Business Law (FBLW)

Syllabus overview

The Business Law syllabus deals with those aspects of law which affect businesses and which contribute towards establishing the competence of the Chartered Management Accountant. By way of introduction, it covers fundamental elements of The English legal system, and uses professional negligence as the vehicle for demonstrating the system of judicial precedent. The syllabus then proceeds to look at the essentials of establishing and performing simple contracts and the remedies available in the event of a breach.

As an introduction to company law, the syllabus then proceeds to look at the essential characteristics of the various forms of business organisation. Following this introduction, the emphasis is placed upon the company limited by shares and the rules relating to company formation, finance and management. Students may be required to present their explanations in the form of a letter or memorandum.

This syllabus aims to test the student’s ability to:

• explain fundamental aspects of the organisation and operation of the English legal system;
• explain the elements of the tort of negligence and the manner in which the tort impacts upon professional advisers;
• identify and explain the essential elements of a simple contract, what is regarded as adequate performance of the simple contract, and the remedies available to the innocent party in the event of a breach;
• explain the essential differences between sole traderships, partnerships and companies limited by shares;
• explain the ways in which companies are administered, financed and managed;
• apply legal knowledge to business problems and communicate the explanations in an appropriate form.

There will be a written paper of two hours. Initially, objective testing will account for a minimum of 50% of the marks awarded on this paper.

On completion of their studies students should be able to:

• explain the manner in which behaviour within society is regulated by the civil and the criminal law;
• identify and explain the sources of English law;
• explain and illustrate the operation of the doctrine of precedent by reference to the essential elements of the tort of negligence, by which we mean duty, breach and damage/loss/injury;
• explain the application of the tort of negligence to professional advisers.

• The sources of English law.
• The system of judicial precedent.
• The essential elements of the tort of negligence, including duty, breach and damage/loss/injury.
• The liability of professionals in respect of negligent advice.

On completion of their studies students should be able to:

• identify the essential elements of a valid simple contract and situations where the law requires the contract to be in a particular form;
• explain how the law determines whether negotiating parties have reached agreement;
• explain what the law regards as consideration sufficient to make the agreement enforceable;
• explain when the parties will be regarded as intending the agreement to be legally binding;
• explain when an apparently valid agreement may be avoided because of misrepresentations.

• The essential elements of a valid simple contract.
• The legal status of the various types of statements which may be made by negotiating parties. Enforceable offers and acceptances, and the application of the rules to standard form contracts and modern forms of communication.
• The meaning and importance of consideration.
• The principles for establishing that the parties intend their agreement to have contractual force.
• How a contract is affected by misrepresentation.

On completion of their studies students should be able to:

• explain how the contents of a contract are established;
• explain the status of contractual terms and the possible repercussions of non-performance;
• explain how the law controls the use of unfair terms in respect of both consumer and non-consumer business agreements;
• explain what the law regards as performance of the contract, and valid and invalid reasons for non-performance.

• Incorporation of express and implied terms.
• Conditions and warranties and the nature and effect of both types of terms.
• The main provisions of sale of goods and supply of services legislation.
• The manner in which the law controls the use of exclusion clauses and unfair terms in consumer and non-consumer transactions.
• The level of performance sufficient to discharge contractual obligations.
• Valid reasons for non-performance by way of agreement, breach by the other party and frustration.

On completion of their studies students should be able to:

• explain the type of breach necessary to cause contractual breakdown;
• describe the remedies which are available for serious and minor breaches of contract.

• The remedies of specific performance, injunction, rescission, and requiring a contract party to pay the agreed price.
• Causation and remoteness of damage.
• The quantification of damages.

On completion of their studies students should be able to:

• distinguish between employees and independent contractors and explain the importance of the distinction;
• explain how the contents of a contract of employment are established;
• explain the distinction between unfair and wrongful dismissal;
• demonstrate an awareness of how employers and employees are affected by health and safety legislation, including the consequences of a failure to comply.

• The tests used to distinguish an employee from an independent contractor.
• The express and implied terms of a contract of employment.
• Unfair and wrongful dismissal.
• An outline of the main rules relating to health and safety at work, sanctions on employers for non-compliance, and remedies for employees.

On completion of their studies students should be able to

• explain the essential characteristics of the different forms of business organisations;
• explain the concept and practical effect of corporate personality;
• explain the differences between public and private companies;
• explain the distinction between establishing a company by registration and purchasing ‘off the shelf’;
• explain the purpose and legal status of the memorandum and articles of association;
• explain the ability of a company to contract;
• explain the main advantages and disadvantages of carrying on business through the medium of a company limited by shares.

• The essential characteristics of sole traderships/practitionerships, partnerships and companies limited by shares.
• Corporate personality and its legal consequences.
• ‘Lifting the corporate veil’ both at common law and by statute.
• The distinction between public and private companies.
• The procedure for registering a company, the advantages of purchasing a company ‘off the shelf’, and the purpose and content of the memorandum and articles of association.
• Corporate capacity to contract.

On completion of their studies students should be able to

• explain the use and procedure of board meetings and general meetings of shareholders;
• explain the voting rights of directors and shareholders;
• identify the various types of shareholder resolutions.

• Board meetings: when used and the procedure at the meeting.
• Annual and Extraordinary General Meetings: when used and the procedure at the meeting.
• Company resolutions and the uses of each type of resolution.

On completion of their studies students should be able to

• explain the nature of a share and the essential characteristics of the different types of share;
• explain the procedure for the issue of shares, and the acceptable forms of payment;
• explain the legal repercussions of issuing shares for an improper purpose;
• explain the maintenance of capital principle and the exceptions to the principle;
• explain the procedure to increase and reduce share capital ;
• explain the ability of a company to take secured and unsecured loans, the different types of security and the registration procedure.

• The rights attaching to the different types of shares issued by companies.
• The procedure for issuing shares.
• The purposes for which shares may be issued.
• The maintenance of capital principle and the ability of a company to redeem, purchase and provide financial assistance for the purchase of its own shares, and the situations in which such powers are useful.
• The rules for the reduction and increase of share capital.
• The ability of a company to borrow money and the procedure to be followed.
• Unsecured loans, and the nature and effect of fixed and floating charges.

On completion of their studies students should be able to:

• explain the procedure for the appointment, retirement, disqualification and removal of directors;
• identify the powers and duties owed by directors to the company, shareholders, creditors and employees;
• explain the rules dealing with the possible imposition of personal liability upon the directors of insolvent companies;
• identify and contrast the rights of shareholders with the board of a company;
• explain the qualifications, powers and duties of the company secretary.

• The appointment, retirement and removal of directors.
• Directors’ powers and duties.
• Fraudulent and wrongful trading, preferences and transactions at an undervalue.
• The division of powers between the board and the shareholders.
• The rights of majority and minority shareholders.

• The qualifications, powers and duties of the company secretary.