Miscellaneous Forms of Resolutions, Notices, &c.

THAT an interim dividend at the rate of &c. on the nominal amount Part III. of the shares of the company [or on the amount paid up on the shares Chap. 5. of the company] be paid to members who are registered holders of shares on the day of , and that in order to arrange for the Resolution payment of such dividend the transfer-books be closed from the day of

to the

day of

declaring an interim dividend.

THAT the capital of the company be increased to the amount of Increase of £20,000 by the creation of additional capital of the amount of £10,000, capital. divided into 1,000 shares of £10 each, such shares to be issued as ordinary shares, ranking as to dividend and as to distribution of capital on a winding-up pari passu with the ordinary shares in the existing capital of the company.

THAT the capital of the company be increased to the amount of £20,000 by the creation of additional capital to the amount of £10,000, divided into 1,000 shares of £10 each, to be issued as preference shares, entitling the holders thereof to receive out of the profits of the company available for dividend, before any dividend is paid to the holders of shares in the now existing capital of the company, a cumulative preferential dividend at the rate of £7 per centum per annum, but to no further share in the profits of the company, and also entitling the holders thereof on a winding-up to a preferential claim on the distribution of the assets of the company remaining after paying the debts and liabilities of the company and the costs of winding-up.

Increase of capital by the

issue of

preference shares.

CHAPTER VI.

Auditors.

Appointment.

Statutory Powers and Duties.
Duties and Liabilities.

Part III.
Chap. 6.

Appointment.

SECTION 133 of The Companies Act, 1903, corresponding to Sec. 24 of the Act of 1901, requires every company to appoint an auditor at each annual general meeting. Prior to the passing Appointment. of the Act of 1901 the appointment of auditors by the company depended on the Articles of Association. Secs. 137 to 139 of the Act of 1903, corresponding to the provisions of The Companies Accounts Audit Act, 1894, give the Governor power to order the audit of the accounts of any company by the Audit Office on the application of the shareholders.

Statutory

powers and duties.

Articles 83 to 94 of Table A of 1882 will be found to be substantially embodied in Secs. 133 to 135 of The Companies Act, 1903.

It seems that these provisions apply to all companies, and must over-ride any inconsistent provision in the Articles of Association.

Statutory Powers and Duties.

The statutory powers and duties of auditors appointed by the company under the Act of 1903 are defined by Sec. 135, as follows:

(1) Every auditor of a company shall have a right of access at all times to the books and accounts and vouchers of the company, and shall be entitled to require from the directors and officers of the company such information and explanation as may be necessary for the performance of his duties.

(2) The auditors shall sign a certificate at the foot of the balance sheet stating whether or not all their requirements as auditors have been complied with, and shall make a report to the members on the accounts examined by them, and on every balance sheet laid before the company in general meeting during their tenure of office.

Statutory Powers and Duties of Auditors.

(3) In every such report the auditors shall state whether, in their Part III.
opinion, the balance sheet referred to in the report is properly Chap. 6.
drawn up, so as to exhibit a true and correct view of the state of
the company's affairs as shown by the books of the company;
and such report shall be read before the company in general
meeting.

Duties and Liabilities.

The duties and liabilities of auditors have been discussed by Duties and the (E.) Court of Appeal in Leeds Estate &c. Co. v. Shepherd, 36 liabilities. C.D. 787; London and General Bank (No. 2), 1895, 2 Ch. 673, and Kingston Cotton Mill Co. (No. 2), 1896, 2 Ch. 279. From these decisions it is to be gathered that the auditor's business is to ascertain and state the true financial position of the company at the time of the audit; he is to ascertain that position by examining the books of the company; he must take reasonable care to ascertain that the books themselves show the company's true position; he must prepare or verify the balance sheet, but his duty is not confined to ascertaining the arithmetical accuracy of the balance sheet, he must enquire into its substantial accuracy, and see that it contains the particulars specified in the Articles of Association, and is a true and correct representation of the state of the company's affairs at the time to which the balance sheet refers. It is no part of his duty to take stock. He is entitled to rely on the information furnished as to quantities and values of stock-in-trade by the company's servants, whose competency and integrity he has no reason to suspect. Where no suspicion of anything wrong is entertained, it is not a want of reasonable care on the part of an auditor to rely on the returns made by a competent and trusted expert relating to matters on which information from such a person is essential.

An auditor is bound to use reasonable skill, care and caution according to the circumstances of each case, and, if there are no circumstances which ought to excite suspicion, he is not bound to be suspicious as distinguished from reasonably careful. If there is anything calculated to excite suspicion, he is bound to probe it to the bottom; but in the absence of anything of that kind he is only bound to be reasonably cautious and careful. There are many matters in which an auditor must rely on the honesty and accuracy of others. He does not guarantee the discovery of all fraud.

An auditor appointed under the company's Articles or Auditor an under the Act of 1903 is an officer" within the meaning of

"officer" of the company.

Part III.
Chap. 6.

Auditor when not an

"officer" of

Duties and Liabilities of Auditors.

Sec. 254 of 1903, and if an auditor fails to discharge his duty to the shareholders, as for example, by not reporting to them such information as is necessary to enable them to see the true financial position of the company, he may be liable to make good to the company the loss which the funds of the company may sustain. In London and General Bank, 1895, 2 Ch. 673, an auditor was ordered to repay the amount of a dividend paid out of capital as the result of a report by which the shareholders were deceived as to the true position of the company.

But the performance of auditor's work upon a given occasion by a person who has never been appointed to the office of the company. auditor of the company, does not make that person an officer of the company so as to render him liable for misfeasance : Western Counties Steam Bakeries, 1897, 1 Ch. 617.

Section 10 of The (E.) Companies (Winding-up) Act, 1890, is substantially identical with Sec. 254 of The N.Z. Act of 1903.

PART IV.

Companies Incorporated outside New Zealand
Carrying on Business in New Zealand.

PROVISION is made by Part VIII. of The Companies Act, 1903 Part IV. (Secs. 297 to 309), enabling companies incorporated outside New Zealand to carry on business in New Zealand on appointing an British comattorney and depositing a copy of the power of attorney in the panies. office of the Registrar of the Supreme Court nearest to the place where the company proposes commencing business.

The new clauses embody the provisions of Part VIII. of the Foreign comrepealed Act of 1882, The Foreign Companies Act, 1884, and Sec. panies. 6 of The Evidence Further Amendment Act, 1885.

Section 150 of 1903 is substituted for Sec. 6 of The Companies Acts Amendment Act, 1893.

Insurance Companies.

By The Fire and Marine Insurance Companies Act, 1889, Insurance provision is made for the registration of local and foreign companies (including British) fire and marine insurance companies, subject to restrictions as to paid-up capital.

Section 4 of 1903 excepts companies registrable in pursuance of that Act from the prohibition against insurance companies registering with limited liability.

By The Foreign Insurance Companies Deposits Act, 1894, Foreign and the Acts of 1895 (No. 37) and 1900 (No. 42) amending the insurance companies same, all insurance companies registered or established out of deposits. the colony of New Zealand, or whose chief office is situate out of the colony, are required to deposit with the Public Trustee the moneys prescribed by these Acts, to be held by the Public Trustee in trust for policy holders and claimants.

See the provisions of these statutes; see also N.Z. Gazette, 1895, p. 1781, 1898, p. 1509, for forms of statement of business to be sent to the Public Trustee.

As to Accident Insurance Companies, see The Accident Accident

Insurance Companies Act, 1902.

insurance companies.