ACCA paper f4 corporate and business law

Corporate and business law paper F4 GLOContents Introduction ...iv Chapter 1: Essential elements of legal systems .... 1 Chapter 2: International commercial arbitration ...13 Chapter 3:

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Paper F4 Glo

Corporate and Business law Pocket notes

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Corporate and business law paper F4 GLO

British library

cataloguing-in-publication

data

A catalogue record for this book is available

from the British Library

Published by:

Kaplan Publishing UK

Unit 2 The Business Centre

Molly Millars Lane

Wokingham

Berkshire

RG41 2QZ

ISBN 978-1-78415-239-0

Printed and bound in Great Britain

The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken

as such No reliance should be placed on the content as the basis for any investment

or other decision or in connection with any advice given to third parties Please consult your appropriate professional adviser as necessary Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect

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by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Kaplan Publishing

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Contents

Introduction .iv

Chapter 1: Essential elements of legal systems 1

Chapter 2: International commercial arbitration 13

Chapter 3: International business transactions: formation of the contract 17

Chapter 4: International business transactions: obligations 23

Chapter 5: International business transactions: risk and payment 35

Chapter 6: International business forms – agency .49

Chapter 7: Types of business organisation 53

Chapter 8: Legal personality .59

Chapter 9: Capital and financing .77

Chapter 10: Directors 91

Chapter 11: Corporate administration 99

Chapter 12: Insolvency .109

Chapter 13: Fraudulent behaviour 117 Index I.1

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Corporate and business law paper F4 GLO Paper introduction

Paper background

The aim of ACCA Paper F4 (GLO),

Corporate and Business Law, is to develop

knowledge and skills in the understanding of

the general legal framework, and of specific

legal areas relating to business, recognising

the need to seek further specialist legal

advice where necessary

Objectives of the syllabus

• Identify the essential elements of

different legal systems including the

main sources of law, the relationship

between the different branches of a

state’s constitution, and the need for

international legal regulation, and explain

the roles of international organisations

in the promotion and regulation of

international trade, and the role of

international arbitration as an alternative

to court adjudication

• Recognise and apply the appropriate legal rules applicable under the United Nations Convention on Contracts for the International Sale of Goods, and explain the various ways in which international business transactions can be funded

• Recognise different types of international business forms

• Distinguish between alternative forms and constitutions of business organisations

• Recognise and compare types of capital and the financing of companies

• Describe and explain how companies are managed, administered and regulated

• Recognise the legal implications relating

to insolvency law

• Demonstrate an understanding of corporate and fraudulent behaviour

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Core areas of the syllabus

• Essential elements of the legal system

• International business transactions

• The formation and constitution of business organisations

• Capital and the financing of companies

• Management, administration and regulation of companies

• Legal implications relating to insolvency law

• Corporate fraudulent and criminal behaviour

Examination Format

The examination is a two-hour assessment – available as either a paper-based examination or as a computer-based examination

The assessment will contain 100%

compulsory questions and will comprise the following:

Section A:

• 20 × 1 mark objective test questions

• 25 × 2 mark objective test questions Section B:

• 5 × 6 mark multi-task questions

Paper based examination tips

Spend the first few minutes of the examination reading the paper

Divide the time you spend on questions

in proportion to the marks on offer One suggestion for this exam is to allocate 2 minutes to each mark available

Multiple-choice questions: Read the questions carefully If you don’t know the answer, eliminate those options you know are incorrect and see if the answer becomes more obvious Guess your final answer rather than leave it blank if necessary

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Computer-based examination (CBE) – tips

Be sure you understand how to use the

software before you start the exam If in

doubt, ask the assessment centre staff to

explain it to you

Questions are displayed on the screen and

answers are entered using keyboard and

mouse At the end of the exam, you are

given a certificate showing the result you

have achieved

Read each question very carefully

Double-check your answer before committing

yourself to it

Answer every question – If you do not know

the answer, you don’t lose anything by

guessing Think carefully before you guess

With a multiple-choice question, eliminate

first those answers that you know are wrong

Then choose the most appropriate answer

from those that are left

Remember that only one answer to a multiple-choice question can be right After you have eliminated the ones that you know

to be wrong, if you are still unsure, guess

But only do so after you have double-checked that you have only eliminated answers that are definitely wrong

Don’t panic if you realise you’ve answered a question incorrectly Getting one question wrong will not mean the difference between passing and failing

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Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email

to mykaplanreporting@kaplan.com with full details, or follow the link to the feedback form

in MyKaplan

Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions

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Corporate and business law

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Essential elements

of legal systems

In this chapter

• Economic, political and legal systems

• Separation of powers

• International trade, international legal regulation and conflict of laws

• Arbitration

chapter

1

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Essential elements of legal systems chapter 1

Economic, political and legal

systems

A country’s political economy refers to its

political, economic and legal systems

These systems are interdependent, and

interact and influence each other

Economic system – The way in which

society decides what to make, how to make

it and who to make it for

Economic systems

Planned –

decisions

made by

government

Market – decision left

to market forces

Mixed – mixture of the other types

Political system – The way in which

countries are managed eg dictatorship or

democracy

Legal system – The law is a body of rules

designed to regulate the conduct of society

Types of legal system

Common Law – applies in

UK and USA

Civil Law – applies in France and Germany

Sharia Law – applies

in Pakistan and Iran

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Separation of powers

Power is split in the following way so that no part of the political process has too much power

1 Legislature – makes the law

2 Executive – implements the law

3 Judiciary – interprets the law in a dispute

Different legal systems

A Common law

• Built up in England between 1066 and about 1400 Has been exported to other countries because of the British Empire, e.g USA and Canada

• Principles of law do not become inoperative because of passing of time

• New laws passed by Parliament are presumed not to alter existing law

• Judges apply law using judicial precedent

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Sources of law

• Common Law – built up through the

application of judicial precedent

• Equity – developed by Chancery to deal

with the rigidity of common law

• Statute – made by legislature

• Custom

• Constitution (where applicable)

• European Union law – where

country is a member of EU

Role of judges

• Apply the law consistently with previous

decisions

• Interpret statutes

• The following presumptions apply when

interpreting a statute:

– it does not override existing law

– it does not alter common law – it does not have retrospective effect

– it does not bind the Crown – it does not repeal other statutes

• The following rules should be used to interpret statutes:

– words should be given their literal meaning

– words should be interpreted within their context

– words should be interpreted according to the purpose of the statute

– the meaning of general words should be limited to the type or class

of thing mentioned by specific words

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B Civil law

• Historically developed from Roman Law

• Law is contained in codes which should answer any question

• Questions of law should be decided within the context of the code

Sources of law

• Countries’ constitutions

• EC law where the country is a member

• Statute mostly codified

• Administrative regulations

• Custom

Role of judges

• Apply the law but they do not create precedents

• Not supposed to interpret the law but, where necessary, must identify the social

purpose of the law and apply it to achieve that purpose

C Sharia law

• Based on the religion of Islam

• It is given by Allah

Sources of law

• Quran – Allah’s divine revelation to the prophet Mohammed

• Sunnah – sets out acceptable conduct derived from the prophet Ahadith

• Madhab – schools of thought based on writings of major jurists Two schools which are the Sunni and Shiite

• Constitution of the country

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Role of judges

• They are generally clerics

• Required to apply the law

• Have limited powers of interpretation

• If clear guidance not available in the

Quran, reference can be made to

Sunnah to confirm, explain or clarify

the law

• Within the Sunnah, ahadith are

classified according to reliability

• Ijtihad are the historic processes

used for interpreting law

International trade, international legal regulation and conflict of laws

Private international law is a set of national and domestic rules to determine the jurisdiction and applicable law in international contracts It is purely domestic law

Public international law is law which is recognised by a group of nations eg conventions and treaties, international custom and law recognised by civilised nations

Conflict of law arises where the private laws

of two different countries produce a different result in the same situation It makes it harder for parties in those two countries to trade

Definition

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Public international law deals with the problem of the conflict of laws Nations negotiate treaties and conventions to enable international trade International bodies exist to make and manage those agreed international laws

International organisations

United Nations

Almost every country is a member

Aims – maintain peace and security – develop friendly relations between nations

– co-operate in solving economic, social, cultural and humanitarian problems

– to promote respect for human rights and international freedoms

It has various legal departments including UNCITRAL and ICJ

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UNCITRAL

(UN Commission on International Trade

Law)

Aim – to harmonise and unify international

law on trade

Composition – 60 member states elected

by the general council

International Chamber of Commerce (ICC)

Set up by business leaders from various countries

Aim – to serve the world business community by promoting trade, investment, open markets for goods and services and the free flow of capital

Functions:

• cooperates with and advises UN in forming international law

• provides practical services to businesses

• combats commercial crime eg money laundering

It has a World Council, National Committees and an International Secretariat

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World Trade Organisation (WTO)

Aims – to assist the free flow of trade by removing obstacles

• to publicise world trade rules

• to give individuals, companies and governments confidence that there will be no changes

in policy

Functions: administers trade agreements

• acts as a forum for trade negotiations

• settles trade disputes

• reviews national trade policies

• assists developing countries in trade policy issues

• cooperates with other international organisations

Structure – Secretariat based in Geneva

It provides technical support for councils and committees

• Ministerial conference meets every two years and makes important decisions

• General Council based in Geneva

• Sub- Councils which report to the general Council

• Specialised committees and working groups

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UNIDROIT (International Institute for the Unification of Private Law)

Aim – to study needs and methods of harmonising private commercial law

Function – draws up International Conventions which have force of law in priority to existing domestic law where adopted

• draws up model laws for states to take into account when drafting their own private law

• draws up general principles for judges and arbitrators

Structure: The Secretariat is responsible for carrying out day to day work

• the Governing Council supervises the work of the secretariat

• General assembly is the decision making body

Organisation for Economic

Cooperation and Development (OECD)

Aim – Forum for discussing, developing

and refining economic and social policies

(Historically it administered American and

Canadian aid to Europe after WWII)

Function – to create legally binding

agreements and non binding guidelines to

subscribe to

Structure – Consists of 30 countries from

most continents

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International Courts International Court of Justice (ICJ)

Part of UN

Settles disputes put before it by states

Provides legal advice to international organisations

No appeal

International Court of Arbitration.

Set up to oversee all aspects of the arbitration process

It decides on challenges to arbitrators, approves awards and fixes arbitrators’

fees

International Criminal Court (ICC).

Formed to deal with the most serious crimes against humanity

May only prosecute states and individuals from states which have accepted the jurisdiction of the court

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