Stuff To Add Flashcards
European Commission
Formed of commissioners from member states- fulfil executive function
European Parliament
Members elected from member states- supervises other EU institutions.
European council
Formed of heads of states from member states.
European court of justice
Applies EU law and provides decisions and rulings that are binding on the parties in the case
Secondary sources of law in the EU
All have force of legislation
Regulation-become part of law of each member nation
Directives-issues to member states to change their law wishing a specified period. Issued by council and commission.
Decision-addressed to an entity (person/state/Company). Immediately binding.
Main bodies of the FEE
3
General assembly
Council
Executive
Involved in:
Money laundering
Banking and insurance
Company law
Courts structure
Bottom- 1. Magistrates court 2. County Court 3. Crown Court 4.High Court 5.the Court of Appeal 6.the Supreme Court 7.the European Court of Justice Top
Ratio decidendi + Obiter Dicta
For courts to bind they need to be binding by a higher court.
Rad: reason for decisions being made. these are binding.
0D: space comments made by deciding judge in passing.
Shariah law
Forbidden things
Apostasy-conversion to another religion.
Blasphemy- criticism of the Prophet Muhammad.
Diet-pork is prohibited.
Types of threat (CIMA guidelines)
Self-interest: obvious
Self-review: error due to bad re-evaluation of own or colleagues work.
Advocacy: Risk that an accountant promotes a clients position too much.
Familiarity: long or close relationship with client. Too ready to be nice/accept
Intimidation: put lots of pressure on them.
Vicarious liability
Liability for torts of others because of relationship.
Arises:
- Relationship employer-employee.
- Employees tort during employment.
Notice of dismissal
One month-2 years: 1 week minimum
2-12 years: 1 week per year
12 years+ : 12 weeks
Time off work
Employees Allowed for:
Trade union duties If redundant -look for other job If Trade union official-paid time off If for public duties- iE army/magistrate Employees suspended on medical grounds
Sick pay
Pay employees for up to 28 weeks.
Paid for time of whilst recovering from occupational disease.
Limited liability partnership requirements:
Files notices with registrar, such as when members leave and an annual return.
Sign file accounts
Assign auditors if appropriate
Promoter duties and rights
Promoter is person who Forms a company.
Duty to
- Account of any benefits he gets
- Not put themselves in a position of conflict
- Provide full info on all transactions
Avoid liability by:
- Draft contract before company is formed
- If finalised, allowe for novation(new contract that overrides)
- Can buy off the shelf company
- Form company ahead of business activities.
Ultra vires
Means beyond capacity.
Scenario 1:
An act restricted by the company’s objects permitted by a director.
This is allowed if third party acted in good faith.
ALSO
Scenario 2:
When delegates legislation is declared to be void. Because delegates body abused power.
Beyond c
Professional qualities of an accountant:
- Independence: “independent mind”
Ignoring things that don’t affect completion of work - Scepticism(not taking things at face value)
Question information given to them
Makes sense? Other supporting? Where did it come from? Why was it given to me? - Accountability
Accountable for judgements and decisions - Social responsibility
Integrity/respect/courtesy/due care
Board structures in different countries
Mainly Unitary: UK and USA
Mainly Two tier board: France and Germany.
1 supervisory
Responsible for: safeguarding stakeholder interests
2 management comittee
Responsible for: independently running the business/meets regulation/prepares resolution/provides financial services stements.
IFAC: International Federation of accountants
Mission: to develop high standards of professional accountants and enhance quality of services.
Ethical standards.
International standardisation organisation (ISO)
Business process standardisation.
Largest issuer of international standards.
With members from 162 countries.
You can be ISO:
Certified/registered
Compliant
To do with process.
Tort
Tort-a civil wrong. Can be sued for compensation/damages.
Can be complete strangers.
Not a breach of contract.
Not a crime.
A representation
Statement or fact made by one party to the other before the contract, and made to induce the other part to enter into it.
Misrepresentation- same as above but false.
Contra Proferentum rule.
“Against he who is relying”
If an exclusion clause is unclear, it will be interpreted against person relying on it.
Because liability can only be excluded by clear words.
Statement of Written Particulars:
“Contract” must be given within two months of beginning. Any changes should be notified within 1 month.
Include: Name of ee and er Date of start Service from previous employer part of this employment. Pay I was in place of work Any holiday Sick leave Pensions Length of notice Title job
Written resolution
Any decision By private company can pass except removing a director or an auditor before the term of office has expired.
Directors
Statutory duties:
Act within their powers
Promote the success of the company
Exercise independent judgement
Exercise reasonable skill, care, diligence
Avoid conflicts of interest
Not to accept benefits from third parties
Declare an interest in proposed transaction
Types of directors
Number of directors
5
- Shadow directors-avoid legal responsibility.
- Alternate directors-vote/attend on behave of another.
- Executive directors-performs specific role.
- Non-executive directors-not perform in general management.
- Managing director-carries out day to day activities.
#: Every company at least 1 Public: minimum is 2. Minimum 1 real person. Company can be a director-sends one member to represent company-(for board meeting etc.
Powers of a managing director
CEO MD same thing in CIMA exam
MD has apparent authority, actual authority is whatever the board gives them.
No other director has this authority.
Rule of majority
Minorities are unable to sue on behalf of the company.
The company should see you on behalf the company through majority of its shareholders.
Exceptions(minorities can sue)
- company is acting illegally.
- Majority shareholders are committing a fraud against the company.
- where an individual’s rights are being infringed.
- Where directors benefit from their own negligence.
Unfairly prejudicial Conduct
Main2:
Exclusion of a director.
Discrimination against minority
Any member can apply to court.
Court can do whatever it deems fit
Class rights
It is possible to alter class rights:
- The articles must allow for variation
- Agreement of 75% of that class of shareholder.
Can be challenged by minority interests: 15% within 21 days.
Special rights: Dividends Return of capital Voting The right to appoint remove director.
Governments investigation.
For minority protection. Appoint inspector for: Affairs of a company Ownership of a company Suspected infringement by directors Suspected insider dealing.
It may appoint inspector if: 1. Company itself applies 2. Members: No less then 200 in mement Hold 1/10 of issues shares If no shares, at least 1/5 of members. 3. If unlawful affairs.
Financial assistance
A company to give assistance to a third party to buy it shares. Ie: Loaning money Acting as guarantor of a loan Purchasing assets at over value.
This is not allowed in a public company.
Exceptions:
If purchasing shares is not main purpose of transaction
If it is a bank
If it is for benefit of genuine enployees-(directors are not genuine employees)
Reducing share capital
Private company: Court not needed Special resolution Statement of solvency within 15 days Copy sent to registrar.
Public needs court approval + member/creditor can object.
Dividends distributable.
Difference between net assets - (share capital + Undistributable reserves.
Undistributed reserves: Share Premium account Capital redemption reserve Revaluation Reserve Any reserve restricted be the articles.
Redemption and purchase by a company of its own shares.
A company cannot acquire its own shares. Exceptions: 1. A quarter order 2. Redeemable shares 3.under specific procedures
FRC
Financial Reporting Council
UK
Has lead role in ethical reporting
Monitors accountability of prof acc.
Work is undertaken by two sub bodies:
(POB) The professional oversight board for accountants. (Regulates specific activities: registration/training/cpd/discipline)
(APB) The auditing practices board.
(Mainly about auditing practices: standards UK/advice/international legislation/public understanding)
IFAC
International Federation of Accountants (IFAC)
Published:
Code of ethics for professional accountants.
4parts:
PartA: General application
PartB: prof acc. In public practise
PartC: prof acc. In business
The seven principles of public life
- Selflessness: act in interest of public
- Integrity: avoid actions that would put them in a position of influence
- Objectivity: choices should be based on merit.
- Accountability: responsible for actions
- Open about actions and decisions.
- Honesty: share private interest
- Leadership: show example and follow 6 rules.
CIMA’s personal development cycle.
Define-current + desired roles Assess-find knowledge gaps Design-learning program Act-do the learnings activity Reflect-what was learnt Evaluate-actual development vs objectives
Confidentiality
Care must be taken not to share info.
Exceptions: Permitted by law Authorised by client or employer Required by law Permitted by professional duty or right.(protect accountant in an investigation)
King report
South Africa’s attempt to deal with corporate governance issues
Symptoms of poor corporate governance
1.domination by a single individual
2.
Promissory Estoppel
If someone makes s promise, (unsupported by consideration), intended to be binding and acted upon, other party relies or acts on it. Then 1st party is estopped to retract promise. Unless party 2 can be restored to original position.
Corporates Governance
Effects of good governance:
Effective controls over operations
Business efficacy
Management are held accountable
Acceptance of an offer
Not effective unless communicated to offerer.
Unless postal rule: as soon as posted,
Capari decision
Auditors do not owe a duty of care to the public at large who rely on the info for investment decisions.
Duty of care during take over bids
A higher duty of care is expected when giving advice on company takeovers then when advising on an audit.
Essentials of a contract
Agreement
Consideration
Intention
Binding in honour
Express denial of intention to create legal relations.
Condition
Gives the right to damages and repudiate contract.
Warranty
Gives right to claim for damages
Consumer
A part to a contract deals as a consumer if:
He neither makes the contract in the course of a business nor holds himself as doing so and
The other party holds himself as going so and
Goods are ordinarily supplied for practice use or consumption.
An injunction
Purpose:
To enforce a negative restraint in a contract.
Termination by notice
Cannot be less then the contract.
If non given: reasonable notice.
Can be given without reason-unless contract requires otherwise.
Termination by dismissal
Summary dismissal and constructive dismissal are ones without proper notice.
Summary: not proper notice (employee bad)
Constructive: employee resigns (employer bad)
Wrongful dismissal
When summary dismissal is unjustified.
Remedy: damages based on loss of earnings.
Unfair dismissal.
Need:
Employed for 2 year
Dismissed
Remedy: what would have been earned if proper notice had been given.
Limited liability companies
Limited by shares:
Only amount unpaid by shares
Limited by guarantee:
Constitution states how much each member will pay.
Unlimited liability
Can only be private.
Public and Private companies
Public:
Registered with registrar.
£50,000 minimum capital
Raise capital by selling shares 2 public.
6 months to to produce accounts.
Must obtain trading certificate, before trading.
Private: cannot offer securities to public. Companies limited by guarantee and that are unlimited can only be private.
No minimum capital
Cannot sell shares to public.
9 months to produce accounts.
Retirement of directors.
In the model article for public companies:
- Every year half should retire
- Retiring directors can be re-elected
- Longest in first out.
- Appointed mid year + not interested in re-election: not included in Calc for those required to be re-elected.
At first AGM: all retire
Quorum
Minimum number of members at a meeting.
If undecided this is 2.
Rules for calling a general meeting
Share holding
Public: 10% of paid up
Private: 5 or 10%
Requisition: signed with registered office or send by email with objective
Date:
Notice of info on meeting must be sent out within 21 days of requisition.
Meeting must be held within 28 days of the notice.
Registration of charges
Must be registered within 21 days of creation by the registrar.
Rectification: court can extend registration of error made by mistake.
Failure to deliver particulars: mistake is responsibility of company-so fine.
On time correctly registered has priority over earlier charge filled late.
Company must keep copy if documents creating charge.
Disadvantages of floating charges
Cannot be certain which asset will form security until crystallisation.
Even crystallisation, others come 1st:
Creditor/landlord
Preferential debts
Holder of a fixed charge
Creditor retains legal ownership until paid.
May be automatically invalid if created and the company is bankrupt after 12m/1y.
Performance of the contract
Discharge by performance:
Only by complete and exact performance.
Exceptions
Substantial performance
Maternity leave
Time
52 weeks
Paternity leave time
1-2 weeks within 56 days of birth
Documents a company needs to send to registrar
Applications for registration 1 name 2. Location of reg office (Wales, eng..) 3. Limited by shares or guarantee 4. Private or public 5. Intends address of reg office
Memorandum Statement Proposed officers Statement of compliance Statement of capital and initial shareholdings/ or guarantee Few
Registration number?
Given to company when incorporated (after documents are sent in.
CIMA fundamental principles:
Integrity (straightforward/consistent)
Objectivity
Professional competence and due care
Confidentiality
Treasury shares
Deferred shares
T: when a Plc is allowed to purchase its own shares out of distributable profit. Up to 10% allowed. And can issue these easily.
Deferred shares
Paid after preference and ordinary shares get the %
Public company allotment of shares
Public offer: public subscribes directly to the company
Offer for sale: offer to public to apply for shares based on prospectus
Placing: small number large blocks to people or institutions, who have previously agreed a price.
What causes crystallisation of a floating charge?
Liquidation Cessation of the company's business Active intervention of chargee Charge contract Crystallisations of another floating charge if it stops the business,
