ACCA F4 - Corp and Business Law (GLO) - Study Text 2013

458 Pages·2012·6.5 MB·English

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S
T
U
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PAPER F4 T
E
X
CORPORATE AND
T
BUSINESS LAW (GLOBAL)
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FOR EXAMS UP TO JUNE 2014
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ii
Contents
Page
Introduction
Helping you to pass – the ONLY F4 Study Text reviewed by the examiner! v
Studying F4 vii
Syllabus and Study Guide xi
The exam paper xxii
Part A Essential elements of legal systems
1 Economic, political and legal systems 3
2 International trade and regulation 27
3 Commercial arbitration 47
Part B International business transactions
4 Contracts for the international sale of goods 65
5 Obligations and risk in contracts for international sales 81
6 Transportation and payment 101
Part C International business forms
7 Agency law 125
8 Sole traders and partnerships 135
Part D Joint stock companies
9 Corporations and legal personality 153
10 Company formation 173
11 Constitution of a company 189
Part E Capital and the financing of companies
12 Share capital 207
13 Borrowing and loan capital 221
14 Capital maintenance and dividend law 235
Part F Management, administration and regulation of companies
15 Company directors and other company officers 251
16 Company meetings and resolutions 285
Part G Legal implications relating to companies in difficulty or in crisis
17 Insolvency and administration 303
Part H Governance and ethical issues relating to business
18 Corporate governance 331
19 Fraudulent behaviour 351

Exam question bank 371
Exam answer bank 375
List of cases and index 399
Review form
Contents i ii
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iv
Helping you to pass – the ONLY F4 Study Text reviewed
by the examiner!
BPP Learning Media – the sole Platinum
Approved Learning Partner - content
As ACCA’s sole Platinum Approved Learning Partner – content, BPP Learning Media gives you the
unique opportunity to use examiner-reviewed study materials for the 2013 and June 2014 exams. By
incorporating the examiner’s comments and suggestions regarding the depth and breadth of syllabus
coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your
studies.
The PER alert
Before you can qualify as an ACCA member, you do not only have to pass all your exams but also fulfil a
three year practical experience requirement (PER). To help you to recognise areas of the syllabus that
you might be able to apply in the workplace to achieve different performance objectives, we have
introduced the ‘PER alert’ feature. You will find this feature throughout the Study Text to remind you that
what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER
requirement.
Tackling studying
Studying can be a daunting prospect, particularly when you have lots of other commitments. The
different features of the text, the purposes of which are explained fully on the Chapter features page, will
help you whilst studying and improve your chances of exam success.
Developing exam awareness
Our Texts are completely focused on helping you pass your exam.
Our advice on Studying F4 outlines the content of the paper, the necessary skills the examiner expects
you to demonstrate and any brought forward knowledge you are expected to have.
Exam focus points are included within the chapters to highlight when and how specific topics were
examined, or how they might be examined in the future.
Using the Syllabus and Study Guide
You can find the syllabus and Study Guide on pages xi – xix of this Study Text
Testing what you can do
Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can
recall what you have learnt.
We include Questions – lots of them - both within chapters and in the Exam Question Bank, as well as
Quick Quizzes at the end of each chapter to test your knowledge of the chapter content.

Introduction v
Chapter features
Each chapter contains a number of helpful features to guide you through each topic.
Topic list
Topic list Syllabus reference What you will be studying in this chapter and the relevant
section numbers, together the ACCA syllabus references.

Puts the chapter content in the context of the syllabus as
Introduction
a whole.
Study Guide
Links the chapter content with ACCA guidance.
Highlights how examinable the chapter content is likely to
Exam Guide
be and the ways in which it could be examined.
What you are assumed to know from previous
Knowledge brought forward from earlier studies
studies/exams.
Summarises the content of main chapter headings,
FAST FORWARD
allowing you to preview and review each section easily.
Demonstrate how to apply key knowledge and
Examples
techniques.
Definitions of important concepts that can often earn you
Key terms
easy marks in exams.
When and how specific topics were examined, or how
Exam focus points
they may be examined in the future.
Formulae that are not given in the exam but which have to
Formula to learn
be learnt.
Gives you a useful indication of syllabus areas that
closely relate to performance objectives in your Practical

Experience Requirement (PER).

Gives you essential practice of techniques covered in the
Question
chapter.

Case Study Real world examples of theories and techniques.

Chapter Roundup A full list of the Fast Forwards included in the chapter,
providing an easy source of review.

A quick test of your knowledge of the main topics in the
Quick Quiz
chapter.

Found at the back of the Study Text with more
Exam Question Bank
comprehensive chapter questions. Cross referenced for
easy navigation.

vi Introduction
Studying F4
This paper examines a basic understanding of legal principles and their application. You may find the
material a little different from what you are used to because there are virtually no numbers involved.
Therefore it is important to develop a concise style of writing in order to get your points across quickly
and clearly.
The F4 examiner
The examiner for this paper is David Kelly and he has been in the role for some time. Therefore there
should be no surprises when it comes to your exam – each of his papers is similar in style and content.
Introduction v ii
1 What F4 is about
The main aims of the F4 (Global) exam are:
 To develop an understanding of the general legal framework in which international business takes
place and of specific legal areas relating to business, but
 To recognise the need to seek further specialist legal advice where necessary
The exam is not designed to turn you into a legal expert. Instead you will be a well-informed professional
accountant who appreciates the legal issues of doing business internationally but who recognises the
boundaries of their legal knowledge and therefore the point at which professional legal expertise must be
sought. The sequence of the syllabus and study guide takes you through the main areas of what you need
to know.
Essential elements of legal systems
In this part of the syllabus you are covering areas that underlie all the other areas, namely: what is law and
how does it fit into a country's political, economic and legal system. The distinctions between criminal and
civil law, and between common law, civil law and sharia law systems, are very important. Most of the
paper is concerned with civil law, namely the law that sets out the rights and duties of persons in relation
to each other. There are elements of criminal law as well, however, especially in relation to companies,
insolvency, insider dealing and international money laundering.
The distinction between public and private international law is also important, affecting as it does the
status of the various UN Conventions and Model Laws that are contained in the syllabus. These are
intended at least in part to address the problem of private international law, namely the conflict of laws.
International business transactions
The central part of this section of the syllabus is concerned with the international sale of goods, covered
by the UNCITRAL Convention on the International Sale of Goods. Its detailed provisions cover formation of
the contract, the obligations and remedies of the buyer and seller, the right to damages, and rules on
matters such as unexpected impediment and the passing of risk.
In any sale of goods the seller wants to make sure they get paid, and international trade operates much
more effectively if it is properly financed. There is a variety of means of payment, such as letters of credit,
credit transfers and bills of exchange. This is an area in which international bodies have been very active,
so there is a Convention and a Model Law to be studied.
International business forms
In addition to the finance and expedition of international trade, the syllabus is very concerned with the
various legal forms through which international business transactions may be conducted. It is important
to distinguish initially between natural persons and legal persons. The law of agency underlies a
substantial part of our study of international business forms, since partners and directors can and
sometimes do act as agents.
Joint stock companies
Companies are probably the most common form of business engaged in international trade but the
detailed rules surrounding their formation and constitution are regulated by each country slightly
differently. In this text we look in detail at company law in the UK as exemplar of possible regimes.
Companies are separate legal persons. Most commonly their owners have limited liability for the
company's debts, although this position can be ignored if certain circumstances exist. This means that
when dealing with a company as a seller or a buyer, say, the other party should ideally have knowledge of
their constitutions and their finances. In fact the price of separate legal personality for a company's
shareholders is that information on these matters is publicly available, for the protection of suppliers,
customers and other stakeholders.
viii Introduction