company in General
Meeting may decide thereon, subject to all the
provisions of the law then existing, and such
decision shall for the purposes of the dividend be
SECTIONS OF THE STATUTES. ^3
final and binding ; but if no such difference is stated,
or if no decision is given on any such difference,
the judgment of the Auditors shall be final and
binding; and the Auditors may examine the books
of the Company at all reasonable times, and may
call for such further Accounts, and such vouchers,
papers, and information, as they think fit, and the
Directors and oflicers of the Company shall produce
and give the same as far as they can, and the
Auditors may refuse to certify as aforesaid until they
. have received the same ; and the Auditors may at
any time add t<.) their certificate, or issue to the
shareholders independently at the cost of the
Company, any statement respecting the financial
condition and prospects of the Company which they
think material for the information of the share­holders.
T H E liAiLWAY COMPANIES (SCOTLAXÜ) ACT, 1867.
(30 and 31 Vict., c. 126.)
[20th August, 1867.]
1. This Act may be cited as the Railway short Title.
Companies (Scotland) Act, 1867.
2. Except as in this Act expressly otherwise ^^^^^^ °^
})ro^dded, this Act shall extend to Scotland only.
23. All' money borrowed or to be borroAved by f™P*y °^
•J •' Mortgages.
a Company on Mortgage, Debenture, or Bond, or
Debenture Stock, under the provisions of any
Act authorising the borrowing thereof, shall have
priority against the Comjjany, and the property
from time to time of the Company, over all
other claims on account of any debts incurred
or engagements entered into by them after the
passing of this Act : Provided always that this
54 AUDITOKS.
priority shall not atfect any claim, right, or
remedy against the Company in respect of any
Rentcharge, annual Feu Duty, or Grround Annual
granted or to be granted by them in pursuance
of the Lands Clauses Consohdation (^Scotland) Act,
1845, or the Lands Clauses Consolidation Acts
Amendment Act, 1860, or in respect of any Rent
or sum reserved by or payable under any lease
granted or made to the Company by any person
in pursuance of any Act relating to the Company
which is entitled to rank in priority to, or pari
passu with, the interest or dividends on the
Mortgages, Debentures, Bonds, and Debenture
Stock; nor shall anything hereinbefore contained
affect any claim for land taken, used, or occupied
by the Company for the purposes of the Railway,
or injuriously affected by the construction thereof,
or by the exercise of any powers conferred on
the Company.
30. No dividend shall be declared by a Com­pany
until the Auditors have certified that the
half-yearly Accounts proposed to be issued contain
a full and true statement of the financial con­dition
of the Company, and that the dividend
proposed to be declared on any shares is hond fide
due thereon after charging the revenue of the
half-year with all expenses which ought to be
paid thereout in the judgment of the Auditors ;
but if the Directors differ from the judgment of
the Auditors with resjject to the payment of any
such expenses out of the income of the hah-year,
such difference shall, if the Directors desire
it, be stated in the Report to the Shareholders,
and the ComjDany in General Meeting may decide
SECTIONS OF THE STATUTES. 00
thereon, subject to all the provisions of the Law
then existing, and such decision shall for the
purposes of dividend be final and binding; but
if no such diöerence is stated, or if no decision
is given on any such difference, the judgment of
the Auditors shall be hnal and binding ; and the
Auditors may examine the books of the Company
at all reasonable times, and may call for such
further Accounts, and such vouchers, papers,
and information as they think fit, and the
Directors and officers of the Company shall pro­duce
and give the same as far as they can, and
the Auditors may refuse to certify as aforesaid
until they have received the same; and the
Auditors may at any time add to their certi­ficate,
or issue to the shareholders independently,
at the cost of the Company, any statement
respecting the financial condition and prospects
of the Company which they think material for
the information of the Shareholders.
THE REGULATION OE RAILWAYS ACT, 1868.
(31 & 32 A^ict., c. 119.)
[31st July, 1868.]
1. This Act may be cited as "The Regulation of Short Title.
Railways Act, 1868."
2. In this Act—
The Term " Railway" means the whole or any yg^o^^®*"'"
portion of a Railway or Tramway, whether Terms,
worked by steam or otherwise.
1.—Accounts^ Audit, (Sfc.
3. Every incorporated Company, seven days fit^"^^™™^
least before each ordinary half-yearly Meeting held ^^^ •'j.*° ^'^
56 AUDITOIiS.
Accounts,
&c., to be
signed, and
printed
Copies
distributsd.
Penalty for
falsifying
Accounts,
Ac-after
the Thirty-first day of December, One thousand
eight hundred and sixty-eight, shall prepare and
print, according to the Forms contained in the First
Schedule to this Act, a Statement of Accounts and
Balance Sheet for the last preceding half-year, and
the other statements and certificates required by
the same Schedule, and an estimate of the proposed
expenditure out of capital for the next ensuing
half-year, and such Statement of Accounts and
Balance Sheet shall be the Statement of Accounts
and Balance Sheet which are submitted to the
Auditors of the Company. Every Company which
makes default in complying with this Section shall
be liable to a penalty not exceeding five jjounds for
every day during Avhich such default continues.
The Board of Trade, with the consent of a
Company, may alter the said forms as regards such
Company for the purpose of adapting them to the
circumstances of such Company, or of better
carrying into efi"ect the objects of this section.
4. Every Statement of Accounts, Balance Sheet,
and Estimate of Expenditure, prepared as required
by this Act, shall be signed by the Chairman or
Deputy Chairman of the Directors and by the
Accountant or other officer in charge of the
Acccjunts of the Company, and shall be preserved
at the Company's princi2)al office. A ]3rinted
copy thereof shall be forwarded to the Board of
Trade.
o. If any Statement, Balance Sheet, Estimate, or
Report which is required by this Act, is false in any
particular to the knowledge of any person who
signs the same, such person shall be liable, on
conviction thereof on indictment to fine, and
SECTIOJfS or THE STATUTES. 57
imprisomnent, or on summary conviction thereof
to a 23enalty not exceeding fifty jjounds.
11. Whenever, after the passinff of this Act, ^^<:^"°^Y°*
' i o I necessarily a
Section One hundred and two of the Companies Shareholder.
Clauses Consolidation Act, 1845, is incorporated in
a Certificate or Special Act relating to a Railway
Company, it shall be construed as if the words,
" w^here no qualification shall be prescribed by the
special Act every Auditor shall have at least one
share in the undertaking," were omitted therefrom ;
and so much of every Certificate and Special Act
relating to a Railway Company, and in force at the
passing of this Act, as incorporates that jJortion
of the said Section, and so much of any sj)6cial
Act relating to a Railway Comjjany, and so in force
as contains a like provision, is hereby repealed.
12. With respect to the Auditors of the Company Auditors of
••- _ 1 ./ Couipany,
the following provisions shall have effect : aiwi Appoiut-
^ ^ ment of
(1.) The Board of Trade may, upon application Auditor by
^ \ . Board of
made in pursuance of a Resolution passed at a Trade.
Meeting of the Directors or at a General Meeting
of the Company, appoint an Auditor in addition to
the Auditors of such Company, and it shall not be
necessary for any such Auditor to be a shareholder
in the Company ;
(2.) The Company shall pay to such Auditor
appointed by the Board of Trade such reasonable
remuneration as the Bcjard of Trade may prescribe ;
(o.) The Auditor so appointed shall have the
same duties and powers as the Auditors of the
Company, and shall report to the Company ;
(4.) Where, in consequence of such appointment
of an Auditor or otherwise, there are three or more
Auditors, the Companv may declare a dividend if
58 AUDITORS.
the majority of such Auditors certify in manner
required by Section thirty of the Raihvay
Companies Act, 1867, and the Railway Companies
{Scotland) Act, 1867, respectively ;
(5.) Where there is a difference of opinion
among such Auditors, the Auditor who so differs
shall issue to the shareholders, at the cost of the
Company, such Statement respecting the grounds
on which he differs from his colleagues, and
respecting the financial condition and prospects of
the Company, as he thinks material for the
information of the Shareholders.
Preferred'uici ^'^' ^^^^ Company which, in the year immediately
Ordinar*^ preceding, has paid a dividend on their Ordinary
stoot. Stock of not less than Three Pounds per Centum
per Annum may, pursuant tt) the Resolution of an
Extraordinary General Meeting, divide their paid-up
Ordinary Stock into two classes, to be and to be
called the one Preferred Ordinary Stock, and the
other Deferred Ordinary Stock, and issue the same
subject and according to the following provisions,
and with the following consequences (that is to
say) :
(1.) Preferred and Deferred Ordinary Stock shall
be issued only in substitution for equal amounts of
paid-up Ordinary Stock, and by way of division of
portions of Ordinary Stock into two equal parts ;
(6.) As between Preferred Ordinary Stock and
Deferred Ordinary Stock, Preferred Ordinary Stock
shall bear a fixed maximum dividend at the rate of
Six per Centum per Annum ;
(7.) In respect of dividend to the extent of the
maximum aforesaid, Preferred Ordinary Stock shall
at the time of its creation, and at all times
SECTIONS OF THK STATUTES. 59
afterwards, have priority over Deferred Ordinary
Stock created or to be created, and shall rank pari
passu with the undivided Ordinary Stock and the
Ordinary Shares of the Company created or to be
created ; and in respect of dividend. Preferred
Ordinary Stock shall at all times and to all
intents rank after all Preference and Guaranteed
Stock and Shares of the Company created or to be
created ;
(8.) In each year after all holders of Preferred
Ordinary Stock for the time being issued have
received in full the maximum dividend aforesaid,
all holders of Deferred Ordinary Stock for the
time being issued shall, in respect of all dividend
exceeding that maximum paid by the Company in
that year on Ordinary Stock and Shares, rank jmri
passu with the holders of undivided Ordinary Stock
and of Ordinary Shares of the Company for the
time being issued ;
(9.) If, nevertheless, in any year ending on the
thirty-hrst day of December, there are not profits
available for payment to all the holders of
Preferred Ordinary Stock of the maximum dividend
aforesaid, no part of the deficiency shall be made
good out of the profits of any subsequent year, or
out of any other funds of the Company.
38. The Railway Companies' Powers Act, 1864, ^^^'•'^^ °*
shall take effect and apply in the following cases in EaiiwayCom-
>- ^ •/ " panics Powers
the same manner as if they were specified in •'^ct, 1864.
Section three of that Act (that is to say) :
Where a Company desire to make new provisions,
or to alter any of the provisions of their
special Act, or of the " Com[)ames Clauses
Consolidation Act, 184.5." so far as it is
60 AUDITORS.
incorporated therewith, with respect to all or
any of the matters following ; namely,
(e.) The Appointment and Duties of
Auditors.
THE REGULATION OF RAILWAYS ACT, 1889.
(52 & 53 Yict., c. 57).
[30th August, 1889.]
3. Whenever any Railway Company shall be
ordered by the Board of Trade to provide any
appliances, or execute any works, or incur any
expenditure, under the provisions of this Act, which
would properly be chargeable to capital account, it
shall be lawful for such Company to furnish to the
Board of Trade an estimate of the cost of providing
such appliances, executing such works, and carrying
out such order generally, and thereupon the Board of
Trade shall, upon the application of the Company, fix
and detemiine the amount which would properly be
capital expenditure, and the Company may from time
to time issue debentures or debenture stock in priority
to or rdnkmgpari 2)assu with any existing debentures
or debenture stock of such Company bearing interest
at a rate not exceeding five per cent, per annum to an
amount not exceeding the sum so paid and determined,
and any money raised under the provisions of this
section shall be applied in carrying out such require­ments
of the Board of Trade, and to no other purpose
whatsoever, and no other authority save the Certificate
of the Board of Trade shall be requisite to authorise
and validate the issue of such debentures or debenture
stock.
S E C T T O N S O F T H E S T A T U T E S . 61
THE (TASWORKS CLAUSES ACT, 1847.
(10 A^ict., c. 15.)
[23rd April, 1847.]
2. The expression " the Special Act," used in 2ft^M°'"^
this Act, shall be construed to mean any Act which
shall be hereafter passed authorising the construc­tion
of Gasworks, and with which this Act shall be
so incorporated as aforesaid ; " the undertaking" "ak?*^»-^"'^^^'
shall mean the Gasworks and the works connected
therewith by the Special Act authorised to be con­structed
; and the expression " the Undertakers" taker°^'^'^"''
shall mean the persons by the Special Act
authorised to construct the Gasworks.
4. In citing this Act in other Acts of Parhament 11^^°^^^'*^^ °^
and in legal instruments, it shall be enough to use
the expression " The Gasworks Clauses Act, 1847."
30. The profits of the Undertaking to be ^'^°^*^,°J *'^°
divided amongst the Undertakers in any year shalU™"*'^'^-
not exceeji the prescribed rate, or where no rate is
prescribed, they shall not exceed the rate of ten
pounds in the hundred by the year on the paid-up
capital in the Undertaking, which in such case shall
be deemed the prescribed rate, unless a larger
dividend be at any time necessary to make up the
deficiency of any previous dividend which shall
have fallen short of the said yearly rate.
31. If the clear profits of the Undertaking in any if rrofits
^ . . exceed the
year amount to a larger sum than is sufficient, after Amount
. . . . . limited
makinff up the deficiency in the dividends of any Excess to be
invested and
previous year as aforesaid, to make a dividend at form a
reserved
the prescribed rate, the excess beyond the sum Fund,
necessary for such purpose shall from time to time
be invested in Government or other Securities ; and
the dividends and interest arising from such
Q2 AUDITORS.
Securities shall also be invested in the same or like
Securities, in order that the same may accumulate
at compound interest until the fund so formed
amounts to the prescribed sum, or if no sum be
prescribed, a sum equal to one-tenth of the nominal
Capital of the undertakers, which sum shall form a
reserved fund to answer any deficiency which may
at any time happen in the amount of divisible
profits, or to meet any extraordinary claim or
demand which may at any time arise against the
Undertakers ; and if such fund be at any time
reduced, it may thereafter be again restored to the
said sum, and so from time to time as often as such
reduction shall happen.
Eeserved 32. Provided always, that no sum of money
Fund not to .
be resorted to shall be taken from the said Fund for the purpose
unless to meet
an extraordi- of meeting any extraordinary claim, unless it be
first certified in England or Ireland by two Justices,
and in Scotland by the Sherifi^, that the sum so
proposed to be taken is required for the purpose of
meeting an extraordinary claim within the meaning
of this or the Special Act.
When Fund 33. When such Fund shall, by accumulation or
amounts to . -i i
prescribed otherwise, amount to the prescribed sum, or one-to
be'applied tenth of the nominal Capital of the Company, as
the Under- the case may be, the interest and di\ddends thereon
shall no longer be invested, but shall be applied to
any of the general purposes of the Undertaking to
which the profits thereof are apphcable.
ifsf than the 34. If in any year the profits of the Undertaking
E^ate'^a'sum divisible amongst the Undertakers shall not amount
foom'the*^'^ to the prescribed rate, such a sum may be taken
FundTo^ from the reserved fund as, with the actual divisible
!?PP^y^ profits of such year, will enable the Undertakers to
SECTIONS OF THE STATUTES. 63
make a dividend of the amount aforesaid, and so
from time to time as often as the occasion shall
require.
38. And with respect to the yearly Receipt and Annual
•^ ^ ./ i Account to be
Expenditure of the Undertakers, be it enacted, that»adeupby
1 m • p Undertakers,
the Undertakers shall, m each year after they have andsenttothe
1 -I T 1 . . ^ -, Clerk of the
begun to supply gas under the provisions of this or Peace in
, • 1 A A • ^ 1 England or
the special Act, cause an Account m abstract to be Ireland, or to
prepared of the total Receipts and Expenditure ofcierkin
all rents or funds levied under the powers of this to be open to
or the special Act for the year preceding, under "^^'^'^'™'
the several distinct heads of Receipt and Expendi­ture,
with a Statement of the Balance of such
Account, duly audited and certified by the
Chairman of the Undertakers, and also by the
Auditors thereof, if any ; and a copy of such annual
Account, if the Gasworks be situated in England or
Ireland, shall be transmitted, free of charge, to the
Clerk of the Peace for the County in which the
Gasworks are situate, and if the Gasworks be
situated in Scotland, such copy shall be transmitted,
free of charge as aforesaid, to the Sheriff Clerk of
such County, and such transmission shall be made
on or before the thirty-first day of January in each
year, under a penalty of twenty pounds for each
default ; and a copy of such Account so sent to the
said Clerk of the Peace or Sheriff' Clerk shall be
kept by him, and shall be open to inspection by all
persons at all seasonable hours, on payment of one
shilling for each inspection.
64 AUDITORS.
THE GTASWORKS CLAUSES ACT, 1871.
(34 and 35 Vict., c. 41.)
[13th July, 1871.]
Short Title. 2. This Act may be cited as "The Gasworks
Clauses Act, 1871."
Aocomits,&c. 3._ r^^^ Undertakers shall fill up and forward to
the local authority of every district within the
limits of the special Act, on or before the twenty-fifth
day of March in each year, an annual Statement
of Accounts, made up to the thirty-first day of
December then next preceding, as near as may be
in the form and containing the particulars specified
in Schedule B to this Act annexed.
The Undertakers shall keep copies of such annual
statement at their ofiice, and sell the same to any
applicant at a price not exceeding one shilling for
each such copy.
The Board of Trade, with the consent of the
Undertakers, may alter the said forms for the
purpose of adapting them to the circumstances of
the Undertaking, or of better carrying into effect
the objects of this section.
THE WATERWORKS CLAUSES ACT, 1847.
(10 and 11 Vict, c. 17.)
[23rd April, 1847.]
Short Title of 4. In citinp" this Act in other Acts of Parliament
this Act. . °
and in legal instruments, it shall be enough to use
the expression " The Waterworks Clauses Act,
1847."
And with respect to the amount of profit to be
received by the Undertakers when the Waterworks
are carried on for their benefit, be it enacted as
follows :
SECTIONS OF THE STATUTES. 65
75. The Profits of the Undertaking to be divided g^^J'^°*'^J,°
among the Undertakers in any year shall not exceed ^^ iimi^d.
the prescribed rate, or where no rate is prescribed,
they shall not exceed the rate of ten pounds in
the hundred by the year on the paid-up Capital
in the Undertaking, which in such case shall be
deemed the prescribed rate, unless a larger dividend
be at any time necessary to make up the deficiency
of any previous dividend which shall have fallen
short of the said yearly rate.
76. If the clear profits of the Undertaking in g^^g^^^L
any year amount to a larger sum than is sufiicient, ^^^g^*
after making" up the deficiency in the dividends Excess to be
o i •' mvested and
of any previous year as aforesaid, to make a dividend formaRe-
•^ i •' ' served Fund.
at the prescribed rate, the excess beyond the sum
necessary for such purpose shall from time to
time be invested in Government or other Securities,
and the dividends and interest arising from such
Securities shall, also be invested in the same or like
Securities, in order that the same may accumulate
at compound interest until the fund so formed
amounts to the prescribed sum, or if no sum be
prescribed, to a sum equal to one-tenth part of
the nominal Capital of the Undertakers, which
sum shall form a reserved fund to answer any
deficiency which may at any time happen in the
amount of divisible profits, or to meet any extraordi­nary
claim or demand Avhich may at any time arise
against the Undertakers ; and if such fund be at
any time reduced, it may thereafter be again
restored to the said sum, and so from time to
time as often as such reduction shall happen.
77. Provided always, that no sum of money Reserved
f ^ • n Fund not to
shall be taken from the said fund for the ^o resorted to
66 AUniTORS.
nuiesstomcct p^ij.p,)so of- mcctino- aiiv extraordinary claim,
anextraordi- ' ' c-^ „ ., ;
nary Claim, unless it be ürst Certified, in Eiujüind or
Ireland, by two Justices, and in ScotUind. by
t h e Sheriff, that the sum so proposed to be
t a k e n is required for the purjiose of meeting- any
e x t r a o r d i n a r y claim within the meaning of this
or the special Act.
When Fund 78. When sucli fund shall, by accumulation or
amounts to . -"i n
prescribed otherwise, amount to the prescril)ed sum, or one-
Sum, Interest n -i • ^ • i
to be applied t e n t h part oi the nominal capital, as the case
to Purposes of . I T - T I I in
the Under- may DC, t h e interest and diyidends thereon shall
"' no longer be inyested, but shall be aj^plied to
any of the general purposes of the u n d e r t a k i ng
t o which the profits thereof are applicable.
If Profits are 79. If in any year the i^rofits of the Under-less
than the _ . . " -n-prescribed
taking divisible amongst the Undertakers shall not
Eate, a Sum -i i
may be taken amouiit to the prescribed rate, such a sum may
fromlleserved T P i • i i'
Fund to be taken irom the reseryeci luiul as, with the
Deficiency, actual divisible profits of such year, will enable
t h e Undertakers to make a dividend of the
amount aforesaid, and so from time to time as
often as t h e occasion shall require.
Annual 33_ ^.11(1 w i t h respect to the yearly Receipt and
Account to be •• •/ .. ^ x
made up by E x p e n d i t u r e of the Undertakers, be it enacted,
Undertakers, ^ _ '
and sent to that the Undertakers shall, in each year after
the Clerk of .
the Peace in thev liavc begTin to supiilv water under this or
England or " . , . . . ,
Ireland, or to t h e spccial Act, cause an Account in abstract to
Clerk in be prepared of t h e whole Receipt and E x p e n d i t u re
Scotland, and „ ,, ^-, i • i i i
to be open t o o t ail rates or other moneys levied under the
powers of this or the special Act for the year
preceding, under the several distinct heads of
Receipt and E x p e n d i t u r e with a Statement of the
Balance of such Account, duly audited and certi­fied
by the Chairman of the l a i d e r t a k e r s , and
SECTIONS OF TIIK STATUTES. (57
also by the Auditors thereof, if any ; and a copy
of such annual Account shall be sent, free of
charge, to the Clerk of the Peace for the Cotmty
in which the Waterworks are situated, if the
Waterworks are situated' in England or Ireland^
and if the Waterworks are situated in Scotland
to the Sheriff Clerk of such County, on or before
the thirty-first day of January in each year.
THE METUOPOIJS WATER ACT, 1852.
(15 and 16 Vict, c. <S4.)
[1st July, 1852.]
19. And with respect to the yearly Receipt ÏHK^ Ret^oTt^nd
Expenditure of every Company, the Company shall of^8'^+*'!*'r?
in each year cause an Account in abstract to be p*a°r^e"d ,P areu­d
to
prepared of the whole Receipt and Expenditure of be open to
'• ^ ^ ^ Inspection.
all rates or other moneys levied under the powers
of this Act, under the several distinct heads of
Receipt and Expenditure, with a Statement of the
Balance of such Account duly audited and certified
by the Chairman of the Company, and also by
the Auditors thereof, if any, and a copy of sucli
annual Account shall be sent, free of charge, to
the Town Clerk t)f the City of London, and to
the Vestry Clerk of each Parish supplied with
Water by each Company respectively not within
the City of London, on or before the thirty-first
day of January in each year.
28. In citing this Act in other Acts and in ^^^'^^ ^'*^^-
legal instruments it shall be enoiigh to use the
ex])ressi<)n " The Metropolis Water Act, 1852."
F 2
68 AUDITOKS.
THE METROPOLIS WATER ACT, 1871.
(34 and 35 Vict., c. 113.)
[21st August, 1871.]
Short Title. 1. TMs Act may be cited for all purposes as
"The Metropolis Water Act, 1871."
'iTiisand 2. This Act and the Metropolis Water Act, 1852,
recited Act to _ -^ _
be as one. as the same is amended by this Act, shall be read
and construed together as one Act.
luterpreta- 3. I n t h i s Act,
tionof Terms.
The expression " the metropolis" shall mean
the metropolis as defined by the Metropolis
Management Act, 1855 ;
The term " Company " shall mean and include
any of the Companies following : that is to
say,—
The Grovernor and Company of the New
River brought from Chadwell and
Amwell to London, commonly called
" The New River Company" ;
The East London Waterworks ;
The Southwark and A'^auxhall Water Com­pany
;
The Company of Proprietors of the West
Middlesex Waterworks Company ;
The Company of Proprietors of Lambeth
Waterworks ;
The Governor and Company of Chelsea
Waterworks ;
The Grand Junction Waterworks Com­pany
;
The Company of Proprietors of the Kent
Waterworks; and also any other corpora­tion,
company, board, commissioners,
association, person, persons, or partner-
SECTIONS OF THE STATUTES. 69
ship, for the time being supplying water
for domestic use Avithin the limits of this
Act.
Accounts.
37. Every Company shall, on or before the Accounts, &c.
thirty-first day of July in eacli year, fill up and
forward to the Board of • Trade, and to the Town
Clerk of the City of London, and to the Metro­politan
Board of Works, and to the Vestry Clerk
of each parish within which v/ater is supplied by
each Company respectively not within the City of
London, a Statement of Accounts, made up to the
end of their financial year then last passed, in
such form and containing such particulars as may
from time ttj time be prescribed by the Board of
Trade.
38. There shall be an Auditor of the Accounts of Auditor of
Acoouuts.
the Companies, being a competent and impartial
person, from time to time appointed by and
removable by the Board of Trade.
There shall be paid to such Auditor such
remuneration by the Companies and in such
proportions as such Board appoints.
39. The Auditor shall, with all practicable speed ^1'^^^^'^*^^^^^-
after the passing of this Act, iiiA-estiffate the Accounts Capital of
, . . Companies.
of the Companies, and ascertain and certify the
amounts of their capitals, distinguishing share from
loan capital, and shall ascertain and certify the
cap