Companies still to understand new Act

Hathoon Sheriffdeen

The directors' remuneration and the other benefits of the accounting period should be disclosed in the annual report. The accounting treatment of the remuneration of directors should be made through interest register of the Company. Partner, Nithya Partners, Naomal Goonewardena said.

Speaking at the discussion on the practical experience of the newly introduced Companies Act, No. 07 of 2007 Goonewardena said, during this six months period, SLT, Commercial Bank and Singer are some of the companies that have recorded its Director's remuneration in the annual reports with only a single line. "This is also specified in total and not substantive enough. HNB has disclosed the payments of the Chairman and the Executive Director's remuneration separately," he said.

However, Goonawardena said many of these companies have not understood the purpose of the new Act comprehensively.

"They are recording the transactions on their accounting records on their own, which is similar to the treatment of transactions in the old Companies Act.

He said identifying the shareholders as per the new CA is much complicating for companies than the earlier Act since the new Act has distincts between the shareholders and members. "Section 86(1) defines the shareholders as a person whose name is in the share register and the person to whom a share has been transferred, whose name needs to be in the register until his name is entered in the register.

The Registrar of Companies has been allowed to interpret capital reserves by bonus issues, which should satisfy the distribution and the solvency test and satisfy the requirement of Section 52.

Allocating a large capitalisation reserve is not very popular in the country. Richard Pieris and Tokyo Cement can be taken for example. Chemanex can be quoted for share split, Goonewardana said.