COMPANY LAW

Grey River Argus, 16 April 1937, Page 6

COMPANY LAW

A SOUTH AFRICAN COMMISSION. The South African Government, recognising the need of amendments in company legislation, appointed a Commission which has made very important recommendations for the protection of the investing publie. In an editorial review of the Commission’s report, “The Accountant” (London) remarks:— “The most far-reaching proposal in the whole report is that relating to profit and loss accounts, designed to make them disclose ‘a true statement of profit and loss for the period covered.’ Accordingly, ‘without prejudice to the generality of this requirement,’ a profit and loss account is to distinguish: (a) Extraneous debits and credits; (b) trading profits and losses; (c) balances arising from share transactions; (d) income from investment; (e) dividends derived frpm, or provision for losses incurred by, subsidiary companies; (f) profits or losses on the realisation of fixed assets; and (g) sums introduced into the account from reserves created in previous years. On this we remark only that the proposals represent the best British practice, but that accountants at Home rather doubt the practicability of proposal (g) as a mandatory enactment. It is obviously easy, as in the Royal Mail ease, to distinguish specific balances brought in as, a matter of book entry; but the most difficult cases ar e ' those where the ‘balances’ brought jn arise f.’>m changes in policy whereby su:h .mattirs as stock valuation or provision for bad debts are made less .stringently conservative than before. It is natural that auditors should shrink from incurring statutory obligations in matters which, like those instanced, depend mor e on a board’s policy than on visible entries in a ledger. “As to holding companies, the Com-

missioners roundly declare that the English 1929 Act does not satisfy the best accountancy opinion in the ■ matter of disclosing subsidiary profits J? and losses. They therefore propose, as it seems to us very sensibly, that the , aggregate profits and losses of subsi- ' diaries shall be declared in specific 1 figures and that the definition of sub- ■ sidiaries' shall include sub-subsidiaries. . “One final matter must be mention- ’ ed, if only to show how closely the 1 Commissioners have kept abreast of s home affairs. They have noted the , I notorious decision (so-called) aboutj loose-leaf minute books in the recent / i Hearts of Oak ease, and they consider/ • the matter with some care. The con<| i elusion they come to is that while : loose-leaf books fill a useful purpose in • general commercial affairs, yet minute ■ books seem to them to be so vital a • record that they ar e not prepared to i take any risks with the integrity I thereof. Accordingly, they recommend that, for this restricted purpose, the ■ definition of a minute book be framed to exclude any form of loose-leaf re- ■ cord. This is a decision which we re- • gard as retrograde, but otherwise we ; find the whole report admirably progressive and in accordance with modern needs.”