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Paper 2.2(PKN)

Corporate and Business Law

(Pakistan)

DECEMBER 2004 STUDY GUIDE

PROFESSIONAL EXAMINATION


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If you have any queries concerning the new study guide, please direct them

to:

Education Department

ACCA 29 Lincoln's Inn Fields London WC2A 3EE United Kingdom

tel: +44 (0)20 7396 5891 fax: +44 (0)20 7396 5858

e-mail: [email protected]

Additional information can be accessed on the ACCA website at:

www.accaglobal.com

The Association of Chartered Certified Accountants

January 2004

ABOUT ACCA

The Association of Chartered

Certified Accountants (ACCA) is

the largest, fastest growing

international professional

accountancy body in the world.

We currently work with 250,000

ACCA students and members in

160 countries.

This booklet includes the syllabus and study guide for Paper 2.2(PKN): Corporate and Business Law (Pakistan).

Introduction


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AIM

To develop knowledge and understanding

of the general legal framework in Pakistan

within which an accountant operates, with

emphasis on the specific areas of

importance central to business law. To

develop an ability to understand and apply

the laws to legal issues and problems

relating to the business and working of an

accountant.

OBJECTIVES

On completion of this paper candidates

should be able to:

Analyse and evaluate situations from a

legal perspective.

Identify and understand the essential

elements of Pakistans legal system, its

operation, the main sources of law, and

rules governing their interpretation.

Discuss and explain the core principles

involved in contract formation, content,

how certain business situations are

governed by the law of contract, and

remedies for breach of contract.

Explain the rules governing agency as

they apply to the sole entrepreneur, to

partnerships and to companies.

Understand and explain the law relating

to partnerships.

Describe the characteristics and

structure of different types of companies

and explain the rules relating to their

financing, management, administration,

and regulation.

Paper 2.2(PKN)

Corporate and Business Law

(Pakistan)

Identify and understand the principal

laws governing labour relations in

Pakistan and the main legal principles

of the employer-employee relationship .

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. Questions in

Paper 2.2 PKN will neither assume, nor

draw on, any knowledge from other papers

at Part 2.

SYLLABUS CONTENT

1 Legal System of Pakistan

This section provides an introduction to

some of the key features of the Pakistan

legal system and explores the rudiments

of constitutional law with particular

emphasis on the sources of law,

fundamental rights, administration of

law, the hierarchy and powers of the

Courts and emergence of legal rules in

the legal system.

a Sources of law (including Islamic

law)

b Parliament and legislation

c Establishment and hierarchy of

Courts (including the Federal Shariat

Court) and the administration of

justice.

d Fundamental Rights and Principles

of Policy

e Rules of interpretation

f Alternate dispute resolution.

2 General Principles of the Law of Contract

This section deals with the principles

involved in contract formation, content,

the effect of certain situations on

contracts, discharge of and remedies

available for breach of contract.

a Formation: offer, acceptance,

consideration, capacity to contract

and intention to create legal relations

b Void agreements and voidable contracts

c Contracts: contingent, indemnity,

guarantee, bailment, pledge and

hypothecation.

d Discharge of contract, including by

frustration

e Breach of contract and remedies:

damages, liquidated damages,

specific performance.

3 Agency and Partnership

This section will familiarise the

candidates with those general rules of

agency which find specific application

in relation to partnerships and

companies. It also examines the general

principles and the law governing the

operation of partnerships.

a Creation of agency

b Principal and agent: reciprocal rights

and duties

c Nature and formation of Partnerships.

d Relationship (duties, rights,

liabilities etc) of partners inter se

e Relationship (authority, introduction,

retirement etc) of partners with

outsiders

f Dissolution.


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Paper 2.3: Business Taxation (United Kingdom) (Continued)

Corporate and Business Law (Pakistan)

4 The company form

This section deals with the nature and

characteristics of different types of

companies, in comparison with other

forms of business organisations, such as

sole traders and partnerships.

a The limited company distinguished

from partnership the concept of

limited liability

b The private limited company and

public limited company

c The meaning and consequences of

separate legal personality

d The lifting of the corporate veil.

5 The formation and constitution of the

company

This section examines the legal

requirements controlling the

incorporation and all related matters of

a company.

a The legal requirements involved in

incorporating a company

b The fundamental/constitutional

documents of a company:

memorandum and articles of

association

c The contractual capacity of a

company the doctrine of ultra vires

d Statutory/Mandatory books, records,

returns and reports.

6 Capital and financing of companies

This section deals in outline with the

capital requirements and financing

available to companies, covering share

and loan capital.

a Share capital: ordinary and

preference shares

b Further issue of capital and public

offerings

c Prospectus

d Loan Capital: debentures and

company charges

e Capital maintenance and dividend law.

7 Management and administration of a

company

This section takes an overview of the

rules and issues involved in the

governance and regulation of

companies. The role of key personnel is

identified and the rights and obligations

they have are explored.

a Directors: Position (qualification,

appointment, disqualification and

termination) and Role (duties,

especially duty of care, and powers).

b Company secretary: appointment,

duties and powers.

c Auditors: appointment, removal,

resignation, powers and duties.

d Insider dealing.

8 Company meetings

This section deals with the function and

conduct of the company meetings and

the decision making at the level of the

shareholders/members.

a Types of meetings: statutory, annual

general meeting and extraordinary

general meetings

b Types of resolutions: ordinary and

special.

9 Prevention of oppression and

mismanagement

This section aims to outline the

circumstances under which oppression

of members exists and the procedure

available for its prevention and remedy.

a Meaning of oppression and

mismanagement

b Members oppression: circumstances

denoting this

c Just and equitable winding up

d Powers of the SECP and the Courts

role.

10 Winding up

This section will introduce candidates to

the ways and the circumstances in

which companies can be wound up.

a Winding up: by Court, voluntary, and

subject to supervision of Court

b Role during winding up of: Courts,

contributories and liquidators.

11 Employment

This section gives an overview of the

principal statutes which govern

employment relationships.

a Principal labour legislation

b Categories: governmental employees,

workmen and master and servant

c Unfair and wrongful dismissal

d The concept of retrenchment.


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Paper 2.3: Business Taxation (United Kingdom) (Continued)


EXCLUDED TOPICS

The syllabus does not attempt to cover

every aspect of the legislation it deals with.

For example, the employment legislation

relating to workmen is spread over a

network of twelve (12) laws of which ten

(10) are discussed.

KEY AREAS OF THE SYLLABUS

Company law as set out in sections 4 to 10

above, is central to the syllabus and it will

cover a possible fifty percent (50%) of the

total marks allocated in any particular

paper.

APPROACH TO EXAMINING THE

SYLLABUS

The examination is a three (3) hour paper

divided into two (2) sections. Section A will

contain short, knowledge-based questions.

Section B will be problem-based and will

test 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 and

amendments in existing legislation will not

be expected until at least six (6) months

after the last day of the month in which it

is enacted, or six (6) months after the

specific provision comes into effect,

whichever is later.

RELEVANT TEXTS

Students studying the syllabus can obtain

relevant material from the following

sources:

a Subscribed web-site

(www.pakistanlawsite.com)

b Free on-line resource (www.secp.gov.pk)

(please note that all statutes may not be

available)

c Paper based statutes and

commentaries of:

Constitution of Pakistan, 1973

Contract Act, 1872

Partnership Act, 1932

Companies Ordinance, 1984

Code of Corporate Governance

Labour Laws:

Industrial Relations Ordinance,

2002

West Pakistan Industrial and

Commercial Employment

(Standing Order) Ordinance,

1968

Payment of Wages Act, 1936

Workmens Compensation Act,

1923

Provincial Employees Social

Security Ordinance, 1965

Employees Old Age Benefits Act,

1976

Minimum Wages Ordinance,

1961

Companies Profits (Workers

Participation) Act, 1968

Workers Welfare Fund

Ordinance, 1971

Workers Children (Education)

Ordinance, 1972.


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STUDY GUIDE

1 Legal System of Pakistan 1

Syllabus reference 1a

Sources of law (including Islamic law)

Understand the primary (Holy

Quran and Sunnah) and the

secondary sources (Ijtihad and Ijma)

of Islamic law

Identify the sources of law and

understand the position of Islamic

Law in the Constitution of Pakistan.


Syllabus reference 1b

Parliament and Legislation

Understand the composition of

Parliament (President, Senate and

National Assembly).

Explain how legislation is made and

evaluate delegated legislation

Explain what is meant by case law

and precedent within the context of

hierarchy of Courts

Illustrate the rules and presumptions

used by the Courts in interpreting

statutes.


Syllabus reference 1c

Establishment and hierarchy of Courts

(including the Federal Shariat Court)

and the administration of justice.

Explain how different kinds of cases

are dealt with by different Courts

Identify the major Courts and their

hierarchy. Discuss Supreme Court,

High Courts and other Courts as

creatures of the Constitution. Discuss

the constitutional jurisdiction of the

Supreme Court and the High Courts

Understand the position, powers,

jurisdiction and functions of the

Federal Shariat Court

Explain the jurisdiction of civil

Courts and understanding of the

term suits of civil nature

Identify the classes of criminal

Courts and Magistrates

Discuss the concept of the

independence of the judiciary as a

basic principle of a constitutional

system of governance.


Syllabus reference 1d

Fundamental Rights and Principles of

Policy

Discuss the concept of fundamental

rights as natural rights

Understand the nature of rights

which are fundamental

Identify the constitutional safe

guards available for the protection of

fundamental rights

Discuss the concept and

responsibilities with regard to

Principles of Policy

Explain the status of Principles of

Policy as an interpretative aid.

5 General Principles of the Law of

Contract 1


Formation

Explain the meaning of an offer and

how is it different from an invitation

to treat

Explain the meaning and

consequences of acceptance

Analyse the concept of consideration

and discuss the considerations

which are lawful and which are not

Distinguish the legal requirements

for creation of a contract

Analyse the qualifications which

render a person as competent to

contract

Understand the concept of privity

Distinguish the presumptions

relating to intention to create legal

relations.


Contract 2


Void agreements and voidable contracts

Analyse the categories of agreements

that are void

Discuss the circumstances under

which a contract may be rendered

voidable.


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Contract 3


Contracts: contingent, indemnity,

guarantee, bailment, pledge and

hypothecation.

Explain and analyse contingent

contracts

Explain and distinguish the contracts

of indemnity and guarantee

Analyse the difference between

pledge and hypothecation

Understand and illustrate the

contracts of bailment.


Contract 4


Discharge of contract, including by

frustration.


Contract 5

Syllabus Reference 2e

Breach of contract and remedies:

damages, liquidated damages, specific

performance.

Explain the meaning and effect of

breach of contract

Explain the rules related to award of

damages and discuss the treatment

of penalty clauses and liquidated

damages

Understand the equitable remedies

for breach of contract. Discuss in

what circumstances specific

performance of a contract could be

granted.

10 Agency and Partnership 1

Syllabus reference 3a, b

Creation of agency

Define agency and explain how the

relationship of agency is established

Define and illustrate the role of agent

and discuss the scope of the

authority of the agent

Analyse the reciprocal rights and

duties between principal and agent

Detail the relationship between the

agent and third parties.



Nature and formation of Partnerships

Understand and explain the role of

the partnerships in the context of

other forms of contemporary

business associations

Understand how partnerships are

formed and demonstrate the

knowledge of the legislation

governing the partnership.


Syllabus reference 3d, e, f

Relationship (duties, rights, liabilities

etc) of partners inter-se

Understand and explain the nature

of general duties and rights of

partners to each other and to the

firm

Analyse the scope of authority of

partners in relation to partnership

activity and discuss the role of a

partner as an agent of the firm and

the extent and limitation of their

implied authority

Analyse the ways in which a partner

may retire from a firm and the extent

of their liability after retirement. Also

discuss the conditions under which a

partner may be excluded from a

firm.

Analyse and discuss the liability of

partners for partnership debts

Examine the ways in which

partnerships can be brought to an

end. Discuss the concept of

dissolution of a firm and methods

(voluntary and compulsory) of

dissolution.


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13 Company Law 1

Syllabus reference 4a, b

The Company Form

Distinguish between companies and

partnerships

Understand and explain the effect of

the concept of limited liability in

relation to companies

Analyse the different types of

companies, particularly private and

public companies.

14 Company Law 2

Syllabus reference 4c, d

Separate Legal Personality

Understand and discuss the effect of

separate personality of a company

Explain the concept of the lifting of

the corporate veil and illustrate the

instances where separate personality

will be ignored.

15 Company Law 3

Syllabus reference 5a, d

Formation and constitution of a

company - the legal requirements

involved in incorporating a company.

Discuss the procedure for registering

companies, both public and private

Detail the statutory books, records

and returns that companies are

required to keep or make.

16 Company Law 4

Syllabus reference 5b, c

The fundamental/constitutional

documents of a company

memorandum and articles of

association.

Discuss the contents and effect of

the memorandum of association and

explain how and to what extent it

can be altered

Discuss articles of association as a

document containing the internal

regulations for the management of

the affairs of the company and the

conduct of its business

Understand and analyse the

relationship between articles and

memorandum of a company

Understand how articles of a

company can be altered

Discuss the doctrine of ultra vires in

relation to the objects of a company.

17 Company Law 3

Syllabus reference 6a, b, c

Capital and Financing of companies

Examine the different meanings of

capital

Discuss the rights attached with the

shares

Illustrate the difference between

various kinds and classes of shares

Explain the procedure for altering

class rights

Discuss public offering of shares and

Prospectus.

18 Company Law 4


Loan Capital and debentures

Define companys borrowing powers

and explain the meaning of

debentures

Distinguish loan capital from share

capital

Explain the concept of charge over

companys assets and distinguish

between fixed and floating charges.

19 Company Law 5

Syllabus reference 6e

Capital maintenance and dividend

Explain the doctrine of capital

maintenance

Examine the effect of issuing shares

at premium or discount

Understand and explain the

procedure prescribed for reduction of

share capital

Discuss the rules and procedure for

declaring and distributing dividends.

20 Company Law 6

Syllabus reference 7a, d

Directors

Discuss the role of directors in the

management of a company

Analyse the statutory impediments

which make persons ineligible to

become directors

Discuss the procedure for

appointment of directors, their

removal and disqualification


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Discuss the scope and limitations of

directors powers in managing the

affairs of the company

Explains the duties of directors owed

to their companies. Discuss the level

of care directors are expected to

maintain while acting as agents of

the company. Also analyse the extent

of directors liability in case of its

violation

Distinguish between fraudulent and

wrongful trading

Insider dealing.

21 Company Law 7


Company secretary: appointment, duties

and powers.

Detail the appointment procedure

relating to, the duties and powers of a

company secretary particularly of a

listed company with reference to the

Code of Corporate Governance of SECP

22 Company Law 8


Auditors

Discuss the eligibility criteria

(qualifications and disqualifications)

of auditors.

Understand the powers granted to

auditors for evaluating the state of a

companys affairs especially the

financial aspect.

Analyse the duties auditors owe to

the shareholders of the company.

23 Company Law 9


Company meetings

Understand the difference between

the following kinds of meetings:

statutory, annual general meeting

and extraordinary general meetings

Explain the purpose, formalities and

procedure for convening and holding

these meetings.

24 Company Law 10


Resolutions

Distinguish between the following

kinds of resolutions: ordinary,

extraordinary and special

Discuss the formalities attached with

passing and filing of resolutions.

25 Company Law 11

Syllabus reference 9a, b, c, d

Oppression and mismanagement

Explain the rule of majority control

as laid down in Foss v. Harbottle

Discuss the meaning of the terms

oppression and mismanagement

Evaluate the statutory remedies

available to minorities against majority

oppression and mismanagement

Evaluate the just and equitable

winding-up procedure as a means of

protecting rights of oppressed

minorities

Discuss government investigations as

a form of protection against oppression

and prevention of mismanagement.

26 Company Law 12


Winding up

Discuss the circumstances,

procedure and effects involved in the

voluntary winding up of a company

on the members behest

Discuss the circumstances,

procedure and effects involved in the

voluntary winding up of a company

on the creditors behest

Discuss the circumstances and

effects involved in the winding up of

a company subject to supervision of

the Court and also discuss the

Courts power in this regard.

27 Company Law 13


Discuss the position of the official

liquidator and his role in the winding

up of a company

Analyse the scope of liability of

contributories where a company is

wound up.

28 Employment Laws 1


Principal labour legislation.

Understand the scope of the

following legislation:

Industrial Relations Ordinance,

2002


Commercial Employment

(Standing Order) Ordinance, 1968


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Payment of Wages Act, 1936


1923

Provincial Employees Social

Security Ordinance, 1965

Employees Old Age Benefits Act,

1976

Minimum Wages Ordinance, 1961

Companies Profits (Workers

Participation) Act, 1968

Workers Welfare Fund

Ordinance, 1971

Workers Children (Education)

Ordinance, 1972



Employment categories

Understand the concept behind the

three streams of employment; (i)

government employees, (ii) workmen

and (iii) master and servant

Distinguish between workman as

discussed in the Industrial Relations

Ordinance, 2002 and West Pakistan

Industrial and Commercial

Employment (Standing Order)

Ordinance, 1968

Analyse the scope of the term

wages as given in Payment of

Wages Act, 1936

Discuss the extent of employers

liability for certain accidental injuries

to workmen related to their

employment as provided for under


1923.


Syllabus reference 11c, d

Dismissal

Unfair and wrongful dismissal under

the Industrial Relations Ordinance,

2002 and Standing Order 15 of the


Commercial Employment (Standing

Order) Ordinance, 1968

The concept of retrenchment under

the Standing Order 14 of the West

Pakistan Industrial and Commercial

Employment (Standing Order)

Ordinance, 1968.

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