acca test book Corporate and Business Law ppsx

OBJECTIVES On completion of this paper students should be able to: • analyse and evaluate situations from a legal perspective • identify the essential elements of different economic, pol

Paper 2.2(GLO)

DECEMBER 2003 – STUDY GUIDE

PROFESSIONAL EXAMINATION

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© The Association of Chartered Certified Accountants

June 2003

ISBN

ABOUT ACCA

ACCA is the largest and fastest-growing international accounting body, with over 300,000 students and members in 160 countries ACCA has an extensive network of over 70 staffed offices and other centres around the world.

This booklet includes the syllabus and study guide for Paper 2.2(GLO): Corporate and Business Law (Global).

Introduction

Business Activity and Legal Control in an

International context

The focus of this paper is the way in

which business is carried out within both

the national and international community

with particular attention be paid to the

problems that arise in relation to

international business activity

OBJECTIVES

On completion of this paper students

should be able to:

• analyse and evaluate situations from a

legal perspective

• identify the essential elements of

different economic, political and legal

systems, identify the main sources of

law and how different legal systems

operate

• explain the variety of organisational

mechanisms through which business

activity is conducted and the regulation

of these organisations both nationally

and internationally

• explain the rules of agency as they apply

to partnerships and joint stock companies

• explain the law relating to partnerships

• describe the different types of joint stock

company and explain the rules relating to

their financing, management,

administration and regulation

• explain the law relating to

international business transactions

and international dispute resolution

• explain the criminal law relating to

insider dealing and money laundering

Paper 2.2

Corporate and Business Law (GLO)

POSITION OF THE PAPER IN THE OVERALL SYLLABUS

There is no prerequisite knowledge for this paper although the generic skills

developed in Part 1 will provide the basis for the substantive study undertaken

Although all of the work done in other papers in Part 2 takes place within the legal framework, legal regulation is particularly relevant to Paper 2.1 Information Systems, Paper 2.3 Business Taxation (UK) and Paper 2.6 Audit and Internal Review Questions in Paper 2.2 will neither assume, nor draw on, any knowledge from those papers

In Part 3, Paper 3.2 Advanced Taxation, will require an ability to understand and apply tax law Paper 3.6 Advanced Corporate Reporting will address the issue

of corporate insolvency

SYLLABUS CONTENT

1 Introduction: Economic, Political and Legal Systems

Business activity takes place within specific contexts This section introduces students to those contexts Its primary focus is, however, on the legal environment within which business activity takes place and makes students aware of the different forms it can take, and the move towards an international legal system It considers different legal systems, different types of law

and the organisations which promote internationally applicable forms of regulation and dispute resolution Students may focus their attention on their own system but should at least be aware of the existence of other systems

(a) Economic systems (i) Market economies, (ii) Planned economies (iii) Mixed economies (iv) International economic and political groupings (b) Political systems

(i) The separation of powers (ii) The rule of law

(c) Legal systems (i) Civil Law and Criminal Law

(ii) Common Law (iii) Civil Law (iv) Sharia Law (d) Types of law (ii) Court based adjudication

in civil and criminal law (iii) ADR

(e) International trade and international legal regulation (i) Potential problems in trade between systems (iv) Types of international law

– public international law

– private international law/conflicts of law

Paper 2.2: Corporate and Business Law (Continued)

Corporate and Business Law (GLO) – continued

– international

economic law

• treaties

• conventions

• model codes

– International dispute

resolution forums

2 Business Forms and Legal

Regulation: Introduction

Business activity is conducted

through a variety of organisational

mechanisms from the sole trader to

the multi-national corporation This

part of the subject examines a

number of such mechanisms, their

particular structures and attributes,

and the way in which they are

regulated both nationally and

internationally

(a) Capital: meaning and types

(b) Shares and Stock exchanges

(c) Limited Liability

(d) Legal personality

(e) Business forms

3 Agency

This section will familiarise the

student with the general principles

and rules of agency which allow the

business activity to be conducted

through the means of a second

party, and which also find specific

application in relation to

partnerships and joint stock

companies

(a) Introduction: agents and representatives (b) The relationship of Principal and agent: reciprocal rights and duties

(c) The relationship of the agent and third party: authority and liability of the agent

(d) The relationship of the principal and third party:

rights and liabilities (e) Agency in International Law

4 Partnership

This section will examine the partnership as a means of operating

a business beyond the limited capital/skills of the sole trader

(a) Formation of Partnership (b) Internal regulation of Partnerships (c) Partnerships and outsiders (d) International Partnerships

5 Joint Stock Company: Introduction

This constitutes the central element

of the subject and examines the joint stock company as the pre-eminent business form in the contemporary world

There is no international standard

or global system relating to the operation of joint stock companies

Different regimes, however, face the same problems and adopt similar approaches to deal with them The

UK as the oldest system of regulation will be used as the exemplar with appropriate reference

to other jurisdictions

The first element in this section examines the different types of companies and the legal requirements controlling their establishment (a) The nature of the Joint Stock Company and types of companies (b) The formation and constitution

of the company

6 Capital and financing of companies

This section deals in outline with the capital and financing of companies, covering share and loan-capital (a) Share capital: ordinary, and preference shares

(b) Public issue of shares (c) Loan capital: debentures and company charge

(d) Capital Maintenance and dividend law

7 Management and administration of

a company

This section takes an overview of the legal obligations of the management

in relation to the administration of the company The role of key personnel is identified and the rights and obligations they have, is explored

(a) Separation of ownership and control

(b) Corporate Governance

(c) Directors:

(i) appointment, termination

of office and

disqualification,

(ii) duties,

(iii) powers

(d) Company meetings and

resolutions

(e) Auditors: appointment, duties

and powers

(f) State regulation of corporate

behaviour

8 Minority protection

This section examines the way in which

potential abuse of majority power may

be prevented or remedied

(a) majority control

(b) fraud on the minority

(c) just and equitable winding up

(d) unfairly prejudicial conduct

(e) company investigation

9 Insolvency

This section will introduce students

to the ways in which insolvent

companies may be dealt with

(a) voluntary liquidation

(b) compulsory liquidation

(c) offences in relation to winding up

(d) alternatives to winding up:

Administration, Chapter 11

Corporate and Business Law (GLO) – continued

10 International Business Transactions:

(a) Sale: United Nations Convention on Contract for the International Sale of Goods (b) ICC INCOTERMS

(c) Transportation: Bills of Lading (d) Payment: Bank Transfers, Bills

of Exchange, Letters of Credit

11 International Dispute Resolution:

(a) Court based System:

determining the appropriate forum

(b) UNCITRAL Model Law on International Commercial Arbitration

12 Criminal law

(a) Insider dealing (b) Money laundering

EXCLUDED TOPICS

The syllabus does not attempt to cover every aspect of the various subject areas it deals with

APPROACH TO EXAMINING THE SYLLABUS

The examination is a three hour paper divided into two sections Section A will contain short, knowledge-based questions Section B will be made up of

20 mark questions, which will have approximately 10 marks for knowledge and 10 marks for problem solving These

questions will test knowledge, communication skills and the ability to appraise and analyse information

Number

of marks

Section A: Choice of 6 from 8 questions (10 marks each) 60 Section B: Choice of 2 from 4 questions (20 marks each) 40

100

ADDITIONAL INFORMATION

Knowledge of new legislation will not be expected until at least six months after the last day of the month in which the Royal Assent (or similar procedure in other countries) is given, or six months after the specific provision comes into effect, which ever is the later

The Study Guide provides more detailed guidance on the syllabus

RELEVANT TEXTS

The sources from which you can obtain materials written for this paper are:

Accountancy Tuition Centre (ATC) International

Contact number: +44 (0)141 880 6469 Website: www.ptc-global.com

BPP

Contact number: +44 (0)20 8740 2211 Website: www.bpp.com

Corporate and Business Law (GLO) – continued

STUDY SESSIONS

1 Introduction: Economic, Political

and Legal Systems – 1

Syllabus reference1(a)&1(b)

Economic and Political environments

– understand the way in which

market economies operate,

– understand the way in which

planned economies operate

– understand the way in which

mixed economies operate

– consider the structure and

operation of International

economic and political groupings

– understand the doctrine of the

separation of powers and its

impact on the legal system

– understand what is meant by the

rule of law

2 Economic, Political and Legal

Systems – 2

Syllabus reference1(c) & (d)

Common Law

– understand its history

– explain its characteristics; mode

of reasoning, role of judges

– consider the relationships

between the common law and

legislation

– cite English law and American

law as examples

Civil Law

– understand its history

– explain its characteristics; mode

of reasoning, role of judges

– understand the role of codification

– cite Continental Europe as an example

Sharia law

– understand its history

– explain its characteristics; mode

of reasoning, role of judges

– consider the operation of the rule against usury

– cite Pakistan, Iran as examples

Civil law and Criminal law

– understand the distinction between Civil Law and Criminal Law, especially in areas relating

to business activity

3 Economic, Political and Legal Systems – 3

Syllabus reference 1(d)

– understand the way in which courts adjudicate in civil and criminal law

– explain the operation, and evaluate the distinct merits, of court-based adjudication and Alternative Dispute Resolution mechanisms such as:

– Arbitration

– Mediation

– Conciliation

4 Economic, Political and Legal Systems – 4

Syllabus reference1(e)

International trade and international legal regulation/conflict of laws

– explain the distinction between public international law and private international law

– understand the concepts of international trade, the consequences of conflict of laws and the need for truly

international economic law

– consider and explain the role of organisations endeavouring to establish international

regulation: UN ICC, WTO, COE,

WTO, OECD, etc

– explain the function of international treaties, conventions and model codes

– explain the need for, and role of,

neutral adjudicators: ICC.

5 Business forms and legal regulation: Introduction

Syllabus reference 2(a)-(e)

– explain the various meanings of the term Capital and cite examples

– explain what shares are in both legal and economic terms

– understand the role stock exchanges in relation to business activity

– explain the meaning and consequences of limited liability

in relation to company shares

– understand the doctrine of legal personality and some of its consequences with particular reference to:

– Separation of ownership and control

– Corporate governance

Corporate and Business Law (GLO) – continued

6 Agency

Syllabus reference 3 (a)- (e)

– explain the role of the agent and

other representatives and give

examples of such relationships

– explain how the agency

relationship is established

– define the authority of the agent

– analyse the reciprocal rights and

duties between principal and agent

– detail the relationship between

the agent and third parties

– examine the particular problems

that flow from international

agency relationships

7 Partnership

Syllabus reference 4 (a)- (b)

– define and explain the role of the

partnership form in the context of

contemporary business organisation

– analyse the duties of partners to

each other

– analyse the rights of partners to

each other

8 Partnership – 2

Syllabus reference 4 (c) – (d)

– explain the authority of partners

in relation to partnership activity

– analyse the liability of various

partners for partnership debts

– explain the way in which

partnerships can be brought to

an end

– examine the legal implications of

international partnerships

9 Joint Stock Company – 1

Syllabus reference 5(a)

The Company Form

– explain and distinguish between the following forms

– sole trader

– partnership

– limited liability or not

– separate personality or not

– legal control

– joint stock company

– types:

– private

– public

– public listed

– parent/subsidiary

– multinational

– state-owned companies

– illustrate the effect of separate personality

– contract/ownership etc

– limited liability, publicity and capital maintenance

– cite instances where separate personality will be ignored

– lifting the veil, misuse/

fraudulent use of corporate form/wrongful trading

10 Joint Stock Company – 2

Syllabus reference5(b)

The formation of the company and constitution of the company

– explain the procedure for registering companies

– detail the content and effect of constitutional documents of the company: memorandum and articles of association

– explain the contractual capacity

of a company

– detail the statutory books, records and returns required to be kept and submitted by companies

11 Capital and financing of companies

– 1

Syllabus reference 6(a) & (b)

Capital and financing of companies: share capital

– illustrate the difference between various classes of shares; ordinary, and preference shares

– explain class rights and the procedure for altering class rights

– explain the legal regulation of the issue of shares to the public, promoters and liability for false statements

– describe the quasi-legal regulation of share issues: the Stock Exchange regulations

– detail the rules relating to the payment for shares

12 Capital and financing of companies

– 2

Syllabus reference 6(c)

Capital and financing of companies: loan capital

– define companies’ borrowing powers

Corporate and Business Law (GLO) – continued

– explain the meaning of debenture

– distinguish loan capital from

share capital

– explain the concept of a company

charge and distinguish between

fixed and floating charges

– detail the need and the procedure

for registering company charges

13 Capital and financing of companies

– 3

Syllabus reference 6(d)

Capital and financing of companies:

capital maintenance

– explain the meaning and effect of

the doctrine of capital

maintenance

– explain the distribution rules

relating to:

– financial assistance for

purchase of shares

– dividend law

14 Management and administration of

a company – 1

Syllabus reference 7(a)(b) &(c)

Corporate Governance

– examine the issues relating to the

separation of ownership and

control

– explain the meaning of corporate

governance

Directors

– explain the role of directors in the

operation of a company with

specific regard to their:

– appointment,

– remuneration including stock/

share options

– loss of office

– disqualification

– detail the powers of the board of directors, the managing director and individual directors

– consider different board structure:

– single board

– supervisory board

15 Management and administration of

a company – 2

Syllabus reference 7(c)&(d)

Directors duties and company meetings

– detail the duties directors owe to their companies

– explain the meaning of fraudulent trading and wrongful trading

– detail the procedure for conducting company meetings

16 Management and administration of

a company – 3

Syllabus reference 7(e)&(f)

Auditors

– detail the appointment procedure relating to, and the duties and powers of company auditors State regulation of corporate behaviour

– examine the role of the Financial Services Authority:

– market abuse

– company investigations

17 Minority Protection

Syllabus reference8(a)–(d)

Majority control and minority protection

– examine the normal operation of rules relating to majority control

– examine the common law doctrine of fraud on the minority

– explain the functioning of the statutory procedures relating to just and equitable winding up and unfairly prejudicial conduct

18 Insolvency –1

Syllabus reference 9(a)-(c)

Insolvency

– explain the meaning, effect and procedures relating to voluntary liquidation

– explain the meaning, effect and procedures relating to compulsory liquidation

– detail the offences in relation to winding up

19 Insolvency – 2

Syllabus reference 9(d)

Insolvency – continued

– examine the alternatives to winding up:

– Administration

– Chapter 11 in the USA

20 International Business

Transactions – 1

Syllabus reference 10(a)&(b)

United Nations Convention on

Contract for the International Sale of

Goods

– explain the sphere of application

and general provisions of the

convention

– explain and be able to apply the

rules for creating contractual

relations under the convention

– explain the effect of the ICC

INCOTERMS

21 International Business

Transactions – 2

Syllabus reference 10(a)

United Nations Convention on

Contract for the International Sale of

Goods -continued

– explain and be able to apply the

rules relating to the obligations of

the seller under the convention:

– delivery of goods and handing

over documents

– conformity of the goods and

third party claims

– remedies for breach of

contract by the seller

– explain and be able to apply the

rules relating to the obligations of

the buyer under the convention:

– payment of the price

– taking delivery

– remedies for breach of

contract by the buyer

22 International Business Transactions – 3

Syllabus reference 10(a)

United Nations Convention on Contract for the International Sale of Goods –continued

– explain and be able to apply the rules relating to the passing of risk under the convention

– explain and be able to apply the rules relating to the provisions common to both seller and buyer under the convention:

– anticipatory breach and instalment contracts

– damages

– interest

– exemptions

– effects of avoidance

– preservation of the goods

23 International Business Transactions – 4

Syllabus reference 10(b)

Transportation documents

– Bills of lading

24 International Business Transactions – 4

Syllabus reference 10(c)

Means of payment

– Bank transfers

– Bills of Exchange

– Letters of credit

Corporate and Business Law (GLO) – continued

25 International Dispute Resolution – 1

Syllabus reference 11(a)

Court based solution in international law

– Selection of forum

– Enforcement of awards

26 International Dispute Resolution – 2

Syllabus reference 11(b)

UNCITRAL Model Law on International Commercial Arbitration

– explain the nature and effect of the arbitration agreement under the model law

– understand the rules relating to the composition of arbitral tribunal under the model law

– explain the jurisdiction of tribunal under the model law

– understand and explain the rules relating to the conduct of proceedings under the model law

– explain how awards may be enforced under the model law

27 Criminal law – 1

Syllabus reference 12(a)

Criminal law – Insider dealing

– explain the nature of insider dealing

– consider the difficulties in regulating it

– detail and assess the effectiveness of the legal control exercised over insider dealing

28 Criminal law – 2

Syllabus reference 12(b)

Criminal law – money laundering

– explain the various legal

measures to control money

laundering

– explain the scope of FATF

– detail and be able to apply the

rules in the Vienna convention

(1988)

– detail and be able to apply the

rules in the Council of Europe

convention (1993)

Corporate and Business Law (GLO) – continued