Post on 29-May-2020
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ICSA: The Governance Institute is the professional body for governance. With over 125 years’ experience, we work with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance. We support our members and students in 80 countries across the world, in organisations of all sizes and across all sectors of the economy, including large corporates, SMEs, the public sector and charities. To gain chartered status, you must pass ICSA’s qualifying programme or one of our Accredited Masters Programmes and have more than five years’ relevant work experience. Chartered professional status is a widely recognised mark of credibility and professional competence maintained through membership of ICSA. Developed by Kelly Padwick © ICSA 2018
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Contents
Key features 4
The ICSA qualifying programme 5
Module format 6
Qualification structure 7
Modules 9
Introducing the Business Environment 10
Introduction to Law 16
Principles of Company Compliance and Administration 28
Introduction to Finance and Accounting 37
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Key features The ICSA Foundation Programme:
is aimed at individuals wishing to achieve Chartered professional status with ICSA or those wishing to pursue roles/careers in company secretarial, governance, risk and compliance-related fields
is a Level 4 programme – set at first-year undergraduate level
contains four compulsory modules
is an open-entry programme, with no prior qualifications required, and is suitable for individuals who do not meet the eligibility criteria for Part One entry on to the ICSA qualifying programme (see the ICSA website for further information on entry requirements – www.icsa.org.uk)
is externally assessed – ICSA will set and mark the assessment
is assessed twice a year – in June and November
is graded at Pass (P), Merit (M) and Distinction (D) – students whose level of achievement is below
Pass will be classified as Fail A, Fail B, Fail C or Fail D, depending on the number of marks achieved.
Prior knowledge, skills and understanding You do not need to achieve any other qualifications before registering for the ICSA Foundation Programme. No prior knowledge, skills or understanding are necessary. There are no formal entry requirements and the qualifications are suitable for non-degree holders, although it is recommended to be working in a relevant occupation. Assessment The programme is externally assessed via one closed-book examination that will cover content from all the modules in this syllabus. The examination is set and marked by ICSA and the pass mark is 50%. See the Qualification structure section on page 7 for further information. The examination provides independent assessed evidence of learning. It also enables you to demonstrate the range of transferable skills you have developed throughout your programme of study by requiring you to apply your knowledge in unfamiliar contexts.
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The ICSA qualifying programme Becoming a member of the ICSA The path to becoming Chartered begins with the ICSA Foundation Programme. It is the first step on the path to a career as a governance professional or company secretary. The programme provides a broad introduction to businesses, how they are governed, maintained and financially managed, and the laws to which they must adhere. The knowledge and skills gained through this programme help to prepare you to meet the demands of Part One and Part Two of the ICSA qualifying programme – the next stages in the path to becoming Chartered. The diagram below demonstrates the path to Chartered status with ICSA.
Foundation Programme
Module 5
Risk
Management
Module 6 Development
of Strategy
Module 7 Boardroom
Dynamics
Part
Tw
o
(6+ years of professional experience)
(8+ years of professional experience)
Associate (ACIS)
Fellow (FCIS)
GradICSA
Module 2 Company
Compliance and
Administration
Module 4 Interpreting
Financial and Accounting
Information
Module 3
Company Law
Module 1 Governance
Choice of Corporate, Health
Service or Not-for-Profit Governance Part
On
e
Affiliated member
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Module format Module title The title describes the content of the module. Level All the modules in this syllabus document are set at Level 4, which is equivalent to first-year undergraduate level in the UK. Module type All of the modules in this syllabus document are compulsory. Total hours study time This is the total number of hours that students are expected to take to study the module. This time incorporates self-study with the study text, tuition (if taken), wider reading and reflection on work experiences, practice assessment tasks and exam preparation. Introduction The introduction provides a snapshot of the module and summarises the learning outcomes. Learning outcomes The learning outcomes of a module set out what a student is expected to know, understand or be able to do as the result of a process of learning. Module content This section identifies the breadth of knowledge, skills and understanding needed to achieve each of the learning outcomes through a programme of study. Topic Each learning outcome is further broken down into a series of themes that should be covered in the programme of study for the module. Exemplification The content of this section provides the range of subject material to be studied under each topic heading.
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Qualification structure
ICSA Foundation Programme This qualification comprises four modules and is assessed via one 3-hour (with 15 minutes’ reading time) closed-book examination which is set and marked by ICSA. Students must pass this examination to be awarded the qualification. The pass mark is 50%.
Module
number
Module title Total hours
study time
F1 Introducing the Business Environment 20
F2 Introduction to Law 70
F3 Principles of Compliance and Company Administration 50
F4 Introduction to Finance and Accounting 60
Total hours 200
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Modules
MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT
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Module F1
Introducing the Business Environment Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 20
Introduction This module provides an overview of how organisations are structured and managed, and how the external environment affects business activities and influences decision making. The module will explore how organisations are categorised according to the economic sector they operate in and the size and scope of the organisation. It will then look at some of the different types of legal ownership structures available to organisations, the objectives that might be pursued, and how organisations structure and manage the workforce to help them achieve their objectives. The module will then examine the wider issues organisations need to consider when trying to achieve their objectives. This includes the influence of stakeholders who have an interest in the activities of the organisations and how to analyse the potential impact of external factors that may affect efforts to achieve organisational objectives. Learning outcomes After successful completion of this module you should:
1 Know about types of organisations and their objectives 2 Understand how organisations are structured to achieve their objectives 3 Know the stakeholders who influence and affect organisations and their activities 4 Be able to analyse the external factors that may impact achievement of organisational objectives.
MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT
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Module content
Section A: Organisations and their objectives
30% – 6 learning hours
LO.1: Know about types of organisations and their objectives
Topic Exemplification
Categorising organisations Sectors of business activity:
primary (extractive industries) – farming, fishing,
mining, forestry
secondary (manufacturing goods from raw materials) –
engineering, construction
tertiary (providing services) – banks, retail businesses,
transport, leisure
quaternary (the knowledge economy) – intellectual
services linked to technological innovation, e.g.
scientific research and information technology
quinary – high-level decision makers (e.g. top
government officials) and domestic activities (e.g.
childcare and housekeeping)
Size and scope of organisations:
defining size by number of employees and turnover
size categories – micro, small, medium, large
differences in criteria for categorising organisational
size
Legal/ownership structures Definition of legal/ownership structures and owners’ liability
for debt in private, public and voluntary sector
organisations
Private sector organisations:
sole trader
partnerships:
− ‘ordinary’ business partnership
− limited partnership
− limited liability partnership
limited companies:
− limited by shares – public and private
− limited by guarantee
parent and subsidiary
unincorporated association
co-operatives
Public sector organisations:
central and local government
public corporations
municipal enterprises
Voluntary organisations, e.g. charities, foundations,
community groups, recreational sports clubs
MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT
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Topic Exemplification
Organisational objectives Types of organisational objectives:
supply of products or services
private sector organisational objectives:
− breakeven
− survival
− profit maximisation
− growth
public sector organisational objectives:
− service provision
− reducing costs
− value for money
− meeting charitable purposes
voluntary sector organisational objectives:
− helping a particular cause
− to benefit and enrich society
− meeting charitable purposes
Difficulties organisations encounter when pursuing and
attempting to achieve objectives:
sector differences
influence of legal structure/ownership type
influence of stakeholder goals
Creating vision, mission and core values statements
Potential uses of vision and mission statements
How organisational objectives link to vision, mission and
core values
MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT
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Section B: Structuring and managing organisations
40% – 8 learning hours
LO.2: Understand how organisations are structured to achieve their objectives
Topic Exemplification
Organisational structures The purpose of organisation charts – to illustrate:
how work roles are delegated, controlled and
co-ordinated
how information and work flows through the
organisation
Structuring the workforce:
layers of management – tall versus flat hierarchies
authority for decision making:
− centralised versus decentralised structures
− advantages and disadvantages of centralised and
decentralised structures
Creating organisational structures to meet business needs:
functional structure
divisional structure
matrix structure
Advantages and disadvantages of different organisational
structures
How business objectives may determine organisational
structure
How organisational structure impacts on decision making:
where decision-making powers reside within different
organisational structures
role of structure on strategic planning
how structure helps achieve objectives
Managing an organisation The board of directors – roles and responsibilities:
chair
chief executive officer (CEO)
executive directors
non-executive directors (NEDs)
senior independent director (SID)
The importance of separating the role of chair and CEO
Board size and composition
Board structures – unitary versus two-tier structures
MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT
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Section C: The wider organisational context
30% – 6 learning hours
LO.3: Know the stakeholders who influence and affect organisations and their activities
LO.4: Be able to analyse the external factors that may impact achievement of organisational objectives
Topic Exemplification
Stakeholders Definition and role of stakeholders
Definition of internal and external stakeholders
Internal stakeholders for different types of organisation,
including:
shareholders
workers/employees
External stakeholders for different types of organisation,
including:
financial institutions – banks and mortgage lenders
customers
suppliers
creditors
debtors
government
local and national communities
trade unions
pressure groups
Definition of primary and secondary stakeholders
Influence of stakeholders over business activities and
decision making
Stakeholder interests and conflicts
How stakeholder theory supports arguments in favour of
corporate social responsibility (CSR)
Analysing the business environment
Definition of the business environment
Definition of the internal and external environment for
organisations
Definition of situational analysis
Benefits of effective situational analysis
Consequences to organisations of not understanding the
external environment
Definition and purpose of different types of situational
analysis:
PESTEL analysis – political, economic, sociocultural,
technological, environmental and legal factors affecting
organisations
LoNGPESTEL analysis – PESTEL factors examined
on a local, national and global level
SWOT analysis – strengths, weaknesses, opportunities
and threats
MODULE F1 – INTRODUCING THE BUSINESS ENVIRONMENT
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Topic Exemplification
Use of PESTEL analysis to monitor and forecast external
influences on organisations:
political – government regulations and legal issues
affecting organisational activities, e.g. tax policy,
copyright and property law enforcement, political
stability, trade regulations, employment laws
economic – factors that influence the economy, e.g.
taxes, inflation, stock market trends, wage costs
sociocultural – consumer behaviour, e.g. lifestyles,
demographic change, buying trends
technological – the effect of levels and advancements
in technology on operational activities, e.g. mobile
technology, new production technology
environmental – issues such as climate change,
weather patterns and ecological-friendliness of
products
legal – factors affecting how organisations can operate,
e.g. obtaining a patent, consumer protection, data
protection, health and safety
Uses of LoNGPESTEL analysis
Use of SWOT analysis as a framework for:
reviewing organisational strategy, direction and
position
identifying strengths and weaknesses to maximise
opportunities and minimise threats
Benefits and limitations of different types of situational
analysis
MODULE F2 – INTRODUCTION TO LAW
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Module F2
Introduction to Law Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 70
Introduction This module introduces business law, including its purposes, administration and sources. Understanding the law is vital but, in order to fully understand the law, it is important to understand where laws come from, the different types of laws that exist (and how they interrelate), and how the law is administered and applied. It is also important to be able to identify which areas of the law are most applicable to businesses. Learning outcomes After successful completion of this module you should: 1 Understand the purposes of business law and how the law is classified 2 Understand how the law is administered and applied 3 Understand the sources of law and how law is created 4 Understand the UK’s company law and corporate governance frameworks 5 Know which areas of law principally impact upon businesses.
MODULE F2 – INTRODUCTION TO LAW
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Module content
Section A: Purposes and classification of the law
10% – 7 learning hours
LO.1: Understand the purposes of business law and how the law is classified
Topic Exemplification
The purposes of business law The principal purposes of business law:
accountability – ensuring businesses are held to
account for any unlawful acts and omissions
transparency:
− the importance of, and need for, businesses to be
transparent when disclosing certain information
− the benefits of transparency
flexibility and autonomy:
− reasons why business laws should be flexible
− ways in which the law provides flexibility for
businesses, including creating a company’s articles
of association
efficiency:
− the importance of not imposing laws that are costly
for businesses to comply with
− the concept of the ‘comply or explain’ approach
adopted by the UK Corporate Governance Code
predictability and certainty:
− reasons why business law should be predictable
and certain
− potential consequences to business of laws that
are not predictable and certain
the importance of ensuring those who act on behalf of
the business (e.g. directors) act in the interests of the
business
dispute resolution, including the three systems of
dispute resolution:
− legal proceedings in a court
− tribunal
− Alternative Dispute Resolution (ADR)
preventing disaster and failure:
− how business law attempts to help prevent
business failure and disaster
− how business law can help when business failure
or disaster cannot be avoided
Issues that can arise when there is a conflict of purposes
MODULE F2 – INTRODUCTION TO LAW
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Topic Exemplification
Classifying the law Definition of legal subjects, e.g. company law, commercial
law, employment law
Principal ways the law can be classified and the differences
between them:
criminal law and civil law
common law and civil law
common law and statute law
common law and equity
public law and private law
MODULE F2 – INTRODUCTION TO LAW
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Section B: Administration of the law
30% – 21 learning hours
LO.2: Understand how the law is administered and applied
Topic Exemplification
The courts system Differences between courts with a first instance jurisdiction
and those with an appellate jurisdiction
Types of court, their composition, purposes and
relationships to other types of court:
magistrates’ courts:
− criminal jurisdiction
− civil jurisdiction
− the three categories of criminal offences
the County Court:
− civil jurisdiction
− the track system – small claims track, fast track,
multi-track
the Crown Court – trial by jury
the High Court of Justice:
− the Chancery Division
− the Queen’s Bench Division
− jury trial in civil cases
the Court of Appeal:
− the Civil Division
− the Criminal Division
the Supreme Court of the United Kingdom
the Judicial Committee of the Privy Council
Tribunals The development of the tribunal system
Typical composition of tribunal panels
Reasons why claimants choose a tribunal over taking their
case to Court
The Tribunals, Courts and Enforcement Act 2007:
First-tier Tribunal
Upper Tribunal
specialist tribunals, e.g. Employment Tribunal and
Employment Appeal Tribunal
Alternative Dispute Resolution (ADR)
The development of ADR in relation to businesses
The advantages of ADR:
less costly than court cases or tribunal hearings
can help to maintain business relationships
avoids publicity
The differences between arbitration, mediation and
conciliation
MODULE F2 – INTRODUCTION TO LAW
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Topic Exemplification
The judiciary, the law officers, and the legal profession
The judiciary:
specific judicial roles, including:
− Lord Chief Justice
− President of the Supreme Court
− Master of the Rolls
− Heads of Division
the judicial hierarchy
Government appointees involved in the administration of
the law:
the law officers, including the Attorney General and the
Solicitor General
the Director of Public Prosecutions
The legal profession – roles and responsibilities:
solicitors
barristers
legal executives, including the impact of the Legal
Services Act 2007
paralegals
MODULE F2 – INTRODUCTION TO LAW
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Section C: Sources of law
30% – 21 learning hours
LO.3: Understand the sources of law and how law is created
Topic Exemplification
Legislation Types of legislation – differences between different types of
legislation and how they are used effectively:
Acts of Parliament
subordinate legislation
Creating and passing Acts of Parliament:
sources of legislative proposals
bills:
− public bills
− private bills
− hybrid bills
the legislative process, including the role of:
− the House of Commons
− the House of Lords
− the monarch
Statutory interpretation – interpreting and applying
legislation:
aids to interpretation:
− presumptions
− intrinsic aids
− extrinsic aids
the canons of interpretation – rules applied by a court
to aid its interpretation of a written document, such as a
statute or contract:
− the literal rule
− the golden rule
− the mischief rule and the purposive approach
Case law The doctrine of precedent and how it is applied by courts,
including:
binding precedent
persuasive authority
no precedent
The court hierarchy – the extent to which different courts
can establish binding precedent:
the magistrates’ courts and the County Court
the Crown Court
the High Court
the Divisional Courts
the Court of Appeal
MODULE F2 – INTRODUCTION TO LAW
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Topic Exemplification
the Supreme Court and House of Lords
the Judicial Committee of the Privy Council
Establishing the aspects of a case that are binding:
stare decisis
ratio decidendi
The law-making role of the judiciary and how it exercises
that role
European Union (EU) law The establishment of the EU
The EU institutions – role, composition and key functions:
the European Council
the European Parliament
the Council of the European Union
the European Commission
the Court of Justice of the European Union:
− the Court of Justice
− the General Court
EU legislation:
the concepts of direct applicability and direct effect
types of EU legislation:
− treaty provisions
− regulations
− directives
− decisions
− recommendations and opinions
The supremacy of EU law
The impact of the UK’s withdrawal from the EU
Human rights law ‘Human’ rights and business
The European Convention on Human Rights (ECHR)
The European Court of Human Rights – role, composition
and functions
The Human Rights Act 1998:
enforcing the ECHR in UK courts
the ECHR and statutory interpretation
declarations of incompatibility
The future of human rights protection in the UK
MODULE F2 – INTRODUCTION TO LAW
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Section D: Company law and governance framework
20% – 14 learning hours
LO.4: Understand the UK’s company law and corporate governance frameworks
Topic Exemplification
Sources of company law Legislation:
the Companies Act 2006
the importance and influence of the Companies Act on
company law
other notable Acts of Parliament, including:
− Stock Transfer Act 1963
− Companies Act 1985
− Insolvency Act 1986
− Company Directors Disqualification Act 1986
− Criminal Justice Act 1993
− Financial Services and Markets Act 2000 (FSMA
2000)
− Corporate Manslaughter and Corporate Homicide
Act 2007
subordinate legislation – its significance and principal
functions
the role of the Department of Business, Energy and
Industrial Strategy (BEIS)
rules with legislative backing
Case law – reasons why case law is an important source of
company law
The constitution of the company – use and benefits
Contract
EU law and its impact on the UK company law system:
right of establishment
the harmonisation programme
the UK’s withdrawal from the EU
Human rights laws as a source of company law
Sources of governance recommendations
Definition of corporate governance
Corporate governance codes and their purposes:
the impact of the Cadbury Code (1992) and the
Combined Code
the UK Corporate Governance Code
the UK Stewardship Code
the concept of ‘comply or explain’
corporate governance and private companies
the impact of the Corporate Governance Review
MODULE F2 – INTRODUCTION TO LAW
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Topic Exemplification
The influence of different reports on the content of codes of
governance, including:
the Greenbury Report (1995) on directors’
remuneration
the Turnbull Report (1999) on internal control
the Smith Report (2003) on audit committees
the Higgs Report (2003) on the role and effectiveness
of non-executive directors
the Walker Review (2009) on the governance of UK
banks during the financial crisis
Lord Davies’ Women on Boards reports (2011–16) on
gender diversity in the boardroom
the Parker Review (2017) into ethnic diversity in the
boardroom
MODULE F2 – INTRODUCTION TO LAW
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Section E: Law and business
10% – 7 learning hours
LO.5: Know which areas of law principally impact upon businesses
Topic Exemplification
Contract law The advantages of contracts for business
How contract law helps to regulate commercial and
consumer dealings undertaken by businesses
The law of torts Types of torts applicable to businesses, including:
negligence
wrongful interference with goods
occupiers’ liability
nuisance
defamation
unlawful interference with contract, trade or business
The doctrine of vicarious liability
interpreting the law of torts, e.g. the Consumer Protection
Act 1987, the Defamation Act 2013
Employment law Identifying key areas covered by employment law, including:
employment rights provided to employees and workers
health and safety in the workplace
the prevention of discrimination in the workplace
providing remedies to those who are unfairly or
wrongfully dismissed
rights provided to employees following a business
transfer
rights relating to collective action, e.g. strikes
Key legislation, including:
Employment Rights Act 1996
National Minimum Wage Act 1998
Commercial law The role of commercial law in regulating and facilitating the
commercial dealings of businesses
Key commercial law topics, including:
domestic sale of goods
international sale of goods
the law of agency
Consumer law The importance to businesses of adhering to consumer law
The principal aim of consumer law and ways in which it can
help protect consumers
Key legislation, e.g. Consumer Rights Act 2015, Consumer
Credit Act 1974
The role of independent regulators, e.g. the Advertising
Standards Authority
MODULE F2 – INTRODUCTION TO LAW
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Topic Exemplification
Environmental law The purpose of environmental law
How environmental law can affect business operations
Key environmental law topics, including:
regulating activities that can affect air and water quality
measures designed to combat climate change
requiring businesses that engage in certain activities to
obtain an environmental permit
rules regarding the disposal of waste
the decontamination of contaminated land
conservation of plants, wildlife and habitats
The impact of international law on protecting the
environment, including the United Nations Framework
Convention on Climate Change
Key legislation, including:
Wildlife and Countryside Act 1981
Environmental Protection Act 1990
Climate Change Act 2008
Intellectual property law Definition of ‘intellectual property’ (IP)
Reasons why businesses may want to protect their IP
Ways in which IP law can help businesses protect their IP,
including:
patents
copyright
design rights
trade marks
Key legislation, including:
Patents Act 1977
Trade Marks Act 1994
Cyber security and data protection
Common forms of cyber attack and their impact, including:
fraudulent emails
infecting computer systems with viruses and malware
ransomware
denial of service attacks
National Cyber Security Centre advice on preventing cyber
attacks
Key legislation and developments, including:
EU General Data Protection Regulation (GDPR)
Data Protection Act 2018
the Directive on Security of Network and Information
Systems
MODULE F2 – INTRODUCTION TO LAW
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Topic Exemplification
Competition law The benefits of competition amongst businesses
The impact of monopolies on other businesses
The purpose of competition law
Key competition law topics, including:
prohibiting businesses from engaging in activity that
can prevent, restrict or distort competition
preventing businesses from abusing their dominant
position in the marketplace
prohibiting cartel activity
assessing the impact of proposed mergers or
takeovers on competition in the marketplace
empowering certain bodies to investigate competition
concerns in the marketplace and impose solutions
Key legislation, including:
Competition Act 1998
Enterprise Act 2002
Role and responsibilities of the Competition and Markets
Authority (CMA)
MODULE F3 – PRINCIPLES OF COMPANY COMPLIANCE AND ADMINISTRATION
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Module F3
Principles of Company Compliance and Administration Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 50
Introduction The aim of this module is to understand the historical origins of modern company law and introduce the legal process that has to be followed to create a corporate entity or company (known as incorporation). It also covers the administration side of incorporation and the obligation for companies to be transparent when providing information about their activities and financial status. The module examines different types of trading structures available for businesses and, in particular, the different types of company available to be incorporated under the Companies Act 2006. It then covers the organisational structure of companies, including the separation of ownership and management and the interaction of the authority, rights, duties, responsibilities and liabilities attached to share ownership or appointment as a company director. Finally, the module explores the routine compliance obligations placed on companies, directors and shareholders, many of which are delegated to the company secretary or governance professional. Learning outcomes After successful completion of this module you should: 1 Understand the different legal structures available for companies 2 Know how companies are incorporated 3 Understand the routine compliance and governance obligations placed on companies 4 Understand the ownership and management structures and the decision-making processes for
shareholders and directors.
MODULE F3 – PRINCIPLES OF COMPANY COMPLIANCE AND ADMINISTRATION
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Module content
Section A: How companies are structured
35% – 17.5 learning hours
LO.1: Understand the different legal structures available for companies
LO.2: Know how companies are incorporated
Topic Exemplification
Historical background Limited liability and separate legal personality:
historical background
the impact of key legislation, including:
− Joint Stock Companies Act 1844 (leading to the
Companies Act 2006)
− Limited Liability Act 1855
comparing the UK unitary board model to international
models, e.g. Germany and Japan
Company structure Types of company that can be incorporated under the
Companies Act 2006, including:
private company limited by shares
public company limited by shares
private company limited by guarantee
private unlimited company, with or without shares
Registered address:
requirements for a registered office in country of
registration
use of Single Alternative Inspection Location (SAIL)
address
legal requirements for stationery
public reporting and accountability – statutory accounts
and reports
Ownership:
members and/or shareholders
definition of a share
share allotments, including:
− authority to issue new shares
− the importance of the Articles of Association and
Model Articles
pre-emption rights
transfers and transmission of shares, including:
− stamping
− the role of the Alternative Investment Market (AIM)
of the London Stock Exchange
MODULE F3 – PRINCIPLES OF COMPANY COMPLIANCE AND ADMINISTRATION
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Topic Exemplification
Managing the company The role of directors in managing the company, including:
appointment and cessation of office, including:
− incorporation document IN01
− requirement for at least one natural person to be
director of a company
− influence of the Articles of Association
− circumstances in which a corporate director can be
appointed
− how rules for appointment of directors and
cessation of office vary according to company type
authority, including:
− general restrictions in the Articles of Association
and how these can be varied, waived or cancelled
by special resolution
− other restrictions, including those in commercial
agreements and director service contracts
directors’ duties and responsibilities according to the
Companies Act 2006:
− to act within their powers (s. 171)
− to promote the success of the company (s. 172)
− to exercise independent judgement (s. 173)
− to exercise reasonable care, skill and diligence
(s. 174)
− to avoid conflicts of interest (s. 175)
− to not accept benefits from third parties (s. 176)
− to declare interests in any proposed transaction or
arrangement (s. 177)
accountability and personal liability of directors
Company secretary:
general duties and responsibilities
role and responsibilities in relation to:
− the board
− the company
− the members
Persons with Significant Control (PSC):
purpose of the PSC register
when to notify the Registrar of Companies of changes
impact of Market Abuse Regulations (MAR)
MODULE F3 – PRINCIPLES OF COMPANY COMPLIANCE AND ADMINISTRATION
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Topic Exemplification
Incorporation process Key questions/criteria to consider when choosing an
appropriate corporate vehicle for a company
Naming a company:
name availability
restrictions and requirements according to:
− the Company, Limited Liability Partnership and
Business Names (Sensitive Words and
Expressions) Regulations 2014
− the Company, Limited Liability Partnership and
Business (Names and Trading Disclosures)
Regulations 2015
Company incorporation process (also known as formation
or registration process), including:
documentation required, including Companies House
form IN01, Memorandum of Association and Articles of
Association
incorporation by third-party registration agents such as
lawyers or accountants
contents of a certificate of incorporation
when trading activities can commence for different
types of company
Share capital structures Prescribed particulars attached to shares, including:
rights to vote
rights to profit
rights to capital
rights to manage
Different types of shares and the rights attached to them:
ordinary
preference
redeemable
Advantages and disadvantages of issuing different types of
share
Protection for existing shareholders in relation to:
additional share allotments, including pre-emption
provisions
pre-emption rights on transfers
tag along/drag along rights
Share administration:
updating the register of members
share transfers and transmissions
issuing a replacement share certificate
death of a member
communicating with members
MODULE F3 – PRINCIPLES OF COMPANY COMPLIANCE AND ADMINISTRATION
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Topic Exemplification
Constitutional documents Memorandum of Association – purpose and typical
contents
Articles of Association – format and typical topics covered,
including:
share capital
directors
meetings
communication
Shareholders and investment agreements – purpose and
typical contents
Ongoing obligations Meetings:
types of meeting, their structure and content, including:
− directors’ meetings
− members’ meetings
− class meetings
key terms, including:
− notice
− quorum
− resolutions – ordinary and special
− proxy voting
Filing requirements, including:
Companies House:
− annual report and accounts
− confirmation statement
− ad hoc filings, e.g. changes to the Articles,
commencement of liquidation
HM Revenue and Customs (HMRC):
− annual filings – corporation tax
− ad hoc filings, e.g. VAT, PAYE, stamp duty
listed and traded companies
general disclosures
insurance
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Section B: Records management, filing requirements and document retention
30% – 15 learning hours
LO.3: Understand the routine compliance and governance obligations placed on companies
Topic Exemplification
Statutory registers Contents and purpose of main statutory registers that
companies must keep as required by Companies House,
including:
register of directors
register of directors’ usual residential addresses
register of secretaries
Persons with Significant Control (PSC) register
register of members
register of replies to disclosure requests
Contents and purpose of other statutory registers and
books companies are required to keep, including:
register of transfers
register of allotments
minute books
Obligation to maintain statutory registers:
in house
use of the central registry at Companies House
use of third-party service providers
Where the registers must be kept
Format of the statutory registers
Updating the statutory registers
Inspection of statutory registers and who can request
copies, including:
the registers and documents that must be available for
inspection
when registers and documents for public and private
companies must be available for inspection
Fees in respect of inspection of registers by non-members
Fees for provision of copies of entries in registers and
copies of reports
Companies House Reasons why companies are required to file documents
with Companies House
Duty to notify any changes to the Registrar of Companies
Regular filing requirements, including:
annual report and accounts:
− financial statements – statement of financial
position (balance sheet) and statement of
comprehensive income (profit and loss)
− directors’ report – matters to be covered within the
report
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Topic Exemplification
− strategic report – matters to be covered within the
report
confirmation statements – form CS01
changes in PSC information – forms PSC01–PSC09
appointment of new directors and changes in officers –
forms AP01–AP04, CH01–CH04, TM01 and TM02
change of registered office – form AD01
change of accounting reference date – form AA01
changes to share capital – forms SH01–SH19
changes to constitution – copy of resolution, forms
CC01–CC06 and NE01–NE06
mortgages and charges – forms MR01–MR10
liquidation/administration/receivership – forms RM01,
RM02 and LQ01
presenter information and fees
Format of filings:
hard copy
electronic filing
web filing
software filing
electronic versus paper filing:
− advantages of electronic filing over paper-based
filing
− pros and cons of paper-only filing, e.g. different
fees, uncertainty of whether a document has
arrived on time
− documents that cannot be filed electronically
Period allowed for notification of different types of changes
Penalties for late submissions
Consequences for failure to file documents, including:
late filings
no filings
Company identification Legal requirements for:
stationery (including websites)
offices
websites
business names
Data protection considerations Suppression of individuals’ residential address data
Data protection registration regime
Retention of documents – how the period of retention
depends upon the nature of the document
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Section C: Meetings
35% – 17.5 learning hours
LO.4: Understand the ownership and management structures and the decision-making processes for shareholders
and directors
Topic Exemplification
Introducing meetings What a meeting is, including the common-law definition of
a meeting – a valid meeting normally consists of people
who can both see and hear each other
Purpose of different meetings
Limits on authority
Types of meeting
Reaching decisions without a meeting
Shareholder requisitions:
meeting
resolutions
statements
Members’ meetings Types and purpose of meetings:
general
annual
class
court
Types of resolution:
ordinary
special
Notice of meetings:
convening
content
notice periods for different types of company
special notice
Proxies:
right to appoint
appointment process
revocation
Quorum requirements for different types of company and
meetings
Attendance by non-members
Role and responsibilities of the chair
Voting:
show of hands
poll
Written resolutions of members
Unanimity rule
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Topic Exemplification
Communicating with members:
paper communications
electronic communications
use of website
Directors’ meetings Types of meeting, their purpose and frequency:
management meetings
board meetings
Convening – who has the authority to convene directors’
meetings
Notice – format and content
Quorum requirements
Conflicts of interest
Attendance by non-directors
Chairing board meetings – role and responsibilities
How to make meetings effective, including:
appropriate documentation and information
ensuring the board and/or participants have a clear
understanding of their role
allowing sufficient time for debate and challenge
allowing appropriate time for agenda items
meeting etiquette, e.g. listening to others’ contributions,
not checking emails whilst others are talking, not
dominating the debate
managing hygiene factors, e.g. meeting length, number
of breaks, location
Minutes:
legal requirement to take minutes
purpose, e.g. to record decisions and actions
good practice
the importance of accurate minute taking
The role of committees, e.g. audit committee,
remuneration committee, nominations committee,
operations committee
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Module F4
Introduction to Finance and Accounting Level: 4 Module type: Mandatory – Foundation Programme Total hours study time: 60
Introduction This module introduces the components of financial documentation and the principles of financial decision making. It provides an overview of basic accounting terms and concepts and examines the importance of financial reporting. The module then covers how financial statements and reports can be analysed to help inform the decision-making activities of both internal and external stakeholders, such as management and investors. Students are not expected to memorise complicated formulae and a formulae sheet will be provided in the exam. Learning outcomes After successful completion of this module you should: 1 Know about costs, revenue and profit 2 Understand principles of accounting and financial reporting 3 Understand principles of management accounting 4 Understand principles of financial decision making and the impact of financial decisions on
businesses.
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Module content
Section A: Revenue, costs and profit
25% – 15 learning hours
LO.1: Know about costs, revenue and profit
Topic Exemplification
Revenue Definition of revenue
Definition of separate/business entity concept
Alternative terms for revenue, including:
turnover
sales/net sales
income/gross income
How businesses generate revenue – sources of revenue:
sales of goods or services
interest income/receivable
royalties
other income, including income from:
− the sale of an asset
− the sale of a business
− a change in value of property or land
− one-off items
Costs and expenditure Definition of costs and expenditure
Differences between expenditure, expenses and costs
Differences between fixed and variable costs, direct and
indirect costs, total costs
How income and expenses appear on a statement of profit
or loss
Cost of sales/cost of goods sold (COGS), including:
raw materials
inventory/stock
work(s) in progress
Selling and distribution costs
Administrative expenses/costs
Finance costs, including:
interest expense
bank charges
other borrowing/financing charges or fees
Start-up costs:
definition and types, including:
− rent of premises
− business insurance
− staff recruitment fees
− employee uniforms, if needed
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Topic Exemplification
− initial stock or materials
− fixtures and fittings, e.g. lights, office furniture
− legal and accountancy advice
− financing costs
− marketing costs for launch of the business
Operating (running) costs:
definition
types of fixed costs, including:
− rent
− utilities
− business insurance
types of variable costs, including:
− raw materials
− staff costs
− distribution costs
definition of semi-variable costs
types of direct costs, including:
− raw materials
− staff costs relating directly to the production of
goods or services sold
types of indirect costs, including:
− depreciation and amortisation
− administrative expenses
Total costs:
total fixed cost and total variable cost
average fixed cost and average variable cost
marginal cost
calculating total costs
Profit and loss Definition of profit and loss
How to calculate profit
Profit and loss metrics – how businesses measure profit
and loss, including calculating:
gross profit
operating profit and EBIT (earnings before interest and
tax – this is usually the same as operating profit)
net profit
EBITDA (earnings before interest, tax, depreciation
and amortisation)
profit margins, including:
− gross profit margin
− operating margin
− net profit margin
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Section B: Financial accounting and management
40% – 24 learning hours
LO.2: Understand principles of accounting and financial reporting
Topic Exemplification
The purpose of financial reporting
Reasons why financial reporting is governed by local and
international standards
Objectives of financial reporting, including International
Financial Reporting Standards (IFRS) definition
Types of financial reporting standards and their purposes,
including:
Generally Accepted Accounting Practice (GAAP):
− variations between countries, e.g. UK GAAP versus
US GAAP
− Financial Reporting Standard for Smaller Entities
(FRSSE) in the UK replaced by FRS 105 (Financial
Reporting Standard for Micro-Entities Regime) or
Section 1A of FRS 102 (The Financial Reporting
Standard)
IFRS for listed companies
Qualitative characteristics of financial reporting:
fundamental characteristics:
− relevance
− materiality
− faithful representation
enhancing characteristics:
− understandability
− comparability
− verifiability
− timeliness
Components of financial statements
The concept of ‘going concern’
Recording financial data:
ledgers and ledger accounting:
− nominal (or general) ledger
− sales ledger
− purchase ledger
books of prime entry:
− sales day book
− purchases day book
− cash book
− petty cash book
− journal
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Topic Exemplification
double-entry bookkeeping:
− understanding the accounting equation and how to
apply it
trial balance:
− how to prepare a trial balance at the end of an
accounting period (e.g. a year-end) to assist in the
preparation of financial statements
− year-end accounting adjustments in the journal
Financial statements and their purposes:
statement of profit or loss and other comprehensive
income:
− format – how a statement of profit or loss would
appear in a company’s accounts
− the importance of comparing statements of profit or
loss from different accounting periods
statement of financial position (balance sheet):
− assets – fixed assets (property, plant and
equipment, goodwill), current assets
(debtors/receivables, inventory/stock, cash and
cash equivalents, prepayments)
− definition of net assets
− liabilities – current liabilities (trade
creditors/accounts payable, other creditors,
accruals, short-term loans, taxes payable) and long-
term liabilities (e.g. loans)
− shareholders’ equity
statement of cash flows (cash flow statement):
− reconciliation of operating profit to cash flow from
operations
− operating activities
− investing activities
− financing activities
statement of income and retained earnings (UK GAAP):
− retained earnings/profit and loss account
− equity dividends paid (distributions)
Students will not be required to prepare full financial
statements as part of their assessment.
Analysing and evaluating financial statements
Tracking performance measures across financial
statements using:
horizontal analysis
vertical analysis
ratio analysis, including:
− return on assets
− return on equity
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Topic Exemplification
How different types of financial statements are used to
analyse trends and calculate ratios for analysis:
statement of comprehensive income (profit and loss),
including:
− profit margins
− interest cover
− break-even point
statement of financial position (balance sheet),
including:
− working capital (current assets minus current
liabilities) and its significance
− using the working capital cycle to evaluate company
performance
− current ratio
− quick (acid test) ratio
− gearing (debt–equity ratio)
− debtors’ turnover/debtor days
− creditors’ turnover/creditor days
− inventory turnover/stock turnover
Advantages and disadvantages of different types of ratio
analysis
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Section C: Management accounting
25% – 15 learning hours
LO.3: Understand principles of management accounting
Topic Exemplification
Understanding management accounting
Definition of management accounting and management
accounting systems
The purpose of management accounting
The importance of integrating management systems within
organisations
The distinction between management accounting and
financial accounting (looking forward versus looking
backwards)
The importance of presenting financial information for users
that is:
reliable
up-to-date
accurate
understandable
Primary users of financial information:
management accounts – primarily internal stakeholders
financial accounts – external stakeholders
Management accounting systems
Cost accounting, including:
standard cost accounting
activity-based costing (ABC)
life cycle costing
target costing
Performance evaluation and analysis, including:
key performance indicators (KPIs)
balanced scorecard
Planning and forecasting, including:
cost allocation
financial modelling:
− weighted average cost of capital (WACC)
− scenario planning
− business valuation of projects – discounted cash
flow, net present value
Benefits and limitations of different types of management
accounting systems
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Topic Exemplification
Management accounting techniques
Costs and cost analysis (cost–benefit analysis)
Cost behaviour
Variances and statement of variance analysis, including:
sales volume variance
direct material price (and/or usage) variance
fixed/variable overhead variance
Budgetary control statements
Financial statements for management information
Breakeven analysis
The importance and usefulness to businesses of using
planning tools, e.g. breakeven analysis and cash flow
forecasting
Potential consequences of inadequate planning
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Section D: Introduction to financial decision making
10% – 6 learning hours
LO.4: Understand principles of financial decision making and the impact of financial decisions on businesses
Topic Exemplification
Principles of financial decision making
The importance of careful consideration of costs and cash
flows when making decisions
Cost–volume–profit (CVP) analysis, its objective and uses,
including:
the contribution – defined as remaining earnings after
all direct costs have been subtracted from revenue
the contribution margin – defined as contribution
divided by revenue
assumptions of CVP when making business
decisions – that:
− all costs, including manufacturing, administrative
and overhead costs, can be accurately identified as
either fixed or variable
− the selling price per unit is constant
− all units produced are sold
− changes in activity are the only factors that affect
costs
Integrated reporting:
information that should be produced alongside financial
statements in an integrated report, including:
− financial information
− governance and remuneration
− sustainability information
− management commentary
the concept, purpose and benefits of integrated
reporting, including the impact on:
− value creation
− corporate governance
− sustainability
Impact of financial decisions The importance of not making business decisions solely on
financial information but considering the impact on, for
example:
the environment
society
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