ACCOUNTANT STUDENTS

New Zealand Times, Volume LI, Issue 11875, 8 July 1924, Page 3

ACCOUNTANT STUDENTS

SOCIETY INTERESTING LECTURE ON "AD>VANCHD COMPANY ACCOUNTS." LIQUIDATION AFFAIRS. A successful meeting of the Wellington Accountant Students’ Society was held in the Accountants’ Chambers, when Mr J. L. Arcus presided over a large .attendance of members. The business of the evening was a lecture by Mr 15. L. Enting, 8.C0m., on the subject of "Advanced Company Accounts." The lecturer at the outset outlined the accounts necessary in the case of a liquidation of a limited! liability company, and stressed the important features that it differed from a partnership or a private concern. He stated that rent was not a perferential claim in a company as in a private concern, whereas wages was preferential for only two months, as against four months in the case of an ordinary business or partnership. In dealing with a deficiency statement of a company, Mr Enting urged the necessity of including the premium on the redemption of debentures. He went on to emphasise that an overdraft to a bank secured by guarantee appeared as an unsecured creditor in the company’s book, whereas tho bank was secured against the directors or guarantors privately. He dealt at some length with the rights of deferred shareholders who were usually deferred only in respect to dividends unless otherwise stiffed in the memorandum of association of the company In dealing with the liquidation of companies, the lecturer emphasised that any loss must ho born by each class of shareholder in proportion to the amount of the nominal and not paid-up capital, excluding any preference shares preferential as to capital. He explained at some length the levelling down process in winding-up a company and stated that care must bo exercised not to divide up the cash available for distribution. Mr Enting then outlined tho Rose claim case and also Birch v. Cropper, known as the Bridgewater case, whereby it was held by the courts that the surplus in a liquidation was divisible among all classes of shares In the absence of special provision in the articles of association to the oontrary. POWERS OF LIQUIDATOR.

The lecturer stated that it appeared clear that in New Zealand the liquidator had no power to forfeit shares after the liquidation had actually commenced, and that calls paid in advance must be refunded first, except where there were preference shares, preferential as to capital. He dwelt on debentures issued at either a premium or a discount, and stressed that they stood in tho books at the nominal value, while furthermore, it was necessary to write off the discount each year in proportion to the amount of debenture capital retained during the year. Mr Enting emphasised that debenture premiums and share premiums were capital profits, and although it was advisable and prudent not to distribute them to shareholders in the form of dividends, it was not illegal to do so provided there wore realised profits and a surplus remained after the whole of the assets of the company had been reasonably valued. In defining a difference between a sinking fund and a depreciation fund, lie pointed out that a sinking fund was an appropriation of profits* whereas a depreciation fund was a direct charge against the profit and loss account beforo the net profits could be ascertained. The lecturer dealt at considerable length with profits prior to incorporation, and caid that they were apportion,o<! as at t}ie diate of incorporation and not the date the company was entitled to commence business. He was of tho opinion that the most satisfactory way to apportion profits prior to incorporation, was to take the gross profits in proportion to actual turnover and other expenses proportionately on a time basis. PREFERENCE DIVIDENDS.

Mr Enting stressed tho principle that when once a liquidation had'commenced,

a preference dividend could .not be declared in accord an co with the rule laid down in tho Crichton’s oil case. He urged the necessity in the case of an amalagamation or reconstruction of working out the consideration accurately, and whore shares are taken over at markot prices it was essential that the considerat ion Ibe taken over at the market quotation in both books. In dealing with a reduction of capital, the articles must permit of a reduction and a special resolution was desired to comply with the Companies Act. Creditors were not entitled to object except with the consent of tho court if the reduction entailed! no return of capital to shareholders or reduction of their liability. Mr Enting gave a clear exposition of tho valuation of shares for probate purposes, where the shares were not quoted on the Stock Exchange. He also explained the method adopted for calculating sinking fund repayments, and repayment of loans by equal instalments, taking interest into consideration. Tho lecture was considerably enhanced by tho very clear examples and specimen accounts distributed to members at tho commencement of the meeting. Tho lecturer answered 1 , a number of questions at the conclusion of his address, and was accorded a vote of thanks by acclamation on the motion of Mr F. J. Brooker, seconded by Mr Cannons.