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Paper F4 Corporate and Business Law (Global) This ACCA Study Text for Paper F4 Corporate and Business Law (Global) has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage February 2017 For exams from September 2017 to 31 August 2018 BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book Study Text Contact us In addition to ACCA examining team reviewed material you get: Corporate and Business Law (Global) BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA F4 ACCA approved content provider Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com ACCA APPROVED CONTENT PROVIDER ACCA Approved Study Text Paper F4 Corporate and Business Law (Global) Free access to our Exam Success site Look inside For exams from September 2017 to 31 August 2018 Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com ACF4I(ST)FEB17 (RICOH).indd 1-3 30/01/2017 16:38 Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com ACCA Approved Content Provider As the first accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for producing exceptional study materials for students and tutors alike Our Study Texts, Practice & Revision Kits and i-Passes (for exams on demand) are reviewed by the ACCA examining team and are written by our in-house authors with industry and teaching experience who understand what is required for exam success Exam Success Site To help maximise your chances of succeeding in your exams, we’ve put together a suite of exclusive ACCA resources Our Exam Success site provides you with access to a free digital version of this publication, as well as extra resources designed to focus your efforts on exams and study methods To access the Exam Success site, please email learningmedia@bpp.com with the subject line “Access to Exam Success site - eBook”, including your order reference number and the name of the book you’ve bought (ie ACCA F5 Study Text) for your access code Once you have received your code, please follow the instructions below: To access the BPP ACCA Exam Success site for this material please go to: study.bpp.com n Create a user account if you don’t already have one Make sure you reply to the confirmation email n Log in using your registered username and password Select the paper you wish to access n Enter the code you received when prompted You will only have  to this once for each paper you are studying Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com S T U D Y PAPER F4 CORPORATE AND BUSINESS LAW (GLOBAL) T E X T BPP Learning Media is an ACCA Approved Content Provider This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam In this Study Text, which has been reviewed by the ACCA examining team, we:  Highlight the most important elements in the syllabus and the key skills you need  Signpost how each chapter links to the syllabus and the study guide  Provide lots of exam focus points demonstrating what is expected of you in the exam  Emphasise key points in regular fast forward summaries  Test your knowledge in quick quizzes  Examine your understanding in our practice question bank  Reference all the important topics in our full index BPP's Practice & Revision Kit also supports this paper FOR EXAMS FROM SEPTEMBER 2017 TO 31 AUGUST 2018 Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com First edition 2007 Tenth edition January 2017 ISBN 9781 5097 0851 (Previous ISBN ) 9781 4727 4421 eISBN 9781 5097 0981 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place 142–144 Uxbridge Road London W12 8AA www.bpp.com/learningmedia Printed in China by Beijing Congreat Printing Company Ltd Ji'an Road No Houshayu Jixiang Industrial Park Shunyi District Beijing PRC Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources A note about copyright Dear Customer What does the little © mean and why does it matter? 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All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated © BPP Learning Media Ltd 2017 ii Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Contents Page Introduction Helping you to pass Studying F4 The exam paper v vii ix Part A Essential elements of legal systems Business, political and legal systems International trade, legal regulation and conflict of laws Court-based adjudication and alternative dispute resolution mechanisms 25 37 Part B International business transactions Contracts for the international sale of goods Obligations and risk in contracts for international sales 59 71 Part C Transportation and payment of international business transactions Transportation documents and means of payment 91 Part D Formation and constitution of business organisations 10 11 Agency law Partnerships Corporations and legal personality Company formation Constitution of a company 115 127 137 157 173 Part E Capital and the financing of companies 12 13 14 Share capital Loan capital Capital maintenance and dividend law 191 207 221 Part F Management, administration and the regulation of companies 15 16 17 Company directors Other company officers Company meetings and resolutions 233 259 271 Part G Insolvency law 18 Insolvency and administration 289 Part H Corporate fraudulent and criminal behaviour 19 Fraudulent and criminal behaviour Practice question bank Practice answer bank Bibliography Case Bibliography List of cases and index Review form 311 331 341 351 355 359 iii Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com iv Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Helping you to pass BPP Learning Media – ACCA Approved Content Provider As ACCA's Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team'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 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 Your achievement of the PER should be recorded in your online My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the Study 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 and the necessary skills you are expected to be able 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 Testing what you can 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 Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com v Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference Tells you what you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points Tell you when and how specific topics were examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) Question vi vi Gives you essential practice of techniques covered in the chapter Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Practice Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Introduction Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com 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 All students should attempt as many exam standard questions as they can, and those taking a paper based exam should develop a concise style of writing in order to get points across quickly and clearly What F4 is about The main aims of the F4 exam are: • To develop knowledge and skills in the understanding of the general legal framework 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 but who recognises the boundaries of your 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 Transportation and payment of international business transactions 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 Formation and constitution of business organisations The syllabus is very concerned with the various legal forms through which business transactions may be conducted It is important to distinguish initially between natural persons (human beings) and legal persons (including natural persons, but extending to some forms of partnership and, most significantly, companies) The law of agency underlies a substantial part of our study of business forms, since partners and directors can, and sometimes do, act as agents Capital and the financing of companies Most trading companies are financed by a mix of share capital (provided by their owners) and loan capital (provided by third-party lenders) Share capital may take a variety of forms, with each class of share having different rights within the company Introduction Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com vii Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com However, the primary responsibility of the shareholder is to contribute funds to the company in accordance with the terms of the company’s constitution and the shares which they own The return of these funds to shareholders is restricted, since they are seen as the 'creditors' buffer'; that is, the funds which are available to settle creditors' outstanding debts in preference to amounts due to shareholders Hence there are detailed laws on 'capital maintenance' These extend to how far companies may distribute accumulated retained earnings to their shareholders in the form of dividends or buyback of shares Loan capital is usually provided by lenders only if they can be assured of its repayment to them If lenders supply funds in return for debentures in the company, they usually require security for their loan: the debenture is secured by means of a registered charge on particular or general assets of the company, which can (within limitations) be realised so that the loan is repaid Management, administration and regulation of companies As an artificial legal person a company cannot manage itself This is the role primarily of the company's directors, who owe duties to the company to manage it for the benefit of the company and thereby for the benefit of its owners, the shareholders There are a great many legal rules which regulate the appointment, remuneration, disqualification, powers and duties of directors These have grown up largely because of problems that frequently occur Most of these can be said to arise from conflicts between directors' personal interests and their duties to act in the company's interest Directors are termed officers of the company, along with the company secretary Many companies also have to have an auditor Directors come into immediate contact with shareholders via company meetings, and the resolutions that are passed at these meetings There are, therefore, a plethora of legal rules on meetings and resolutions, designed to ensure that the company is taking decisions properly and in accordance with the legitimate interests of shareholders as a body Insolvency law Not everything goes according to plan and frequently companies will encounter financial or other difficulties, or will even reach crisis point and find themselves insolvent At this point all parties – shareholders, directors, lenders, customers, suppliers and employees – are in danger of losing out There are procedures designed to protect struggling companies to give them a 'breathing space' while they resolve their issues There are also rules for how a company which cannot be saved should be 'wound up', depending on whether or not the company has any funds left Corporate fraudulent and criminal behaviour Finally, the syllabus covers the situations where activities of directors and others have strayed into criminal behaviour This often arises in the context of companies running out of money, but the law is also concerned with company insiders, with superior knowledge, benefiting from insider dealing, and crime in the form of money laundering What skills are required? To pass the F4 exam you will need to bring different professional attributes to bear First, you need technical knowledge There is a huge amount of technical content in the syllabus: case law, conventions, codes of practice and legislation You need to learn this and be able to identify which parts of the knowledge are being called for in a particular question Second, you need to be able to apply knowledge to the scenarios that are presented in the last five questions on the paper You are aiming to solve practical problems here viii viii Introduction Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com ... exceptional study materials for students and tutors alike Our Study Texts, Practice & Revision Kits and i-Passes (for exams on demand) are reviewed by the ACCA examining team and are written by our in-house... www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com S T U D Y PAPER F4 CORPORATE AND BUSINESS LAW (GLOBAL) T E X T BPP Learning Media is an ACCA. .. principles of law, sources of law and the role of judges Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com Download FREE ACCA STUDY MATERIALS & LSBF LECTURES from www.accalsbfvideos.com