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1
Corporate Secretary Certificate
Statutory Books and Accounts
2
Statutory Books or Registers
These are records or details to be maintained by company as required by law.
It is the duties of the company’s directors to maintained these statutory books and registers.
The duties are generally delegated, entrusted and performed by professional such as company secretary and accountants.
3
Statutory Books and Records A company is required to keep an properly
maintained various registers, minutes and accounting records in a form that can be inspected.- Register of members [CA 158 (1)]- An index of members where the company has more than 50 members [CA 158 (5)]- Register of substantial shareholders [CA 69L] – for public company- Register of debenture holders [CA 70(1)]- Register of interest holders [CA 92]- Register of options [CA 68A]
4
Statutory Books and Records
-Register of directors, managers and secretaries [CA 141(1)]-Register of directors shareholdings [CA 134 (1)]-Register of charges [CA 115(2)]-All minutes of company general meeting [CA 156]-All minutes of meetings of directors and managers [CA 156]-Accounting and other records [CA 167(1)]-Register of Transfer/ register of Allotment
No set form is prescribed for the registers. A register may take the form of a bound book or any
other permanent records [CA 358(1)]
5
Register of Members
A person may become a member in several ways: Subscribing to the memorandum A director undertaking to take and pay for qualification
shares Applying for and receiving an allotment of shares Accepting a transfer of shares from present member Receiving shares by transmission on death or
bankruptcy of a member Holders of convertible notes exercise their right to
convert them into shares of the company
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Register of Members – CA 158 Every company must keep a register of members –
CA 158(1) The register will contain :
- Name of members- Address- Identity Card / Passport No.- Occupation- Nationality / Race- Date of birth- Date entered as member- Date ceased as member- Number of shares or amount of the member hold and charged or movement in his holdings
7
Register of Members – CA 158 On incorporation, the subscribers to the memorandum
become members of company and their names are entered in the register of members – CA 16(6)
Subscribers becomes members as soon as the company is incorporated
The articles may require a director to hold qualification shares which may be fixed by the company in general meeting – Table A, art. 71
Shares may also be issued to existing members or new members by way of ‘cash’ or ‘consideration other than cash’ (Form 24)
Where there is allotment exercise, the shares alloted has to be updated to the respective page of register of members/ (allotment).
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Register of Members – CA 158
The amount shares updated to the register shall as per Form 24
Where there is a transfer, both the buyer and the seller of the shares need to be updated to the register of members/ (transfer)
The amount of the shares so transfer and updated in the register shall as per Form 32A
If the allotment or transfer involved a director, the register of directors shareholding must be updated accordingly.
9
Register of Members – CA 158
Where a company has more than 50 members, an index of member must be maintained unless the register itself is in such a form as to constitute an index – CA 158(5)
The index will be kept together with the register of members
The register of members is usually to be kept at the company’s registered office – CA 159(1)
However, if the work of maintaining the register is done at another office of the company within Malaysia, the register may be kept at that office – CA 159(1)(a)
If a company arranges with some other person to maintain the ROM on its behalf , then the register may be kept at that person office if that office is in Malaysia – CA 159(1)(b)
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Register of Members – CA 158
A foreign company which has share capital and has any member resident in Malaysia may have to keep a branch register at its registered office or at some other places in M’sia – CA 342(1)
This requirement need only be fulfilled if a member applies in writing for registration of his shares in co’s branch register – CA 342(2)
If foreign co prohibit public from subscribing its shares, is not required to maintain a branch register in M’sia – CA 342(4)
A foreign co’s branch register is treated in the same manner as the register of members of a Malaysian company – CA345 & 346
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Register of Members – CA 158
A company may close its register of member after giving not less than 14 days notice to the Registrar. But the closure cannot be more than 30 days in aggregate in any calendar year – CA 160(1)
Generally, this may occur prior to the payment of dividend or before a rights or bonus issue
The ROM is open to inspection by any member free of charge – CA 160(2)
Any other person may inspect a company’s register of members or obtain a copy of the register on payment of a small fee – CA 160(3)
12
Register of Members – CA 158
A person who is a trustee, executor or administrator of the estate of the deceased person may be registered in the ROM of a company or branch register of a foreign in that capacity – CA 163(1)
This enable the personal representative of the deceased shareholder to become registered as holder of his shares for purpose of administration of the estate
The liability of such trustee, executor or administrator will be the same as if the share had remained registered in the name of the deceased
However, it is not compulsory for a personal representative to be registered in respect of the shares of the deceased shareholders, and the personal representative may effectively transfer such shares notwithstanding that he is not registered as holder – CA 103(2)
13
Register of Members – CA 158
Except the above, no other case will notice of trust of shares, whether express, implied or constructive, be entered on a register or branch register – CA 163(4)
A company having a share capital may maintain a branch register outside Malaysia – CA 164(1)
This branch register is treated as part of the company’s register of members. A duplicate of the branch register must be kept in Malaysia – CA 164(4)
14
Register of substantial shareholders (CA 69L) – for public company
A company to which Division 3A of Part IV of the Act applies must maintain a register of substantial shareholders
This include all companies with any shares listed on the KLSE, all public companies and other bodies which the Minister has declared to be companies for the purpose of this division – CA 69B(2)
The register will contain the name of the substantial shareholders together with the details of these shareholders’ interest in the shares of the company – CA 69L+69E to 69G
15
Register of substantial shareholders (CA 69L) – for public company
The purpose of substantial shareholding provision is to enable directors and shareholders of the company defined in S.69B(2) to ascertain the identity of the holders of large numbers of share and the extent of their shareholding
Jenkins Committee provided two reason why such disclosure is important:
1. The directors, other shareholders and employees of the company, all of whom may be materially affected, ought to be able to ascertain the identity of any substantial shareholder especially where there is reason to believe that someone is in the process of buying for control and
2. Even when the substantial shareholder is not in the process of buying for control, it may be of interest to the others concerned to know that someone is in the position to veto a special resolution
16
Register of substantial shareholders (CA 69L) – for public company
A substantial shareholder is a person who has an interest in 5% or more of the voting shares of the company – CA 69D(1)
The person mentioned above include both natural persons (citizens and non-citizens) and artificial persons, even if they are not resident or carrying on business in Malaysia – CA 69C
Where a company’s share capital is divided into classes, a person who has an interest in 50% or more of the voting shares of any class is also a substantial shareholders – CA 69D(2)
17
Register of substantial shareholders (CA 69L) – for public company
A substantial shareholders must give notice in writing to the company of his name, address, full particulars of the shares in which he has an interest, stating the nature of the interest – CA 69E(1)
If there is any change in the interest of a substantial shareholder or if a person ceased to be substantial shareholder, notice in writing must also be given to the company – CA 69F & 69G
Notice must be given to the company within seven days of a person becoming substantial shareholder, changing the nature of his interest or ceasing to be a substantial shareholder – CA 69E(2), 69F(2) &69G(2) and for non-resident member,within 14 days – CA 69J(2)
18
Register of substantial shareholders (CA 69L) – for public company
For public listed company listed on KLS, statutory form need to be lodged with the company and KLSE
Forms Lodged with ParticularsForm 29A Co. & KLSE Notice of interest of (S 69E(1)) substantial shareholder
Form 29B Co. & KLSE Change in interest of (S 69F(1)) substantial shareholder
Form 29C Co. & KLSE Notice of person ceasing(S 69G(1)) to be substantial
shareholder
19
Register of substantial shareholders (CA 69L) – for public company
Failure to give notice to the company is an offence and a court may on the application of the Minister make orders (inter alia) restraining the defaulting shareholder from dealing in the shares in which h has an interest, restricting his voting rights or entitlement to dividends, or selling the shares in question – CA 69N(1)
Failure to comply with S.69E, 69F, 69G or 69J will attract a penalty of RM 1 million, default penalty of RM 50,000 – CA 69M
20
Register of substantial shareholders (CA 69L) – for public company
A company with any of its shares listed on a stock exchange may require disclosures from members of beneficial interest in its voting shares, whether as beneficial owner or trustee. If as trustee, who the beneficiaries are – CA 690(1)
Where it is disclosed that shares are held on trust for someone else, the company may also require this other person to inform it whether he holds his interest as beneficial owner or as trustee, and if the latter, for whom –CA 690(2)
A company is also entitled to require any member to inform it of any voting agreement that he may have in relation to shares held by him – CA 690(3)
These is to enable a company to discover exactly who controls the votes attached to the shares held by its members.
21
Register of substantial shareholders (CA 69L) – for public company
The disclosure of trust relationship is not confined to substantial shareholders
The information received on this is noted in a separate portion of the register of substantial shareholders – CA 690(4)
Failure to comply with a notice requiring disclosure of information or deliberately makes a statement that is false in materials particulars, is an offence under S.690(6) that carries imprisonment term.
The register of substantial shareholders will be kept at the registered office of the company – CA 69L(2)
The register may be inspected by an member free of charge, ang by any other person on payment of a small fee
22
Register of debenture holders (CA 70(1))
A company which has issued debentures (other than bearer debentures) must keep a register of debentures holders at its registered office or some other place in Malaysia – CA 70(1)
The register will contain the names and addresses of the debenture holders and the amount of debenture held by them
The register is open to inspection by any registered holder of debenture and by any shareholder, such person may also obtain a copy of register on request on payment of a small fee – CA 70(3) & 70(5)
23
Register of interest holders (CA 92) – for public company
Companies may generates funds in other ways besides by issuing shares or borrowing. A company may set up some sort of investment scheme and invite participation by other person in the scheme such as a joint venture with others, set up a unit trust or franchise its operations. Such activities may lead to “interest” of “participatory interest” – CA 84(1)
The person who participate in these activities with the company are holders of interest
A public company that creates any interest other than shares or debentures must maintain a register of interest holders – CA 92
24
Register of interest holders (CA 92) – for public company
This register will contain the names and addresses of the interest holders, together with details of their holdings and date they became and ceased to be the interest holders – CA 92(1)
The register of interest holders is maintained in the same way as the register of members – CA 92(2)
25
Register of options (CA 68A) – for public company
An option is a contract whereby a company agrees to issue a certain number of shares to a person at a future date, if he chooses to take up the shares
If the person does so, he is said to exercise an option and can require the company to allot shares with some considerations (exercise price)
While an option holder is not a member of the company until he exercises the option, he may be the holder of rights with some value, especially if the shares of the company have a value in excess of their nominal value or exercise price
26
Register of options (CA 68A) – for public company
For example, the company may issue convertible debenture or convertible notes where the company borrow money and give the creditors an option to convert the loan into shares at a future date
A company may also issue warrant or transferable subscription right (TSR) that give the holders the right to convert the warrants or TSRs into company shares on a future date at a pre-determined price.
27
Register of options (CA 68A) – for public company
The company that gives the options over its unissued shares must maintain a register of options with the following details (CA 68A(1))- the identity of the holder- the date on which the option granted- the number and description of the shares to which the option has been granted- details as to when the option can be exercised
The company is require to enter the necessary particulars into the register within 14 days after grant of option
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Register of directors, managers and secretaries (CA 141(1))
Every companies must keep a register of directors, managers and secretaries – CA 141(1)
This register will contains the full names, addresses, other occupation (if any) and identification (NRIC No, Passport No. or such other similar evidence – CA 149(9) as well as date of appointment and date of removal/ registration of the company’s directors, managers and secretaries
In addition, the register must contained a directors written consent to appointment (CA 123(1)) and particulars of any other directorships pf public companies or subsidiaries of public companies which he hold
The particulars updated to the register must be the same as per the Form 49
29
Register of directors, managers and secretaries (CA 141(1))
If there is any change (whether by addition or removal) in the company’s directors, managers and secretaries or in the residential address of such persons, the company must lodged the prescribed return or notice with the registrar within one month – CA 141(6)
The register may be inspected by members of the company free of charge and by other persons on a payment of a fee – CA 141(5)
A director is obliged to give notice in writing to his company of such events or matters as are necessary for the company to maintain the register in relation to him – CA 135(1)©
30
Register of directors shareholdings (CA 134(1))
Every company must be keep a register of directors’ shareholdings – CA 134(1)
This register will contain particulars of :1. Shares, debentures or participatory interest of the company
or its related corporation which are held by the directors2. The nature and extent of the above3. Rights or options of the directors in respect of the
acquisition or disposal of shares in the company or its related corporations
4. Contracts to which any of the directors may be party or under which any of them is entitled to benefit, being contract under which a person has a right to call for or make delivery of shares in the company or its related corporation
31
Register of directors shareholdings (CA 134(1))
A director must disclose the information necessary for the company to maintain the register by giving notice in writing to the company – CA 135(1)(a) & (b)
The register of directors’ shareholdings is kept at the company’s registered office and is open to inspection by members free of charge and by other persons on payment of a fee – CA 134(8)
Any person is entitled to be supplied with a copy of the register on request upon payment of a fee – CA 134(9)
The register must be produced at the commencement of each AGM of a company and kept open and accessible during the meeting to all person attending – CA 134(11)
32
Register of charges (CA 115(2))
Any companies that creates fixed or floating charge over its property must keep a register of charges at its office – CA 115(2)
The register should contain:- short description of the property charged- amount of the charge- name of the person entitled to the charge
The register of charges may be inspected by any creditors and members of the company for free and by other person on payment of a fee – CA115(3)
33
Register of Transfer/ Register of Allotment
No statutory provision but generally kept for records and practical purpose
Both the registers record transaction in chronological order Generally, the details are:
- serial number of the transfer(T1, T2…) or allotment (A1, A2…)- date of the transfer or allotment- number of shares transferred or allotted- consideration : in cash or in kind- surrendered share certificate number (for transfer only)- Transferor and transferee ( for transfer) or allotee (for allotment)- New share certificate number
34
Register of Transfer/ Register of Allotment
The register of transfer give an overview of all transfer occurred since incorporation up to current date
The register of allotment give full account of all shares issued since incorporation to current date – this generally will indicate the number of shares issued and paid up capital of the company
35
All minutes of company general meeting and meetings of directors and managers (CA 156)
Every company must keep minutes of all genera meetings and meetings of its directors and of its managers within 14 days of the date which the relevant meeting were held – CA 156(1)
The minutes are evidence of the proceedings to which they relate – CA 156(2)
Where the minutes had been signed and entered, they are prima facie evidence that the meeting has been duly held and convened, that all appointments are valid that the proceedings were duly conducted – CA 156(3)
The minutes books of general meeting may be inspected by any member of the company without charge – CA 157(1)
36
Registered Office
A company must have a registered office within Malaysia from the day that it begins carry on business or as from the 14th day after incorporation, whichever is earlier – CA 119(1)
Notice of the registered office (Form 44) need to be lodged with the Registrar within one month after the date of incorporation or any changes – CA 120
Document may be served on a company by leaving them or sending them by registered post to the registered of the company, whether or not the company is still carrying on business from that office
37
Accounting and other records (CA 167(1))
Part of opportunity cost of incorporation is the loss of informality and privacy
A sole proprietor or partnership may conduct its business on the simplest term and keep matters informal – need not disclose their doings to public and could keep its accounts on a simple sheet of used paper, if he so desired
Companies are required to maintain detailed accounts and to have proper balance sheet and profit and loss accounts prepared and audited every year
These account are generally available for inspection by public (as they are attached to the Annual Return)
38
Accounting and other records (CA 167(1)) Every company must keep such accounting and other
records as are necessary to explain the transaction and financial position of the company and to allow the profit and loss account and a balance sheet to be prepared – CA 167(1)
This obligation is cast expressly upon the directors and managers of the company
Accounting records include invoices, receipts, orders for payment of money, bills of exchange, cheques, promissory notes, vouchers and other documents of prime entry – CA 4(1)
Appropriate entries shall be made in the accounting and other records within 60 days of the completion of the transactions which they relate – CA 167(1A)
39
Accounting and other records (CA 167(1))
The accounting records must be kept for 7 years after the completion of the transactions or operations to which they relate – CA 167(2)
The records must be kept at the company’s registered office or any other place as the directors think fit – CA 167(3)
If the records of operations outside Malaysia are kept outside Malaysia, statement and return must be sent and kept at a place in Malaysia, to enable a profit and loss account and balance sheet to be prepared – CA 167(4)
The accounting records are open to inspection by any director (CA 167(3)), or if court order obtained, by an auditor acting for a director – CA 167(6)
40
Accounting and other records (CA 167(1))
At every general meeting of the company of a company, the directors must lay before the meeting a profit and loss account made up to a date not more than six months before the date of the meeting – CA 169(1)
A balance sheet made up to the same date as the profit and loss account must also be laid before the meeting at the same time – CA 169(3)
Both the profit and loss account and the balance sheet must be audited – CA 169(4)
The form of the account is prescribed in the Ninth Schedule of the Act. The schedule generally reflect standard accounting practice.
41
Accounting and other records (CA 167(1))
The balance sheet and P&L account must give a true and fair view of the state of the company’s financial affairs and its profit and loss for the accounting period it relates – CA 169(14)
The accounts must be accompanied by:- a directors’ report (CA 169(5)) which contains the following details (CA 169(6)):- names of directors- a review of operations- net amount of profit and loss- details of any significant changes in the co’s state of affairs- details of co’s principal activities, any changes of them- amount of dividend to be paid as recommended by directors- details of shares and- steps taken by directors to write off any bad debts
42
Accounting and other records (CA 167(1))
- A statement of directors (CA 169(15))- states that in the directors’ opinion the B/S and P&L are drawn up to give a true and fair view of the state of affairs and results of the business
- Statutory declaration (CA 169(16))- contains declaration of the directors’ opinion as to the correctness or otherwise of the B/S and P&L
- An auditor reportFor public listed company, additional statement:- Statement on corporate governance- Audit committee report- Statement on internal control
43
Accounting and other records (CA 167(1))
A directors’ report is made in accordance with a resolution of the directors and signed by at least 2 of them, reporting on the profit and loss of the company and the state of its affairs as at the end of the financial year – CA 169(5)
A statement of directors is signed by 2 directors on behalf of the directors stating whether P&L account and balance sheet present a true and fair view of the business and financial state of the company – CA 169(15)
The statutory declaration may be made by one of the director or where the directors are not primarily responsible for the financial management of the company, by the person so responsible and state the opinion as to the correctness or otherwise of the accounts – CA 169(16)
44
Accounting and other records (CA 167(1))
An auditors’ report will report on the auditors’ independent professional opinion whether the company’s financial statements have been properly drawn up in accordance with CA and GAAPs and give a true and fair view of the company financial position to which they relate.
For public listed companies, additional statement is required as per Malaysian Code on Corporate Governance
A statement on corporate governance will give an overview of how the company applied the 13 broad principles and the extent of compliance to the 33 best practices set out in the Code
45
Accounting and other records (CA 167(1))
The audit committee report will report on the composition, term of reference and the activities of the committee in the financial period as well as any irregularities
The statement on internal control will report on the state of internal controls in the company and the activities and actions taken to ensure a proper internal control system is in place
46
Accounting and other records (CA 167(1))
“Financial year” is defined as the period in respect of which any P&L account laid before the AGM is made up, whether that period is a year or not – CA 4(1)
In order to facilitate the preparation of consolidated accounts, the FY of a holding company must coincide with FY of each of its subsidiaries
The directors of a holding company that is not a foreign company are required to ensure that the FY of each subsidiary coincides with the FY of the holding company within 2 years after any corporation become a subsidiary of the holding company – CA 168(1)(a) & (b)
47
Accounting and other records (CA 167(1))
The directors must ensure that the financial years do not cease to coincide – CA 168(2)
If there 9s good reason for the FYs of a holding company and its subsidiaries not to coincide, the directors may apply in writing to the Registrar for an order authorising the subsidiary to have a different FY to the holding company – CA 168(3)
KLSE Listing Requirement (Para 9.22, Part K, Chapter 9), issued Jan 2001, formalised requirement that listed cos. release quarterly financial reports not after than two months after the end of each quarter of a financial year.
48
Accounting and other records (CA 167(1))
The term “true and fair” is not defined in the Act, but means that the accounts must not be misleading
The directors are required to take all reasonable steps to ensure that the Act’s provisions regarding accounts are complied with – CA 171(1)
A copy of the accounts accompanied by auditors report must be sent to all person entitled to receive notice of general meetings at least 14 days before the meeting at which the accounts are to be laid before the members – CA 170(1)
Any member of a company or debenture holder may request a copy of the accounts, which must be furnished without charge by the company – CA 170(2)
49
Relief as to Form and Contents of Accounts and Reports
The directors of a co may apply to the Registrar in writing for an order relieving them from compliance with the Act regarding the form and content of accounts, consolidated accounts, or directors’ report – CA 169A(1)
The registrar will not make such as order unless he is of the opinion that compliance with Act would render the accounts or reports misleading or in appropriate or it would impose unreasonable burden on the company or its officers – CA 169A(3)
50
Auditors – Appointment, Qualification and Remuneration
Every company must have auditors as ‘watchdogs’; if they smell anything wrong, they must bark
For this reason, the provisions of the Act dealing with appointment and removal of auditors are designed to ensure that the auditors retain a measure of independence
The Act is especially careful to provide that a change of auditors will be accompanied with some publicity, thereby precluding the possibility of quietly removing the auditors to cover up misdeeds
51
Auditors – Appointment, Qualification and Remuneration
The 1st auditors are appointed by the directors or the company at a general meeting at any time before the first AGM and hold office until the conclusion of the first AGM – CA 172(1)
Thereafter, the auditors are appointed at each AGM – CA 172(2)
The term of office of the auditors is from the time of appointment until the conclusion of the following AGM
Casual vacancy (e.g. on death of an auditor) may be filled by the directors’ but it is not compulsory, as the remaining may continue to act as such until their term of office expires – CA 172(3)
52
Auditors – Appointment, Qualification and Remuneration
If the company or the directors do not appoint the auditors, the Registrar may do so on the written application of any member – CA 172(10)
The act seems to contemplate that individuals will be appointed as auditors. However, in practice it is common to appoint a firm of accountants as auditors. Such an appointment operates as an appointment of all partners of the firm at the time as auditors of the company – CA 9(7)
In order to be an auditor, a person must be an approved company auditors who has the necessary qualification and approved by Minister of Finance – CA 8(1)
53
Auditors – Appointment, Qualification and Remuneration
A person may not knowingly consent to be appointed as auditor or function as such if he is (CA 9(1)):
a. Not an approved company auditorb. Indebted to the company or its related corporations in an
amount exceeding RM2,500c. An officer of the company or is a partner, employer or
employee of an officer of the companyd. A partner or employee of an employee of an officer of the
companye. A shareholder or his or her spouse is a shareholder of a
corporation whose employee is an officer of the company orf. Responsible for, or if he is a partner, employer or employee
of a person responsible for the keeping of the register of members or the register of holders of debentures of the company
54
Auditors – Appointment, Qualification and Remuneration
It is necessary before an appointment is made to obtain the written consent of the person or firm which is to be appointed as auditor – CA 9(7)
An auditor may be nominated for re-appointment at the AGM, there are no special notice requirement. If a new auditor is nominated, notice of his nomination must be given by a member to the company at least 21 days before the AGM – CA 172(11)
Upon receipt of notice of nomination of an auditor, the company must sent the notice to each auditor and to all persons entitled to receive notice of general meeting at least 7 days before the meeting – CA 172(12)
55
Auditors – Appointment, Qualification and Remuneration
The requirement of notice where a new auditor is nominated ensures that there will be due publicity if a change of auditor is proposed
The fees and expenses of an auditor are fixed by the company at a general meeting or by the directors or by the Registrar, depending on which party made the appointment
The general meeting may delegate its duty to the directors. On the other hand, if the directors or Registrar fail to fix the remuneration, the general meeting may do so – CA172(16)
56
Auditors – Resignation and Removal
Once appointed, an auditor continues in office until the conclusion of the AGM following his appointment
An auditor’s term of office may come to an end prematurely by death, resignation or removal
An auditor of the company may resign (CA 172(14):a. If he is not the sole auditor of the company; orb. At a general meeting of a company but not otherwiseLiterally interpreted, the section provides:a. An auditor of the co may resign if he is not the sole auditor of
the company but not otherwiseb. An auditor of the company mat resign at a general meeting, but
not otherwise
57
Auditors – Resignation and Removal
An auditor may resign by giving notice in writing to the directors, who must then call a general meeting as soon as practicable – CA 172(15)
On the appointment of the new auditor by the general meeting, the resignation of the old auditor takes effect – CA 172(15)
An auditor may be removed by an ordinary resolution of a general meeting
Special notice – 28 days (CA153) must be given of such a resolution – CA 172(4)
Upon receipt of the notice proposing the removal of the auditor, the co must send a copy of the notice to the auditor concerned and to the Registrar – CA 172(5)
58
Auditors – Resignation and Removal
The auditor who is to be removed has the right to have his say. The auditor may within 7 days of receipt of notice in writing make representations in writing with the request that copies of the representations be sent by the co to all members entitled to attend the meeting – CA 172(5)(b)
The auditor may require that the representations be read at the meeting – CA 172(6). He may also speak at the meeting
However, if the content are deemed defamatory or irrelevant or detrimental to the interest of the company in nature, the company may apply to the Registrar for an order to waive the representations be read out at the general meeting – CA 172(6)
59
Auditors – Resignation and Removal
This enable the auditors to defend himself against any imputation that may be made against him
It also ensures that the company cannot remove an auditor to avoid a scandal or to cover up misdeeds
In the event where the auditor is removed from a general meeting where special notice has been duly served, Form 11 must be lodged within 30 days of passing the ordinary resolution
60
Auditors – Resignation and Removal
If the resolution to moved the auditor is passed, the meeting may appoint someone else immediately – CA 172(7)
The nomination may be made in the meeting itself The resolution to appoint the new auditor must be
passed by three – fourths majority – CA 172(7)(a) The form 11 for the special resolution must be
lodged with Registrar within 14 days If it is not desired to appoint a replacement auditor
or if three quarters majority cannot be obtained, the meeting may be adjourned to a date not earlier than 20 days and not later than 30 days after the meeting at which the auditor was removed – CA 172(7)(b)
61
Auditors – Resignation and Removal
At the resumed meeting, a new auditor may be appointed by ordinary resolution
The Form 11 with the ordinary resolution must be lodged within 30 days from passing at the adjourned meeting
The person must have been nominated by notice to the company at least 10 days before the resumed meeting
If the company does not appoint another auditor, the Registrar may do so – CA 172(8)
An auditor appointed to replace one removed prematurely will hold office until the conclusion of the annual general meeting following his appointment – CA 172(9)
62
Auditors – Duties and Power
An auditor’s function is to certify the correctness of the company’s accounts, to detect errors and to detect fraud, the detection of fraud is generally regarded as being of primary importance (Frankston & Hastings Corporation v Cohen)
His function is discharged by making a report to the members of the company in accordance with CA 174 and in the appropriate case, by reporting to the management of the company or the Registrar any irregularities that he has discovered
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Auditors – Duties and Power
Summarily, the auditors performs two core functions: Reports to members of the co on various matters
relating to the preparation of the co’s financial statements - to give members independence assurance that information received from management are reliable
To report on any breaches of the Companies Act, discovered as part of the audit, that have not been appropriately dealt with
Audit cannot guarantee financial report is free from material misstatement but provide “reasonable assurance” on accountability matters
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Auditors – Duties and Power
Auditor is required to report to the members on the accounts laid before the general meeting and on the company’s accounting and other records – CA 174(1)
In the report, the auditor must state whether in his view the accounts are properly drawn up so as to give a true and fair view of the co’s affairs or profit or loss and whether the accounting and other records of the co and its subsidiaries have been properly kept in accordance with the Act – CA 174(2)(b)
If the auditor is not satisfied that the accounts, records and registers are in order, he must state this in his report, together with his reason – CA 174(2)(e)
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Auditors – Duties and Power
The auditor must also form an opinion as to whether he ahs obtained all the information and explanations that he required
The auditors’ report must be furnished to the directors in time for them to lay it before the annual general meeting, but no offence is committed by the auditors if the directors have not submitted the accounts in sufficient time for the auditor to make this report
In the case of the company that have subsidiaries, the auditor must also report to the members on the consolidated accounts of the group – CA 174(1)
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Auditors – Duties and Power
Must state his opinion on whether the consolidated accounts give a true and fair view – CA 174(2)(a)(i)
Where the company has issued debentures to the public, the auditor is obliged to send a copy of his report to the trustee for the debentures holders – CA 175(1)
To enable the auditor to perform his statutory duties, he has right of access at all times to the co’s records and registers, and he is entitled to get any information or explanations that he requires from the officers of the co and from the auditors of a related corporation – CA 174(4)
In the case of auditor of holding co, from the officers and auditors of any subsidiary – CA 174 (5)
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Auditors – Duties and Power The auditor or his authorised agent is entitled to
attend all general meeting of the company and to receive all notices of such meeting – CA 174(7)
He may also speak at general meeting on matters which concern him in his capacity as auditor
Where an auditor discovers any irregularities or suspect fraud or dishonesty, he has an obligation to bring these matters to the attention of the co’s management or directly to the members
An auditor is protected against suits for defamation if the statement he has made in discharge his duty is false and defamatory, he is not liable is he acted without malice – CA 174A(1)
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Auditors – Duty of care and skill
Like all other professionals, an auditor is obliged to exhibit a reasonable degree of care and skill in the performance of his duties (Nelson Guarantee Corporation v Hodgson)
An auditor is not in breach of his duty merely because he turns out to have been mistaken about some matters; a breach will only occur if it can be shown that a reasonable auditor would not have made such a mistake
He has a duty to be honest, in that he must not certify what he does not believe to be true
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Auditors – To whom the duty is owed
An auditor’s duty will be owed primarily to the company he is auditing, as that is the person with whom he has contractual relations
The Act provides that auditor must report to the members of the company (CA 174(1)). This suggest that the auditor owes a duty to the members as well as to the co. It is therefore possible that the members might sue the auditor if he breaches his duty to them but he should show that he had suffered damage in some way from the negligence of the auditor
The auditor may also be liable to person other than the co and its members where he ought to know that another person is rely on his judgment (Hedley Byrne & Co v Heller)
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Auditors – Indemnity and Exoneration from liability
A company cannot indemnify an auditor against liability for negligence, default, breach of duty or breach of trust
Any such provision, whether contained in the co’s articles or in a contract with the auditor, is void – CA 140(1)
If the auditor is sued and obtains judgment in his favour, the co may indemnify him against cost of defending the proceedings – CA 140(3)
An auditor who is sued for negligence, default, breach of duty or breach of trust may apply to court to be excused from liability under S.354
The court may relieve the auditor from liability if it is satisfied that he acted honestly and reasonably and that, having regard to all circumstances of the cases, he ought fairly be excused – CA 354(1)
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Adoption of Accounts
CA 169(1) provides that the directors has to lay before the co at its AGM the audited accounts which means there must be a formal tabling of the audited accounts in AGM
The Articles normally provide that “ to consider the account” in the AGM – Table A, art 46
It is common practice to submit a resolution at a general meeting that the audited accounts be received, approved and adopted
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Annual Returns Every company must lodge an annual return, signed by a
director, manager or secretary, with the registrar within one month of its AGM –CA 165(4) & (5)
The matter to be stated in the annual return are prescribed in the Eight Schedule (Co. with a share capital), including :- company’s name- address of registered office- summary of shares issued for cash or otherwise- details of indebtedness secured by charge- details of members- particulars of directors and secretary and- name and address of auditors
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Annual Returns
The annual return must be made up to the date of AGM of the co or a date not later than the 14th day after the date of the general meeting
A co with a share capital must attach a copy of its last audited balance sheet and profit and loss accounts, unless it is exempt private co
Exempt private co means a private co in the shares of which no beneficial interest is held directly or indirectly by any corporation and which has no more than 20 members none of them is a corporation – CA 4
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Annual Returns
Particulars of the directors, managers, secretaries and auditors of the company at the date of the return and a list of members must also be included
CA 166 exempt public co with more than 500 members from having to attach a list of members, provided that reasonable facilities are provided for a person to inspect and take copies of its list of members and particulars of shares transferred
Once the annual return is lodged, it becomes a public document, which may be inspected by anyone who pays the prescribed fee