Honestly, from the economic point of view, the 1947 Act was passed as a result of the findings of the then Lord Chancellor(Lord Jowett) described as financial democracy i.e. to make it easier for shareholders to influence the management of their company. The 1947 Act ensues that as full information as possible is made available to shareholders in the statement of accounts Every balance sheet of a company shall give a true and fair view of the state of affairs of a company and every profit and loss account of a company for the financial year. There are a lot of other means for information, always readily available. The Act also provides that the accounts must show the sum total of director’s emoluments (fees and salaries as executives). The accounts must equally indicate the amount paid to past or present directors in the form of pensions and also any amounts paid to directors as compensation for loss of office. The retiring age of directors of public companies is fixed at 70 but a company may in its articles fix a retiring age between 60 and 80 and any director over 70 may continue in office by special resolution. Another provision affecting directors is that they must disclose transactions in the shares of their company. The object of this is to prevent directors making improper use of information they may have for speculative purposes.
Provision is made for the investigation of the affairs of a company by the board of trade at the instigation of (a) Two hundred members of a company even though their share may be small. (b)Members holding at least one tenth of the shares with voting rights (c) the board of trade itself (d) the courts. There are provisions that no allotment of shares shall be made until three days after the issue of the prospectus. This affords the public more time to digest the matter contained in the prospectus. If a prospectus states that application will be or dealt in on any stock exchange then permission has not been applied for before the third day after the issue of the prospectus or if permission is refused within three weeks, the allotment is void and all the money must be returned to subscribers. The Act provides that every company must have at least one director and a secretary as well. The right of shareholders to appoint proxies is made statutory and proxy need not be a member of the private company. A proxy may speak at a meeting of a private company as well as vote but not at a meeting of public company. Proxy forms if sent out must be sent to all shareholders of the company. A member entitled to more than one vote may cast his vote in many ways. This enables nominee shareholders to give effect to different views of the individuals for whom they hold shares. The Committee of Cohen drew attention to the fact that the placing of shares in the names of nominees had grown to so great an extent that a company register of membership had virtually lost its significance as registered of real owners of the shares. It considered that the abolition of the practice was however, impracticable and it did not appear to have led to any widespread abuse. The committee none the less had made certain recommendations and commendations that every shareholder should be required to state whether he has the beneficial owner. That every person who directly owned one per cent or more of the issued capital should be compelled to make a declaration to that effect to the company concerned and that the register of such beneficial ownership should be maintained , thirdly that the board of trade should be empowered to investigate the ownership of shares where this was thought to be in the public interest. Later on, the last of these commendations was incorporated in the companies Act.
The Cohen committee drew also the undivided attention to the fact that private companies had always been excused from filing their balance sheets with the registrar in order that family businesses and other private business concerns might enjoy the benefits of limited liability without exposing their financial position to the public gaze. It equally drew the attention of all concerned to the fact that public companies had developed the technique of forming subsidiaries as private companies and thereby making their true financial position. The committee sought to confine the provision exempting private companies from filing their balance sheets with the register to truly private concerns and to exclude private companies which were in fact branches of a public company. A public company such as this is also called a holding company because it holds shares in the subsidiary company. From the economic point of view the given effect under the Act by stipulating that all holding companies must with certain exceptions furnish consolidated accounts for themselves and their subsidiaries so as to disclose a true and fair view of the position of the group as a whole. A company is therefore defined under the ACT as a subsidiary company , if the holding holds more than 50% of its equity share capital or if the holding company is a member of the other company and controls , regulates the composition of that company’s directorate. As a result most holding companies have to file with the registrar consolidated balance sheets and profits and loss accounts for the whole of their organization, strictly and periodically.
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