The Institute of Chartered Accountants in England and Wales

LAW

For exams in 2019

Study Guide

www.icaew.com
Contents

1 Key resources 1

2 Study guide 2

3 Syllabus and learning outcomes 15

4 Technical knowledge grid 18

5 Glossary of terms 20

The Law module provides you with an understanding of the principles of English law.

ii ICAEW 2019
1 Key resources
Whether you’re studying the ACA qualification or ICAEW CFAB, with an employer, at university,
independently (self-studying), or via an apprenticeship, we provide a wide range of fantastic
resources and services to help you in your studies. They can be found on our website. Be sure to
visit the specific area for your qualification.
ACA students, you can access dedicated exam resources, guidance and information for the ACA
qualification via your dashboard at icaew.com/dashboard.
ICAEW CFAB students, you can find everything you need at icaew.com/cfabstudents.
Syllabus and technical knowledge grids
This gives you the full breakdown of learning outcomes for each module and how your technical
knowledge will grow throughout the qualification.
Study guide
This guides you through your learning process, putting each chapter and topic of the Study
Manual into context and showing what learning outcomes are attached to them.
Exam webinars
The pre-recorded webinars focus on how to approach each exam, plus exam and study tips.
Errata sheets
These are available on our website if we are made aware of a mistake within a Study Manual or
Question Bank once it has been published.
Student support team
Our dedicated student support team is here to help and advise you throughout your studies,
don’t hesitate to get in touch. Email [email protected] or call +44 (0)1908 248 250 to
speak to an adviser.

ICAEW 2019 Study Guide 1

 2 Study guide
2.1 Help yourself study for your ACA exams
The right approach

1 Develop the right attitude

Believe in yourself Yes, there is a lot to learn. But thousands have

succeeded before and you can too.
Remember why you're doing it You are studying for a good reason: to advance your
career.

2 Focus on the exam

Read through the Syllabus in this This tells you what you are expected to know.
guide

3 The right method

See the whole picture Keeping in mind how all the detail you need to know
fits into the whole picture will help you understand it
better.
 The Practical significance and Working context to
each chapter in the study guide put the material
into context.
 The Learning outcomes and Section overviews in
the study manual show you what you need to
grasp.
Use your own words To absorb the information (and to practise your written
communication skills), you need to put it into your own
words.
 Take notes.
 Answer the questions in each chapter.
 Draw mindmaps.
 Try 'teaching' a subject to a colleague or friend.
Give yourself cues to jog your The Study Manual uses bold to highlight key points.
memory
 Try colour coding with a highlighter pen.
 Write key points on cards.

4 The right recap

Review, review, review Regularly reviewing a topic in summary form can fix it in
your memory. The Study Manual helps you review in
many ways.
 Each Chapter Summary will help you to recall that
study session.
 The Self-test actively tests your grasp of the
essentials.
 Go through the Examples in each chapter a
second or third time.

2 Law ICAEW 2019

2.2 Study cycle
The best way to approach the Study Manual is to tackle the chapters in order. We will look in
detail at how to approach each chapter below but as a general guide, taking into account your
individual learning style, you could follow this sequence for each chapter.

Key study steps Activity

Step 1 This topic list is shown in the contents for each chapter and helps you
Topic list navigate each part of the book; each numbered topic is a numbered
section in the chapter.
Step 2 The practical significance and working context sections for each
Introduction chapter, set out in this study guide give you the big picture in terms of
the context of the chapter. The Examination context guidance shows
what the examiners are looking for and tells you why the topics
covered in the chapter need to be studied.
Step 3 Section overviews give you a quick summary of the content of each of
Section overviews the main chapter sections. They can also be used at the end of each
chapter to help you review each chapter quickly.
Step 4 Proceed methodically through each chapter, particularly focusing on
Explanations areas highlighted as significant in the chapter introduction or study
guide.
Step 5 Take brief notes, if you wish. Don't copy out too much. Remember that
Note taking being able to record something yourself is a sign of being able to
understand it. Your notes can be in whatever format you find most
helpful; lists, diagrams, mindmaps.
Step 6 Work through the examples very carefully as they illustrate key
Examples knowledge and techniques.
Step 7 Check yours against the suggested solutions, and make sure you
Answers understand any discrepancies.
Step 8 Review it carefully, to make sure you have grasped the significance of
Chapter summary all the important points in the chapter.
Step 9 Use the Self-test to check how much you have remembered of the
Self-test topics covered.
Step 10 Ensure you have ticked off the Learning outcomes.
Learning outcomes

Moving on...
When you are ready to start revising, you should still refer back to the Study Manual.
 As a source of reference (you should find the index particularly helpful for this).
 As a way to review (the Section overviews, Examination context, Chapter summaries and
Self-test questions help you here).
Remember to keep careful hold of the Study Manual – you will find it invaluable in your work.

2.3 Detailed study guide

Use this schedule and your exam timetable to plan the dates on which you will complete each
study period below.
Revision phase – your revision should be centred around using the questions in the ICAEW
Question Bank.

ICAEW 2019 Study Guide 3

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date

1 Contract formation You might need to Section 1 of Chapter 1 sets out what is needed in Contract is an important part of
understand the order to create a valid contract. Make sure you the syllabus. Typically 7 out of 50
Practically all companies and
implications of a learn the rules of law set out here, as exam questions relate to contract law.
most individuals enter into
contract to carry out questions will require you to apply them in Understanding the basic
contracts. Individuals might
accounting or auditing determining whether a contract exists between precepts relating to contract is
have a mobile phone or buy
work. For example, a parties. Read sections 2, 3 and 4. vital.
a car or rent or buy a house.
company has a contract
Companies are likely to have Once you've reached the end of section 4, it may You are likely to be presented
to obtain assets – is it a
contracts with their be a good idea to go over sections 1–4 again, this with scenarios and may have to
purchase contract, or
employees, suppliers and time studying the interactive questions (IQs). conclude whether a valid
hire-purchase or lease?
customers. It is obviously contract has been formed. Many
These things will affect This basic knowledge of contract is essential and a
important that such contracts cases are referred to in this and
how the asset should be real grasp of the legal principles is crucial.
are valid or money and time later chapters. They will not be
reflected in the financial
is wasted and the company Once you have a contract established, you then examined directly, but illustrate
statements.
could be prevented from need to understand how to identify its terms. points of law that could be.
operating as it wishes. Audit Whether or not a Section 5 explains that unfortunately it is not
In the assessment, students may
firms may have contracts with contract has been always a case of just reading the document! Terms
be required to:
suppliers and clients, formed could be very are often implied by statute and by the courts, in
employees and landlords important to an auditor. order to make better sense of the parties'  recognise when a legally
and, again, it is important For example, if a agreement and to ensure that contractual duties binding contract exists
that these contracts are valid company enters into that should apply do apply, even when not written between two parties
and suitable, in order to certain contracts after down.
 understand how a contract
enable the business to run the year end, these
In section 6 take time to make sure you may be enforced
smoothly. might need disclosure
understand the doctrine of privity of contract.
as post-balance sheet The specific syllabus reference
Stop and think Again you need to be aware of the exceptions
events in the financial for this chapter is 1a.
given, but do not worry about the first on agency,
What things can you think of statements.
as this will become clearer when you study
that are essential for a If a valid contract has
Chapter 3.
contract to work properly? not been formed, this
Think of any contracts you disclosure will not be Go back over the chapter, especially interactive
might be involved with to see required. questions, before testing your understanding with
what the important factors the self-test questions.
are. Where does negotiation
stop and the contract start?

4 Law ICAEW 2019

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date
2 Termination of contract The impact of a breach of Now you understand what a legal contract is and You should expect several questions
contract, and therefore whether it is valid and enforceable, Chapter 2 considers on contract termination. They are
The effect of breach of contract how that contract may be discharged or terminated.
damages, might be likely to be a mixture of application
on a company can be section 1 asks is it enough if a party performs their
relevant to an accountant 'scenario' questions and definition
substantial, whether that obligations almost perfectly but not quite? What
or auditor calculating a questions.
company is the party suffering happens if the contract cannot be performed for some
liability or provision in the
the loss caused by the other reason outside the parties' contemplation or control? In the assessment, students may be
financial statements.
party's default or the defaulting Where the performance isn't sufficient, a party is in required to:
party who then has to make breach. Use the IQs on performance and frustration to
make sure you understand how these rules are applied.  identify the circumstances
good the losses to the other
Try to use your sense of what seems fair and just in under which a contract can be
party.
answering law questions. You will be surprised how terminated
Stop and think often this gives you the right answer, even where you  identify possible remedies for
When might financial cannot recall the relevant legal provisions precisely! breach of contract
compensation, ie, damages, not Section 2 then considers the remedies available to one
party where the other is in breach. The rules on  recognise an exclusion clause
be an appropriate remedy for
remoteness of damage and measure of damages are and assess whether it is
breach of contract?
not easy to understand initially, so be prepared to read effective
and re-read section 2.1. The cases illustrate the Specific syllabus references for this
principles well, so use these rather like worked chapter are: 1a, b.
examples. When reading these cases, make sure you
have a good grasp of the facts (especially which party is
which!) before reading the decision. It can be a good
idea to judge the facts yourself and then see whether
the decision given reflects yours.
Section 3 examines specific clauses in contracts called
'exclusion clauses' (and appears in Chapter 2 because
they are relevant when a party in breach seeks to rely on
them). Keep an eye out for exclusion clauses some time,
when you park your car or take something to the dry
cleaners for example. Applying the legal principles that
you learn in this chapter to something you find in
everyday life can help your understanding. This is
another area where there are rules that you really should
learn.
Read through the chapter again before attempting the
self-test questions. Make a note of your score.

ICAEW 2019 Study Guide 5

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date

3 Agency You will be working for Read section 1 which gives the context of what This is an important area for your
a group of agents if you follows. You will learn the various ways in which an exam. The sample paper
As you will see, the law of
work for a firm of agency can be created in section 2. Use the contained five questions on
agency is highly relevant to
accountants and you worked examples and the case as illustrations to agency law. It is likely to be
partners and their liability
may come across help you understand. Make sure, in particular, that examined in the context of
(and therefore of interest to
situations where your you understand that agency by estoppel is based partnerships.
ambitious trainees in
client has acted as only on the principal's conduct and also that you
accountancy firms). In the assessment, students may
agent or appointed an learn the conditions relating to ratification.
be required to:
It is also an area of law that agent to act on its
In section 3 the duties and rights of agents are
governs many contractual behalf.  identify the methods by
unsurprising. You will not be required to list them,
situations in business which agency can be
but you may need to identify whether something is
generally and so is one with created
a legal duty of an agent or principal, so you should
which you should be familiar.
be familiar with them and their explanations.  identify the rights and
Stop and think duties of agents
Section 4 deals with the authority of an agent and
What do you know about the you should allow sufficient time for getting to grips  recognise the authority an
differences between the with this. Concentrate on understanding the scope agent has to enter into
types of business run as of authority and how it arises, rather than the exact contracts on behalf of a
agents and those run terminology that is appropriate. Make sure you principal, including actual
through companies? understand the worked examples and cases before and ostensible authority
attempting IQ 3.
Specific syllabus references for
In section 5 learn the rules that determine who may this chapter are: 1c, d, e.
enforce a contract entered into by an agent,
depending on whether they have authority and
whether they are known to be an agent. These
rules are designed to produce a fair result and if
you can see the sense that lies behind them, you
will find them easier to memorise.

6 Law ICAEW 2019

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date
4 Negligence As an employee, you Read through section 1, which is designed to give you Being an important practical issue
should be conscious that a feel for what the law of tort covers, although you only for accountants, you might expect
Negligence, particularly
your employer could be need to study one tort, negligence. around five questions relating to
negligent misstatement (as can
liable for any tortious act Know (without any shadow of a doubt!) the three negligence and vicarious liability in
be seen from the case examples
of yours in the course of essential elements that must be proved in an action for your exam.
given in this chapter), can be a
your employment. If you negligence. Whether or not a duty of care exists has
very important issue for In the assessment, students may be
achieve partnership, your tested the best legal minds for many years, but you
accountancy firms. Being required to:
partners could be jointly should endeavour to understand the four tests outlined
accused of, or worse, being
and severally liable for any in section 2.1. Now attempt IQ 1.  identify instances and
found liable for negligent
negligent misstatement by consequences of negligence
misstatement can have far- The principles set out in section 2.2 are important and
you. Hopefully it will not (particularly negligent
reaching effects for a firm, both you should learn them, as they may well determine the
come to that and misstatement) in a given
financially and in other ways, standard of care that is applicable in deciding whether
negligence will never have scenario
such as loss of reputation. there has been a breach. Make sure you understand
an impact on your working
the fact that the loss must be caused by the breach.  identify issues and
Stop and think life.
This is explained in section 2.3 and illustrated by cases. consequences of vicarious
To whom do auditors owe a liability in a given scenario
Obviously the question of professional negligence is
duty of care when they issue
crucial. You may need to work through section 3 Specific syllabus references for this
their report?
several times to secure a good understanding of the chapter are: 1f, g.
sorts of considerations that are relevant to whether a
duty of care exists in this context. Use the cases as
illustrations of key principles. Try to appreciate, from
the point of view of common sense or public policy,
why the law has developed in the way it has. Attempt
IQ 3.
Be aware of an auditor's potential liability in respect of
the auditor's report and how it can be limited. Study
the defences in section 4 and, in particular, appreciate
how limited the defence of volenti is. The question of
remoteness in damages is important.
Section 5 explains vicarious liability. Use the cases as
worked examples as they illustrate the courts'
approach.
Attempt the self-test questions. Note your score.

ICAEW 2019 Study Guide 7

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date

5 Companies: the consequences Unless you are a personal Section 1 addresses a key legal principle which is A large proportion of your exam
of incorporation tax adviser, most of your perhaps most easily understood by reading and will relate to company law, as set
clients will be companies. understanding the cases, especially Salomon's case out in this chapter and Chapters 6,
There are about three million
You will audit companies, and Macaura. Make sure you appreciate that it is the 7 and 8. You might expect around
companies registered at
provide due diligence on liability of members that may be limited, not the 12 questions to address the areas
Companies House. Nearly
companies and advise on liability of the company. covered by this chapter.
12,000 of these are public
various matters, Appreciate the distinctions in section 2 between the
limited companies, of which In the assessment, students may
including company different types of company, in particular public and
more than half are listed on be required to:
takeovers, insolvency and private companies. Businesses have to select the
the Stock Exchange.
formation. The legislative most appropriate type. It may help to imagine a  identify the procedure
Stop and think requirement for a public company and a private company and build up required to form a registered
company to keep a profile for each with the appropriate characteristics, company and identify the
It is often said that the
accounting records and in order to learn the distinctions between them. advantages and
requirement of public
prepare accounts is at disadvantages of off-the-shelf
disclosure is the price that the Study how a company is registered in section 3 or
the heart of the working companies
members of a company pay bought off the shelf. Take time to read and
life of a chartered
for limited liability. Is it always understand section 3.3.  demonstrate an
accountant, whether
an acceptable price? understanding of corporate
working as an accountant Read section 4 on various aspects of a company's personality and recognise the
or an auditor. This name and know how it can be changed. An circumstances when the veil
chapter therefore understanding of what articles of association are and
of incorporation can be lifted
explains some of the how they can be altered is important (section 5). The
important legal principles contractual effect is also important, but might not be  identify the administrative
that will underpin much grasped immediately. Use the Eley case as an example. consequences of
of your work as an incorporation including
Section 6 details various administrative consequences
accountant. requirements regarding
of incorporation. This may look like detailed
statutory books, accounts,
information but much is straightforward and may
meetings and the role of a
already be familiar to you. Appreciate the difference
Company Secretary
between a company's records and the main register
(section 6.2). Specific syllabus references for
Read section 7 on accounts and audit requirements this chapter are: 2a, b, c, e.
carefully. It contains a wealth of information
concerning the legal requirements relating to a
company's financial statements and the need to audit.
Pay close attention to the different requirements of
micro, small and medium companies.

8 Law ICAEW 2019

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date

6 Companies: ownership and As mentioned at the In section 1 learn about the different types of director You should expect exam questions
management beginning of the last and how they are appointed and removed. on each of the learning objectives
chapter, companies are Consolidate by attempting IQs 1 and 2. The power of stated.
Directors have very extensive
the most common form individual directors to bind the company is an
powers in relation to running a In the assessment, students may
of business organisation important topic. You might find it helpful to recap
company in which its members be required to:
with which you will deal. Chapter 3 when you study section 1.4 and before
and lenders have invested.
It is essential that you attempting IQ 3. You should learn the general duties  identify the various statutory
The Act sets out a statutory
understand how they are of directors, codified for the first time in Companies rights of shareholders to
code of directors’ duties to
managed and, in Act 2006. The worked example provides a helpful challenge the management
guide and regulate the
particular, how and when illustration. Consider what happens when there is a of the company
exercise of those powers by
directors fall short of their breach. Spend time on understanding wrongful
the directors. The obligation to  identify the ways in which a
legal responsibilities. trading and fraudulent trading and the dual criminal
perform these duties also director may be appointed
and civil liability, at section 1.7. Learn the rules
means that directors can be and removed
relating to mandatory and discretionary
called to account for their
disqualification.  identify directors' duties and
actions where these are
explain the consequences of
dishonest in some way or fall Read section 2 and see the role and power of
any major breach
short of the standards which members in a company, particularly in relation to
an investor might reasonably directors.  identify the powers of
expect. Without the options directors and in what
You should then be ready to understand the legal
available to them, discussed in circumstances they will bind
principle described in section 3 based on majority
this chapter (both in having to the company in a contract
rule. Remember what you learned in Chapter 5
approve some directors' with third parties
regarding a company's separate legal personality, as
actions and in bringing
this is another application of that principle.  recognise how members can
proceedings to court)
influence the management of
individuals and companies Learn the various rights of action available to minority
a company through meetings
might be reluctant or unwise shareholders and see the examples of where these
and resolutions, including the
to invest. have been successful. Use IQs 5 and 6 to consolidate
members' right to requisition
this learning.
Stop and think a meeting
Learn the various rules concerning meetings and
If someone is a majority Specific syllabus references for
resolutions in section 4. Test yourself as you go. Then
shareholder, owning 80% of this chapter are: 2c, h, i, k, l, m.
use the self-test for the whole chapter and note your
the company, does that mean
score.
that they can effectively do
whatever they like?

ICAEW 2019 Study Guide 9

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date
7 Companies: finance Return on capital is a key In section 1 familiarise yourself with the various You can expect around four or five
Share capital represents funding measure of the success of differences between ordinary and preference shares. questions on the subject matter of
provided to a company by the a company. You will need Read about class rights and how they can be varied. this chapter on your exam paper.
owners of that company. It is to have a clear Attempt IQ 1.
In the assessment, students may be
subject to a number of rules understanding of a Learn the rules in section 1.3 as to how shares are required to:
which are designed to maintain company's capital allotted and the authority required. In particular,
the company's capital and structure and of its understand the application of pre-emption rights and be  identify the procedures for the
prevent it from being obligations to aware that they can be excluded and do not apply in issue of shares, including issues
diminished or returned to shareholders and lenders, certain circumstances (1.4). at a premium and pre-emption
shareholders (save in limited particularly if you become rights
circumstances). Share capital involved in company There are also rules to learn regarding payment for
may, however, be increased shares. Be clear that whilst shares can be (and often are)  identify aspects of capital
valuations or appraisals.
from time to time, to enable the issued at a premium, the general rule is that they cannot maintenance including
Listed companies would
company's business to expand be issued at a discount. You should also appreciate the reduction of capital,
usually expect to declare
for example. A return is different treatment of public companies in this respect redemption and purchase of a
dividends every year, but a
provided to shareholders by and understand how shares are transferred. company's own shares,
private company may go
way of dividends paid on shares. financial assistance for the
for years without paying In section 2 familiarise yourself with what is meant by the
An alternative way of obtaining purchase of a company's own
dividends. A company that various references to share capital, illustrated by the
additional finance is through shares and distribution of
is financed partly by loans worked example. Know how share capital can be altered
loan capital. This is provided by profits
has to ensure that it can but, generally speaking, not reduced. Make sure you
lenders, typically banks, who do
not thereby become owners of meet its obligations to understand the rules on redemption and purchase of  identify share transfer
the company. Their return is in make capital and interest shares and financial assistance, appreciating the requirements and disclosure
the form of interest. A lender will payments. different regimes for public and private companies. Read requirements
usually require some security for about dividends.
 identify the nature of fixed and
their loan and this may be by Section 3 looks at loan capital. Make sure you floating charges and the
way of a fixed or floating charge understand what is meant by a debenture and then procedures for registering
over some or all of the concentrate on understanding how charges are either
company's assets. them
fixed or floating and the consequences of each.
Specific syllabus references for this
Stop and think It is also important that you learn the registration
chapter are: 2d, f, g, n.
requirements and understand how the priority of
If a company wishes to raise
charges is worked out.
additional funds, how would an
existing shareholder be affected Attempt the IQs and self-test. Note your score.
by the choice of whether to
issue new shares or to obtain
loan finance?

10 Law ICAEW 2019

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date
8 Insolvency law: corporate and As an accountant, you will Allow time to study section 1. Administration is an The legal issues discussed in this
personal need to recognise the increasingly important area of insolvency law and it is chapter could be examined in
early warning signs that essential that you understand its purpose and how that conjunction with other areas of
No-one goes into business or purpose is achieved. Its advantages are described in
suggest that a business company law, for example the
sets up a company and expects section 1.5. Understand that an administrator may be
may not be a going incorporation of a company,
it to fail. However, not every appointed by the court or out of court in certain cases. You fraudulent and wrongful trading and
concern or that it may be
business venture is successful should have a good grasp of the role of the administrator financing by loan capital. You might
facing cash-flow
and there are many reasons why and how they are empowered to achieve the aim of be asked to advise on appropriate
difficulties. Perhaps the
a company, partnership or sole administration. courses of action available to
business is failing to meet
trader business might find itself members or creditors in a scenario
interest payments as they Receivership is given brief mention in section 2 but make
unable to meet its debts as they involving a company in financial
fall due or maybe its sure you study the material, as it is still examinable.
fall due. Insolvency law is difficulties. An awareness of
creditor days are growing. Company voluntary arrangements are covered in
designed to protect those who personal bankruptcy and individual
You may even choose to section 3. You need to understand what they are, the
have a financial interest in a voluntary arrangements may be
specialise in insolvency procedure involved in setting them up and, if successful,
failing business. Administration needed in the context of discussing
work. In any event, it is what impacts they have on the company and its creditors.
and voluntary arrangements (for partners’ liabilities.
almost certainly an area of
both companies and individuals) Liquidation is an important subject and you should make
law and business In the assessment, students may be
are aimed at rescuing the sure that you recognise that it can be achieved in three
experience that you will required to:
business and will normally be ways. In particular, appreciate the distinction between
come across and so  identify the nature and function
pursued if at all possible. members' voluntary and creditors' voluntary liquidations
familiarity with the relevant of company voluntary
However, where rescuing a (especially as the terminology can lead to confusion).
legal provisions is arrangements, receivership
business is not plausible, it may Learn the two most common grounds for petitions for
essential. and administration
be necessary to wind up a compulsory winding up (section 4.3). Understand the
company or make an individual, consequences of liquidation and the liquidator's role.  identify the principal means of
or individuals, bankrupt. Attempt IQ 1. termination of companies,
Insolvency law provides the including voluntary and
Learn the rules relating to the avoidance of charges and
framework for both strategies. other transactions and, once confident that you have compulsory winding-up
learned them, attempt IQ 2.
Stop and think  describe the priorities on a
Learn the order of priority for distribution of a company's liquidation of a distribution of
Does the fact that a company is assets on liquidation (section 4.6) and attempt IQ 3. assets including the rights of
in financial difficulties
Read section 5 which explains IVAs. Then go on to creditors and employees
necessarily mean that steps will
bankruptcy in section 6. Appreciate the three ways that a
or should be taken to wind it bankruptcy may commence. Understand the effect of  identify the main implications
up? bankruptcy and learn the order of priority for any of bankruptcy and individual
distribution. voluntary arrangements
Specific syllabus references for this
chapter are: 2o, p.

ICAEW 2019 Study Guide 11

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date
9 Sole traders and partnerships Not only might you be You may already be familiar with the concept of sole Partners' authority will be examined
working for a partnership, traders, if so, skim through section 1. If not, read through in the context of agency law,
Businesses should ensure that
you may find your firm this short section carefully, noting the advantages and commonly in a scenario question.
they are run in the most efficient
numbers partnerships disadvantages of this common business form. The law on partnerships may also be
and appropriate manner. Part of
among its clients as well as examined by requiring a
this is assessing whether to Now you go on to learn about partnerships, a different
sole traders. As a business comparison with companies.
operate as a sole trader, business organisation. Learn the definition and
adviser, you could well
partnership or a registered understand its constituent parts. In the assessment, students may be
find yourself advising a
company. Limited liability is required to:
client on the advantages Read and learn the rules that govern a partnership where
attractive, but usually brings with
and disadvantages of a there is no express agreement and then attempt IQ 2.  identify the differences
it a more onerous burden of
range of business forms. The question of a partner's authority (and firm's liability between sole traders,
regulation and administration. A
for their acts) is important and again builds on what you partnerships and companies
limited liability partnership may
learned in Chapter 3, so you may wish to revisit that
be an attractive option for some  recognise the authority a
chapter. Spend time on the worked example to make
businesses. Like your clients, the partner has to enter into
sure you understand how the law is applied, before
firm you work for may also need contracts on behalf of the
attempting IQ 3.
to assess how it operates. partnership
Accountants have traditionally Study the comparison between companies and
worked together in  identify the procedure required
partnerships and make sure you understand all the
partnerships, but recent years to form a limited liability
differences described. You should then find IQ 4
have seen them increasingly partnership and the
straightforward.
finding ways of limiting their administrative consequences
Mindful of what you have learned about ordinary
potential liabilities (which we  identify the rights and duties
partnerships and companies, now study LLPs in
touched upon in Chapter 4). which a member of a limited
section 4. See how the question of authority and liability
liability partnership possesses
Stop and think is similar (but not identical) to ordinary partnerships.
Attempt IQs 5 and 6. Specific syllabus references for this
If an agent binds the principal, chapter are: 1e, 2a, b, c, j.
and partners are all agents of Review the chapter, appreciating that you have now
each other, how will a large learned about three different business organisations,
accountancy firm seek to before answering the self-test questions at the end of the
regulate the actions of its chapter.
partners?
Why is limited liability so
attractive, especially in the case
of larger partnerships?

12 Law ICAEW 2019

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date

10 Criminal law You must always Read section 1 on whistleblowing, learning the In the assessment, students may
remember that you are categories of qualified disclosure and the persons be required to:
It goes without saying that
bound by professional to whom disclosure should be made. Read the
the repercussions of fraud,  identify circumstances
ethics, the keystone of worked example and make sure you understand
bribery or corruption can be where an accountant is
which is integrity. It is the law in context.
enormous, on a company's protected from dismissal
hoped that you will
ability to carry on business Learn the three types of statutory fraud. Section 2 and victimisation if they
never be involved in any
and on its creditors, investors also considers how cybercrime relates to fraud raise concerns
of the criminal offences
and employees. It is vital that before revisiting fraudulent trading (discussed in ('whistleblow') about
discussed in this
you are able to recognise Chapter 6). Study the worked example to see how malpractice in the
chapter or be in a
instances of such criminal the law is applied. You should learn the definitions workplace
position where you feel
offences and know their legal relevant to insider dealing and make sure that you  identify instances and
bound to make a
consequences and what understand the three principal offences and consequences of fraud and
disclosure about the
steps to take. These crimes defences and penalties relevant to each. money laundering
wrongdoing of people
and cases of whistleblowing
in your workplace. Read section 3 on bribery before attempting IQ1.  advise on appropriate
all have the potential of
However, a charted courses of action for an
being very high profile Money laundering is explained in section 4 and,
accountant is often privy accountant faced with a
matters in the public domain. again, you should become familiar with the three
to sensitive information money laundering scenario
You need to be aware of the offences and their relevant defences and penalties.
in a company and it is
impact of cybercrime and It may be helpful to study the text in section 4.3  identify instances and
essential that you are
criminal law in general on the and, once you are satisfied that you understand it, consequences of bribery
aware of requirements
work of both you and your then study the worked examples (perhaps putting
to report certain things  recognise the role of ethics
colleagues and also of your yourself in the place of the accountants in those
of which you have and ethical codes and their
clients and those with whom examples). Finally, attempt IQ 2 before finishing
knowledge or suspicion interaction with law
your clients deal. with the self-test, reviewing the whole chapter.
and that you appreciate
 identify the offences
Stop and think the effect that criminal Read section 5. It is helpful and reminds you of the
created under the
activity (and its being interaction between law, ethics and professional
Why are accountants Computer Misuse Act 1990
made public) can have codes.
required by law to make on the reputation and  identify how the Fraud Act
disclosures about money value of the business. (2006) relates to
laundering? Why is insider cybercrime
dealing a crime?
Specific syllabus references for
this chapter are: 3a, b, c, d, e, f, g.

ICAEW 2019 Study Guide 13

 Study Exam context and syllabus Due
period Practical significance Work context Approach reference date
11 Employment, data protection A value is not placed on The test of whether someone is an employee or You may expect several questions
and intellectual property law employees in the financial independent contractor (section 1) is very important and on employee status and the
Where you are an employee of statements, but employees very examinable. Spend time on this section. Learn the contents of an employment contract.
your company or firm, the will be paid through the three essential elements and other relevant factors, Redundancy, wrongful dismissal and
employment law issues payroll and the company understanding why each is consistent with employee or unfair dismissal are particularly
discussed in this chapter will be may have liabilities in independent contractor status (as the case may be). See important exam topics. You should
of significance to you. In respect of tax for them. how the multiple test operates in the worked example and also be prepared for questions on
addition, your company or your Other kinds of workers then attempt IQ 1. Learn the practical distinction between the practical application of laws
clients will have 'human assets', may be paid through the the two. Test your knowledge with IQ 2. relating to data protection and
and as you will see in these payables ledger. Read section 2 on employment contracts. Learn the intellectual property.
chapters, the question of The outcome of a wrongful written particulars and the duties on employee and In the assessment, students may be
whether these people are or unfair dismissal case or employer in the absence of express provision. Attempt required to:
employees or independent an announcement of IQ 3.  identify who is an employee and
contractors may have significant redundancies may have a the main legal consequences of
Unfair dismissal is a very important subject and in
financial and liability significant impact on employment status
section 3 you will need to learn various lists – of
implications for those clients. financial statements in
automatically unfair and potentially fair reasons for  identify the key features of
Bear in mind too that claims terms of liabilities or
dismissal. Make sure that you understand what constitutes employment contracts
relating to dismissal can have a provision which you might
a dismissal, how the employer's reasonableness is  recognise circumstances in
significant financial impact on a have to account for or
assessed and know the procedure for making a claim. which an employment contract
company. audit.
Learn the remedies. Be prepared to spend time on unfair may be terminated and the
Companies are subject to Most business enterprises dismissal. Attempt IQs 4 and 5 once you feel confident consequences of termination
restrictions on how they hold keep information about that you have understood the material.
individuals, so your  identify when a dismissal
and process information as a Section 4 explains wrongful dismissal and its overlap with constitutes a wrongful dismissal
result of the Data Protection Act company or your firm and
unfair dismissal. Learn what constitutes wrongful dismissal or an unfair dismissal
and the penalty of failing to its clients will be subject to
(section 4.2) and when summary dismissal applies.
meet these restrictions is that a the Data Protection Act  identify the circumstances
Attempt IQ 6.
company might not be able to and it will affect their where an employee can claim a
systems and the way they Read section 5. You need to understand what amounts to statutory redundancy payment
maintain its information system.
operate. redundancy. Use the worked example to help you.
 identify employers’ obligations
Stop and think
Intellectual property can Review sections 3–5 before attempting IQ 7. under social security law
What potential financial be a valuable asset for a Read section 6 which deals with protection of personal  identify the key requirements
implications do 'human assets' business and it is data and test your understanding with IQ 8. of the Data Protection Act 2018
have for companies and how important to understand
might employment law affect Carefully study section 7 which deals with what intellectual  recognise the requirements of
how a company and
financial statements? property is and the various methods that can be used by a protecting intellectual property,
protect it.
business to protect its IP. including digital contexts
Specific syllabus references for this
chapter are: 4a, b, c, d, e, f, g.

14 Law ICAEW 2019

3 Syllabus and learning outcomes
Covered
in chapter

1 The impact of civil law on business and professional services

Students will be able to explain the nature of contractual agreements, the agency relationship
and the consequences of negligence.
In the assessment, students may be required to:
Contract
(a) Recognise when a legally binding contract exists between two parties
and how a contract may be enforced; 1, 2
(b) Identify the circumstances under which a contract can be terminated and
possible remedies for breach of contract; 2
Agency
(c) Identify the methods by which agency can be created; 3
(d) Identify the duties and rights of agents; 3
(e) Recognise the authority an agent has to enter into contracts on behalf of a
principal, including express, implied and apparent authority; and that given to
partners under legislation; 3, 9
Negligence and liability
(f) Identify instances and consequences of negligence (particularly negligent
misstatement) in a given scenario; and 4
(g) Identify instances and consequences of vicarious liability in a given scenario 4

2 Company and insolvency law

Students will be able to understand the implications of incorporation, including the roles of
shareholders and directors, and the main implications of insolvency law.
In the assessment, students may be required to:
(a) Identify the differences between unincorporated businesses (sole traderships
and partnerships), limited liability partnerships and companies, show the
advantages and disadvantages of incorporation and recognise the circumstances
when the veil of incorporation can be lifted; 5, 9
(b) Identify the procedures required to form a registered company or a limited
liability partnership, including any practical considerations, and the nature and
contractual force of a company's memorandum and articles of association,
and identify the advantages and disadvantages of off-the-shelf companies; 5, 9
(c) Identify the administrative consequences of incorporation or the formation
of a limited liability partnership including requirements regarding statutory
books, accounts, meetings and the role of the Company Secretary; 5, 6, 9
(d) Identify the procedures for the issue of shares, including issues at a premium and
pre-emption rights; 7
(e) Identify the requirements of the Companies Act 2006 in respect of companies’
statutory accounts and audit, including the exemptions for small and
medium-sized companies and micro-entities 5

ICAEW 2019 Study Guide 15

 Covered
in chapter
(f) Identify aspects of capital maintenance including: 7
 reduction of capital
 redemption and purchase of a company's own shares
 financial assistance for the purchase of a company's own shares
 distribution of profits
(g) Identify share transfer requirements and disclosure requirements; 7
(h) Recognise how a shareholder can influence the management of a company through
meetings and resolutions, including shareholders’ rights to requisition a meeting; 6
(i) Identify the various statutory rights of shareholders to challenge the management
of the company under the Companies Act 2006 and the Insolvency Act 1986; 6
(j) Identify the rights and duties which a member of a limited liability partnership
possesses; 9
(k) Identify the ways in which a director may be appointed and removed; 6
(l) Identify directors’ duties, explaining the consequences of any major breach; 6
(m) Identify the powers of directors and in what circumstances they will bind the
company in a contract with third parties; 6
(n) Identify the nature of fixed and floating charges and the procedures for
registering them; 7
(o) Identify the nature and function of: 8
 company voluntary arrangements
 administration orders
 receivership
 compulsory and voluntary liquidation (including relevance of secured debt);
and
(p) Identify the main implications of insolvency law, including: 8
 the principal means of termination of companies or other business entities;
 the priorities on a liquidation of the distribution of assets including rights of
creditors and employees (including secured assets); and
 bankruptcy and other responses to personal insolvency.

3 The impact of criminal law on business and professional services

Students will be able to identify instances of criminal behaviour that may be encountered by
professional accountants.
In the assessment, students may be required to:
(a) Identify circumstances where an accountant will be protected from dismissal and
victimisation if he raises concerns about malpractice in the workplace; 10
(b) Identify instances and consequences of fraud in a given scenario; 10
(c) Identify instances and consequences of bribery; 10
(d) Identify instances and consequences of money laundering and select appropriate
courses of action for a professional accountant in accordance with international
and national regulations and law; 10

16 Law ICAEW 2019

 Covered
in chapter
(e) Recognise the relationships and interaction between legal principles,
legislation, case law, ethics and ethical codes; 10
(f) Identify the offences created under the Computer Misuse Act 1990; and 10
(g) Identify how the Fraud Act (2006) relates to Cybercrime. 10

4 The impact of law in the professional context

Students will be able to identify other key areas in which the law affects the role and work of the
professional accountant.
In the assessment, students may be required to:
Information and its legal environment
(a) Identify the key requirements of the Data Protection Act 2018, on the use
of personal information and how the Act can affect the manner in which
information systems are used by businesses; and 11
(b) Recognise the requirements of protecting intellectual property, including
digital contexts. 11
Employment law and social security law
(c) Identify who is an employee and the main legal consequences of
employment status; 11
(d) Identify the key features of employment contracts and recognise circumstances
in which an employment contract may be terminated and the consequences
arising; 11
(e) Identify when dismissal constitutes: 11
 a wrongful dismissal
 an unfair dismissal;
(f) Identify the circumstances where an employee can claim a statutory redundancy
payment; and 11
(g) Identify employers' obligations under social security law. 11

ICAEW 2019 Study Guide 17

 4 Technical knowledge grid

4.1 Technical knowledge

The tables contained in this section show the technical knowledge in the disciplines of financial
reporting, audit and assurance, business analysis, ethics and taxation covered in the ACA
syllabus by module.
For each individual standard the level of knowledge required in the relevant Certificate and
Professional Level module and at the Advanced Level is shown.
The knowledge levels are defined as follows:
Level D
An awareness of the scope of the standard.
Level C
A general knowledge with a basic understanding of the subject matter and training in its
application thereof sufficient to identify significant issues and evaluate their potential
implications or impact.
Level B
A working knowledge with a broad understanding of the subject matter and a level of
experience in the application thereof sufficient to apply the subject matter in straightforward
circumstances.
Level A
A thorough knowledge with a solid understanding of the subject matter and experience in the
application thereof sufficient to exercise reasonable professional judgement in the application
of the subject matter in those circumstances generally encountered by chartered accountants.
Key to other symbols:
→ The knowledge level reached is assumed to be continued

18 Law ICAEW 2019

 Ethics Codes and Standards
Ethics Codes and Standards Level Modules

IESBA Code of Ethics for Professional Certificate Level

Accountants
C/D Accounting
(parts A, B and C and Definitions)
B Assurance
ICAEW Code of Ethics
C/D Business, Technology and
Finance
D Law
C Management Information
C Principles of Taxation

Professional Level
A Audit and Assurance
B Business Strategy and
Technology
B Financial Accounting and
Reporting
B/C Financial Management
B Tax Compliance
B Business Planning

Advanced Level
A Corporate Reporting
A Strategic Business Management
A Case Study

FRC Revised Ethical Standard (2016) B Assurance

A Audit and Assurance

Advanced Level
A Corporate Reporting
A Strategic Business Management
A Case Study

ICAEW 2019 Study Guide 19

5 Glossary of terms
Acceptance An unqualified agreement to the terms of the offer.
Administration A process whereby a moratorium is imposed on creditors' actions
against the company while an insolvency practitioner attempts to rescue
the business as a going concern.
Administrator A person appointed to carry out an administration.
Agent A person authorised to act for another (the principal) and bring that
other into legal relations with a third party.
Annual general Every public company is required to hold a meeting of each its
meeting (AGM) members each year at which it is usual, but not obligatory, to transact
the 'ordinary business' of the company. Such business may include
consideration of the accounts, declaration of a dividend and
appointment of auditors.
Anticipatory breach Renunciation by a party to a contract of their contractual obligations
before the date of performance.
Articles of association Rules governing the internal conduct of a company's affairs, such as
appointment, powers and proceedings of directors, alteration of capital
structure, dividends and so on.
Auditor A person appointed by the company in a general meeting to report
whether the accounts reflect a true and fair view of the company's
affairs.
Breach of contract Where a party does not perform their contractual obligation sufficiently.
Bribery Giving or receiving money, goods or services to induce a party's
improper performance of an official duty.
Business name A name used by a company other than the registered one.
Capacity The ability or power of a person to enter into legal relationships or carry
out legal acts.
Care, duty of The care owed by one person to another which, if broken, may give rise
to an action for negligence.
Claimant The party who brings a claim in a civil court. They were previously
known as the plaintiff.
Company An entity registered under the Companies Act 2006 or any earlier
Companies Act.
Compulsory A liquidation initiated when a creditor petitions the court.
liquidation
Confirmation Statements that confirm to the Registrar that there have been no
statements changes to the information held by them about the company during the
previous 12 months, or, if changes have been made, they record the
changes that have occurred.
Conflict of interest Where the personal interests of an individual clash with another party's
interests that they have the power to control.

20 Law ICAEW 2019

 Consideration Consists either in some right, interest, profit or benefit accruing to one
party to a contract, or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the other. Broadly, the
element of value that each party contributes to the contract.
Constitution Documents which set out the rules for governing a company and
(company) include the articles of association and member resolutions relevant to
the constitution.
Contract An agreement which legally binds the parties.
Contract of A contract of employment is 'a contract of service or apprenticeship,
service/employment whether express or implied, and (if it is express) whether it is oral or in
writing.'
Creditors' voluntary A form of liquidation where a company does not provide a declaration
liquidation of solvency. If no such declaration is made, the liquidation proceeds as
a creditors' voluntary winding up even if in the end the company pays
its debts in full.
Crystallisation The point at which certain events cause a floating charge to be
converted into a fixed charge.
Damages The sum claimed or awarded in a civil action in compensation for the
loss or injury suffered by the claimant.
Defendant The person against whom a civil action is brought or who is prosecuted
for a criminal offence.
Derivative claim A remedy available to a minority shareholder to redress a wrong done
to the company. Such an action is brought where those who have
committed the offence control the company, and thus, under Foss v
Harbottle could prevent it from taking action. Any benefit obtained will
accrue to the company since the claim is derived from and made on
behalf of the company.
Director A person who takes part in making decisions and managing a
company's affairs.
Dividend A distribution of profits to members made in proportion to their
shareholdings.
Estoppel A party is prevented from retracting their words or conduct where
another has relied upon and acted on them.
Exclusion clause Contract clause purporting to exclude or restrict liability.
Executed A performed, or executed, act in return for a promise.
consideration
Executory A promise given for a promise, not a performed act.
consideration
Express term A term that is clearly agreed to by the parties in a contract to be a term
of that contract. In examining a contract, the courts will look first at the
terms expressly agreed by the parties.
Fiduciary duty A duty imposed upon certain persons because of the position of trust
and confidence in which they stand in relation to another. This is
particularly relevant to company directors.

ICAEW 2019 Study Guide 21

 Fixed charge A charge attaching to a particular asset on creation. The asset in
question is usually a fixed asset, which the company is likely to retain for
a long period. If the company defaults in payment of the debt the
holder can realise the asset to meet the debt. Fixed charges rank first in
order of priority in a liquidation.
Floating charge A charge on a class of assets of a company, present and future which
changes in the ordinary course of the company's business. Until the
holders enforce the charge the company may carry on business and
deal with the assets charged. It attaches to the assets only on
crystallisation.
Fraud Using misrepresentation to obtain an unjust advantage.
Fraud on the minority Discrimination by the majority shareholders against the minority. The
minority may have a remedy at common law
Fraudulent trading Carrying on business and incurring debts when there is to the
knowledge of the directors no reasonable prospect that these debts will
be repaid, ie, with intent to defraud the creditors. Persons so acting may
be liable for the debts of the company as the court may decide.
Freedom of contract Principle that parties may contract on the terms which they choose.
Gagging clause A term in an employment contract or severance agreement that restricts
the ability of a party to make disclosures about their employment.
Gazette An official publication in which certain notices must be inserted as
prescribed by statute, for example the appointment of a liquidator.
Good faith Fair and open action without any attempt to deceive or take advantage
of knowledge of which the other party is unaware.
Implied term Term deemed to form part of a contract even though not expressly
mentioned by the parties.
Injunction An equitable remedy in which the court orders the other party to a
contract to observe contractual terms.
Insider A person has information as an insider if it is (and they know it is) inside
information, and if they have (and know they have) it from an inside
source through being a director, employee or shareholder of a
company or by having access to it because of their employment, office
or profession (eg, as auditor), or through a source within either
category.
Intellectual property A form of intangible asset that a company creates through the
application of skill and knowledge of its employees.
Intention to create Element necessary for an agreement to become a legally binding
legal relations contract.
Insolvency The inability to pay creditors in full after realising all the assets of a
business.
Insolvency practitioner Persons acting as a liquidator, administrative receiver or administrator
must be insolvency practitioners, authorised by the professional body to
which they belong or the relevant government department.
Invitation to treat Indication that someone is prepared to receive offers with a view to
forming a binding contract. It is not an offer in itself.

22 Law ICAEW 2019

 Lifting the veil (of A company is normally to be treated as a separate legal person from its
incorporation) members. 'Lifting the veil' means that the company is identified with its
members or directors or that a group of companies is to be treated as a
single commercial entity. An example of this is to prevent fraud.
Limited liability Limitation of the liability of members to contribute to the assets of a
business in the event of a winding up. Liability is limited to any amounts
outstanding on members' shares including any premium.
Liquidated damages Fixed sum agreed by parties to a contract and payable in the event of a
breach.
Liquidation A process by which a company ceases to exist, otherwise known as a
winding up. May take the form of a compulsory liquidation, a members'
voluntary liquidation or a creditors' voluntary liquidation.
Liquidator A person who organises a company's liquidation or winding up. Their
task is to take control of the company's assets with a view to their
realisation and the payment of all debts of the company and
distribution of any surplus to members
Listed company A company whose shares are quoted on a recognised stock exchange.
Managing director One of the directors of the company appointed to carry out overall day-
to-day management functions.
Member Shareholder of a company.
Members' voluntary A form of liquidation where the directors have made a declaration of
winding up solvency and the members have passed a resolution that the company
be wound up.
Memorandum of A memorandum in the prescribed form stating that the subscribers wish
association to form a company and agree to become members of the company
and, in the case of a company with a share capital, agree to take at least
one share each. It must be authenticated by each subscriber.
Minutes A written, indexed record of the business transacted and decisions
taken at a meeting. Company law requires minutes to be kept of all
company meetings. Minutes of general meetings should be available
for inspection by members.
Misrepresentation False statement made with the object of inducing the other party to
enter into a contract.
Mitigate An action by the injured party to limit the effect of any loss or damage
caused by the defendant.
Negligence This may refer to the way in which an act is carried out, that is carelessly,
or to the tort which arises when a person breaches a legal duty of care
that is owed to another, thereby causing loss to that other.
Objects The aims and purposes of a company.
Off-the-shelf company A company that has been 'ready-made' and available to purchase by
those wishing to incorporate their business quickly.
Offer A definite promise to be bound on specific terms.
Ordinary resolution A resolution carried by a simple majority of votes cast.
Ordinary share A share which gives the holder the right to participate in the company's
surplus profit and capital. The dividend is payable only when
preference dividends, including arrears, have been paid.

ICAEW 2019 Study Guide 23

 Partnership The relation which subsists between persons carrying on a business in
common with a view of profit.
Past consideration Something already done at the time that a contractual promise is made.
Penalty clause A term in a contract that fixes a specific sum to be payable to the injured
party in the event of breach of contract. The objective is to penalise the
party in breach rather than to recover actual losses.
Perpetual succession The company continues to exist despite the death, insolvency, or
insanity of any member or director, any change in membership or any
transfer of shares.
Poll Where shareholders vote on company resolutions and the number of
votes they may cast is related to the size of their shareholding.
Preference shares Company shares which entitle the holder to a fixed rate of dividend and
priority of repayment ahead of ordinary shareholders.
Pre-incorporation A contract purported to be made by a company or its agent before the
contract company has received its certificate of incorporation. An agent may be
made personally liable on such a contract which will be unenforceable
against the company.
Private company A company which may not offer shares to the public, and which has not
been registered as a public company.
Privity of contract A principle of contract law that states only parties to a contract may sue
on it.
Promoter Person who undertakes to form a company by making the appropriate
business preparations.
Proxy A person appointed to vote on company resolutions by the
shareholder.
Public company A company registered as such under the Companies Act. The principal
distinction between public and private companies is that only the
former may offer shares to the public.
Quasi-loan An agreement between two parties where one pays the other's debts
on the condition that the second party agrees to reimburse them at
some later date.
Quantum meruit As much as they have deserved. A restitutory award that may be
granted in cases of breach of contract to reflect the value of the work
done.
Quorum Minimum number required to be present for a valid meeting to take
place.
Ratification Occurs in agency law where the agent acts on behalf of the principal
before the agency agreement is created. The principal agrees to be
bound by those acts once the agency agreement is formed.
Re In the matter of. Seen in some case names.
Registered office A business address to which communications with a company may be
sent.
Registration Process by which a company comes into being, which involves the filing
of documents with the relevant authority and the issuance of a
certificate of registration.

24 Law ICAEW 2019

 Remoteness of Relationship between a wrongful act and the resulting damage which
damage determines whether or not compensation may be recovered. Different
principles apply in contract and in tort.
Repudiation A breach of contract that is caused by the party in breach rejecting or
renouncing the terms of the contract.
Sale of goods A contract whereby the seller transfers or agrees to transfer the
property in goods for a money consideration called the price.
Secretary (company) An officer of a company appointed to carry out general administrative
duties. Every public company must have a secretary.
Shadow director A person in accordance with whose instructions other directors are
accustomed to act.
Share A member's stake in a company's share capital
Sole trader A business vehicle that involves a single individual who contributes
capital to start the enterprise, runs it with or without employees, and
personally earns the profits or stands the losses of the venture.
Specific performance An equitable remedy in which the court orders the defendant to
perform their side of a contract.
Standard form A standard document prepared by many large organisations and
contract setting out the terms on which they contract with their customers.
Subsidiary company A company under the control of another company, its holding
company.
Third party A party that does not have a legal connection with a contract but who
might be affected by it.
Tort A wrongful (but not necessarily criminal) act by one person to another.
No contractual relationship is needed between the parties for a liability
to be created.
Unenforceable A contract that will not be enforced by the court in the event of its
contract breach.
Unlimited liability Members do not have limited liability and in the event of liquidation
members are required to contribute as much as needed to repay the
company's debt in full.
Void contract Not a contract at all. The parties are not bound by it and if they transfer
property under it they can sometimes recover their goods even from a
third party.
Voidable contract A contract which one party may avoid, that is, terminate at their option.
Property transferred before avoidance is usually irrecoverable from a third
party.
Whistleblowing Where an individual makes disclosures about an organisation that they are
employed by, usually related to illegal or unethical actions occurring.
Winding up A process by which a company ceases to exist, otherwise known as a
liquidation. May take the form of a compulsory winding up, a members'
voluntary winding up or a creditors' voluntary winding up.
Wrongful trading The term used where directors of an insolvent company knew or should
have known that there was no reasonable prospect that the company
could have avoided insolvency and did not take sufficient steps to
minimise the potential loss to the creditors.

ICAEW 2019 Study Guide 25

26 Law ICAEW 2019