DECEMBER 2001 STUDY GUIDE PROFESSIONAL EXAMINATION

Paper 2.2(ZWE) Corporate and Business Law (Zimbabwe)

Introduction

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

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: education@accaglobal.com Additional information can be accessed on the ACCA website at: www.accaglobal.com The Association of Chartered Certified Accountants June 2000 ISBN

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.

PAGE 2

Paper 2.2(ZWE) Corporate and Business Law (Zimbabwe)

AIM To develop knowledge and understanding of the general legal framework within which an accountant operates. To develop an awareness of and an ability to understand both common law and statute in relationship to specific legal areas of central importance to business. OBJECTIVES On completion of this paper students should be able to: analyse and evaluate situations from a legal perspective identify the essential elements of the Zimbabwean legal system including the main sources of law and explain its operation explain and demonstrate an ability to use the essential principles relating to the formation, content and remedies for the breach of contracts explain the rules of agency as they apply to sole traders, partnerships and companies describe the different types of company and explain the rules relating to the formation, financing, management, administration and regulation explain the law relating to employment relationships with particular regard to unfair labour practices, fundamental rights of employees. SYLLABUS CONTENT 1 The Zimbabwean Legal System This section provides an introduction to some key features of the Zimbabwean legal system and will facilitate understanding of the sources of law, how law is administered and how legal rules emerge in the legal system. a Court structure and the administration of justice b Sources of law c Case law and legislation; statutory instruments, statutory interpretation, customary law 4 Agency and Partnership This section will familiarise the student with those general rules of agency, which find specific application in relation to partnerships and companies. It also examines the legal rules governing the operation of partnerships. a Creation of agency b Types of agents In Part 3, Paper 3.2 Advanced Taxation, will require an ability to understand and apply tax law. Paper 3.6 Advanced Corporate Reporting will address the issue of corporate insolvency. 3 The Law of Sale Major types of sales, risk, rights and duties of buyer and seller, remedies for breach of contract of sale. Although all of the work done in other papers in Part 2 takes place within the legal framework, legal regulation is particularly relevant in Paper 2.1 Information Systems, Paper 2.3 Business Taxation (UK) and Paper 2.6 Audit and Internal Review. Questions in Paper 2.2 will not assume, or draw on, any knowledge from these papers. 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. 2 General principles of the Law of Contract This section deals with major features of the formation, content and discharge of a contract and will provide an understanding of the basic nature of contractual agreements. a Formation. Essentials of a valid contract, offer, acceptance, intention to create legal relations. b Contents: terms, exclusion clauses and their control c Contractual capacity d Factors Vitiating Enforceability of contracts, voidable and void abinitio contracts. e Breach of contract remedies for breach of contract. d Arbitration e Human rights.

PAGE 3

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

Corporate and Business Law (Zimbabwe)

c Principal and agent: reciprocal rights and duties d Relations between the agent and third parties e Termination of agency f The distinction between partnerships and other forms of business association g Internal regulation of Partnerships h Partnerships and outsiders. 5 The Company Form This section deals with the nature of companies; both the private company and the public limited company; in comparison to the sole trader and the partnership, co-operative and private business organisations. a The limited liability distinguished from partnership b The private company and public limited liability company c The meaning and consequences of separate legal personality The rule in Salomon v Salomon & Co and how it operates in Zimbabwe. 6 The Formation and Constitution of the Company This section examines the legal requirements controlling the setting up of the company. a The formalities involved in registering a company b Functions and Duties of the Registrar's office

c The constitutional documents of the company, memorandum and articles of association d The promoter functions and obligations e The contractual capacity of a company f Statutory books, records and returns.

9 Company meetings This section deals with the function and conduct of the company meeting. a Types of meetings: statutory, annual general meeting; and extraordinary general meetings b Types of resolutions: ordinary, special and written resolutions. 10 Majority Control and Minority Protection This section examines the way in which potential abuse of majority power may be prevented or remedied. a The rule in Foss v Harbottle and exceptions thereto, both statutory and under the common law b The rights, privileges and duties of members. 11 Judicial Management

7 Capital and Financing of Companies This section deals in outline with the capital and financing of companies, covering share and loan-capital. a Share capital: The various classes of shares b Loan capital: debentures and company charges c The prospectus d Capital maintenance. 8 Management and Administration of a Company This section takes an overview of the legal obligations of the management in relation to the administration of the company. The role of key personnel is identified and the rights and obligations they have, are explored. a Directors: appointment, termination of office and disqualification; duties and functions both statutory and under the common law b Company secretary: appointment; duties; powers c Companies' books of accounts d Auditors: appointment; removal e Insider dealing.

a Circumstances in which provisional and final judicial management is granted b Application for a judicial management order c Appointment of a judicial manager and his duties d Voidable and undue preferences e Termination of a Judicial Management order. 12 Arrangements and Reconstruction a Compromise arrangement and takeover bids b The role of the Stock Exchange and requirements for listing a Public Company on the Stock Exchange.

PAGE 4

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

Corporate and Business Law (Zimbabwe)

13 Winding-up of Companies a Voluntary winding up b Compulsory winding up (winding up by the Court) c The appointment of a liquidator, duties and grounds for his removal d Effects of winding up. Contributories Definition, preparation of lists of contributories, the A and B lists and liability of contributories.

EXCLUDED TOPICS The syllabus does not attempt to cover every aspect of the various subject areas it deals with. For example, Contract does not cover misrepresentation or frustration. KEY AREAS OF THE SYLLABUS Company law, as set out in sections 4-10 above, is central to the syllabus and it will provide a possible 50% of the total marks allocated in any particular paper. APPROACH TO EXAMINING THE

The Study Guide provides more detailed guidance on the syllabus. RECOMMENDED TEXT There are a number of sources from which you can obtain a series of materials written for the ACCA examinations. These are listed below: AT Foulks Lynch ACCA's official publisher Contact number: +44 (0)20 8831 9990. Website: www.foulkslynch.com ATC International Contact number: +44 (0)20 8943 1596. Website: www.atc-int.com BPP Contact number: +44 (0)20 8740 2211. Website: www.bpp.com The Financial Training Company Number of marks Contact number: +44 (0)20 7407 5000. Website: www.acca-ftc.com Candidates may also find the following texts useful: Nkala and Nyapadi Company Law in Zimbabwe ZEDCO Publishing House (1995) Christie, RH Business Law in Zimbabwe Juta and Company (1995) The Companies Act Chapter 24:03 The Labour Relations Act Chapter 28:01 The Insolvency Act Chapter 6:04

14 Insolvency This section will introduce students to the ways in which insolvent persons may be dealt with. a Voluntary surrender b Compulsory sequestration c Acts of Insolvency d Consequences of sequestration and the appointment of a Trustee e Voidable and Undue Preferences f Rehabilitation of the Insolvent Person. 15 Employment This section focuses on the major legislative and common law principles which govern employment relationships. a Fundamental rights of employees b Unfair labour practices c General conditions of employment d Employment councils and Boards and collective job action e The Labour Relations Tribunal.

SYLLABUS The examination is a three hour paper divided into two 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.

Section A: Choice of 6 from 8 questions (10 marks each) Section B: Choice of 2 from 4 questions (20 marks each) 40 100 ADDITIONAL INFORMATION Knowledge of new legislation will not be expected until at least six months after the last day of the month in which the Royal Assent (or similar procedure in other countries) is given, or six months after the specific provision comes into effect, which ever is the later. 60

PAGE 5

Corporate and Business Law (Zimbabwe)

The Zimbabwe Stock Exchange Act Chapter 24:18. Wider reading is also desirable, especially regular study of relevant articles in the Student Accountant.

STUDY GUIDE 1 ZIMBABWEAN LEGAL SYSTEM 1 Syllabus reference 1a Court structure and administration of justice understand how different types of cases are dealt with by different courts identify the major courts and their relationship of seniority explain how appeals go from one court to another. 2 ZIMBABWEAN LEGAL SYSTEM 2 Syllabus reference 1b explain what is meant by case law and precedent within the context of the hierarchy of the courts explain legislation and evaluate delegated legislation illustrate the rules and presumptions used by the courts in interpreting statutes. 3 ZIMBABWEAN LEGAL SYSTEM 3 Syllabus reference 1c, d Customary Law explain the system of dualism in relation to the position of customary law in the legal system Human Rights and the Constitution arbitration evaluate arbitration as an alternative to the court structure in business relationships.

4 GENERAL PRINCIPLES OF THE LAW OF CONTRACT 1 Syllabus reference 2a Formation analyse the nature of a simple contract distinguish the legal requirements for the creation of a contract explain the meaning of offer and distinguish it from invitations to treat explain the meaning and consequence of acceptance. 5 GENERAL PRINCIPLES OF THE LAW OF CONTRACT 2 Syllabus reference 2a Formation explain the doctrine of quasi mutual assent consider the doctrine of privity of contract distinguish the presumptions relating to intention to create legal relations. 6 GENERAL PRINCIPLES OF THE LAW OF CONTRACT 3 Syllabus reference 2b distinguish terms from mere representations define the various contractual terms explain the effect of exclusive clauses and evaluate their control.

PAGE 6

Corporate and Business Law (Zimbabwe)

7 GENERAL PRINCIPLES OF THE LAW OF CONTRACT 4 Syllabus reference 2c Breach of contract and remedies describe the procedure for registering companies, both public and private detail the statutory books, records and returns that companies must keep or make explain the controls over the names that companies may or must use. 16 COMPANY LAW 4 Syllabus reference 5b, c The constitution of the company detail the content and effect of the memorandum of association describe the contents of Table A articles of association analyse the effect of a company's constitutional documents explain how articles of association can be changed. 17 COMPANY LAW 5 Syllabus reference 6a Share Capital explain the different meanings of capital illustrate the difference between various classes of shares explain the procedure for altering class rights.

18 COMPANY LAW 6 Syllabus reference 6b Loan capital define the companies borrowing powers explain the meaning of debenture distinguish loan capital from share capital explain the concept of a company charge and distinguish between fixed and floating charges detail the need and the procedure for registering company charges.

21 COMPANY LAW 9 Syllabus reference 7a Directors 2 explain the duties that directors owe to their companies demonstrate an understanding of some of the ways in which the companies' legislation has attempted to control directors distinguish between fraudulent and wrongful trading insider dealing. 22 COMPANY LAW 10

19 COMPANY LAW 7 Syllabus reference 6c Capital maintenance and dividend law explain the doctrine of capital maintenance examine the effect of issuing shares at either discount or premium explain the rules governing the distribution of dividends in both private and public companies. 20 COMPANY LAW 8 Syllabus reference 7a Directors 1 explain the role of directors in the operation of a company detail the ways in which directors are appointed, can lose their office or be subject to a disqualification order distinguish between the powers of the board of directors, the managing director and individual directors to bind their company.

Syllabus reference 7b, c Other company officers detail the appointment procedure relating to, and the duties and powers of, a company secretary detail the appointment procedure relating to, and the duties and powers of, company auditors. 23 COMPANY LAW 11 Syllabus reference 8a, b Company meetings and resolutions distinguish between types of meetings: ordinary and extraordinary general meetings and class meetings explain the procedure for calling such meetings detail the procedure for conducting company meetings distinguish between types of resolutions: ordinary, special and written.

PAGE 7

Corporate and Business Law (Zimbabwe)

24 COMPANY LAW 12 Syllabus reference 9a, b, c Majority control and minority protection explain the normal rule of majority control as expressed in Foss v Harbottle consider the common law exceptions to Foss v Harbottle evaluate the just and equitable winding up procedure as a means of protecting minority rights discuss the statutory protection relating to unfairly prejudicial conduct under the companies legislation as an alternative to winding up. 25 COMPANY WINDING-UP 13 Syllabus reference 10a, b, c explain the meaning of an procedure involved in voluntary liquidation explain the meaning of and procedure involved in compulsory liquidation consider judicial management as an alternative to winding-up explain the circumstances in which provisional and final judicial management order are granted discuss the duties of a judicial manager and the termination of a judicial management order consider compromise arrangements, takeover bids and schemes of reconstruction

explain the requirements for the listing for the listing of a Public Company on the Zimbabwe Stock Exchange. 26 INSOLVENCY Syllabus reference 14 explain what is meant by voluntary surrender explain what is meant by compulsory sequestration discuss the various possibilities which constitute acts of insolvency explain the concept of voidable and undue preferences discuss the rehabilitation of an insolvent person. 27 EMPLOYMENT LAW 1 Syllabus reference 15a Contracts of service and for services distinguish between employees and the self employed explain why such a distinction is important explain the nature of the contract of employment and give examples of the main duties placed on the parties to such a contract. explain the nature of the employer's vacarious liability for delicts/torts committed by the employee.

28 EMPLOYMENT LAW 2 Syllabus reference 15b Dismissal and redundancy distinguish between wrongful and unfair dismissal including constructive dismissal detail the remedies available to employees who have been subject to unfair dismissal or redundancy discuss the concept of unfair labour practices discuss the powers and functions of the Labour relations Tribunal as a Labour Court.

PAGE 8