acca test book Corporate and Business Law ppsx

Paper 2.2(GLO)
Corporate and Business Law
(Global)
DECEMBER 2003  STUDY GUIDE
PROFESSIONAL EXAMINATION
PAGE 2
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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
PAGE 3
AIM
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
PAGE 4
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
PAGE 5
(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
PAGE 6
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
PAGE 7
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
PAGE 8
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
PAGE 9
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
PAGE 10
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