FLK1 · SQE1 module

Business Law and Practice

Business Law and Practice spans company formation and constitution, directors’ duties, shareholder decision-making, partnerships and business accounts.

Directors’ duties under the Companies Act 2006 are the single most tested topic, usually applied to a short scenario rather than asked as a definition.

What this module covers

Every topic in Business Law and Practice, in the order the course teaches them. This is the whole syllabus for the module, not a selection.

Business Forms: Sole Trader, Partnership, LLP and Company
Partnership Default Rules (Partnership Act 1890)
Company Constitution: Objects, Capacity, Articles as Contract and Entrenchment
Directors: Appointment, Removal, Types and General Duties
Shareholder Rights, Resolutions and Minority Protection
Company Secretary, Auditor and Companies House Filings
Share Capital and Company Financing (Equity and Debt)
Corporate Insolvency: Procedures and Liquidation Priority
Insolvency Clawback: Antecedent Transactions and Wrongful/Fraudulent Trading
Personal Insolvency: Bankruptcy and IVA
Income Tax (and Dividend Income)
Capital Gains Tax (including BADR)
Corporation Tax
Value Added Tax (VAT)
National Insurance Contributions (NICs)
Tax Planning, Avoidance and Evasion
Inheritance Tax: Business Property Relief

A real question from this module

Answer it before you decide

FLK1 · Business Law and Practice

Question

A director causes her company to enter into a supply contract with another business that she personally owns. She mentions the arrangement informally to the finance director over lunch, but the matter is never placed before the board, and the other directors do not turn their minds to it before the contract is signed. Which of the following best describes the position?

AShe has complied with her duties, because informally telling one other director satisfies the disclosure requirement

BShe has breached her duty to declare an interest in a proposed transaction with the company, since disclosure must be made to the board

CShe has breached her duty to avoid a conflict of interest, since this type of arrangement can never be authorised by directors

DShe has complied with her duties, because shareholder approval is only required for transactions above a set financial threshold

EShe has breached her duty to exercise independent judgment, since she allowed her personal interests to affect her decision

Answer B

Where a director has an interest in a proposed transaction with the company itself, the duty is to declare its nature and extent to the board before the company enters into it. Telling one director informally, rather than declaring it to the board as a whole, does not satisfy this. This is distinct from the duty to avoid conflicts with the company’s business or opportunities outside a transaction with the company, which instead requires formal authorisation by the other directors, and a financial threshold for shareholder approval is not what makes a declaration under this duty necessary.

Companies Act 2006, s.177 (duty to declare interest in proposed transaction with the company).

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