What the subject covers
Business Law and Practice follows a business from birth to death: choosing and forming the vehicle, running it, financing it, and dealing with it when it fails. It sits in FLK1 Session 1 and carries more questions than anything else in that session.
The examinable material divides into partnership and LLP basics, company formation and constitution, decision-making and procedure, directors, share capital and financing, security, insolvency, and the tax that attaches to all of it.
Company procedure: the examinable core
More marks turn on procedure than on doctrine, because procedure is precise and therefore easy to examine objectively. The material worth knowing without hesitation:
- Which decision belongs to whom — board resolution, ordinary resolution of the members (a simple majority), or special resolution (75 per cent).
- Notice and quorum — the notice a general meeting requires, how short notice can be agreed, the quorum under the model articles, and the written resolution procedure and what cannot be done by it.
- Filing and registers — what has to be sent to Companies House and within what period, and which registers a company must keep.
- Removing a director— the ordinary resolution, the special notice required, and the director’s right to make representations, plus the contractual consequences of removal.
The typical question gives you a proposed transaction and asks what must happen first, or which resolution is needed. The distractors are other real procedures, applied to the wrong facts.
Directors, duties and the conflicts
The general duties — to act within powers, to promote the success of the company, to exercise independent judgment, to exercise reasonable care and skill, to avoid conflicts, not to accept benefits from third parties, and to declare an interest in a proposed transaction — are examined as applied rules rather than as a list to recite.
Sitting alongside them are the transactions requiring member approval: substantial property transactions with a director, loans to directors, long-term service contracts, and payments for loss of office. A question here usually describes a director doing something obviously self-interested and asks what makes it permissible — the answer is almost always a disclosure and an approval, in the right order.
Professional conduct threads through this constantly: who the solicitor’s client is when the company and its directors want different things is an ethics question dressed as company law.
Shares, debt and security
- Equity: allotment and the authority required, pre-emption rights and how they are disapplied, classes of share and variation of class rights, transfers and transmission, buybacks and the permitted sources of funding.
- Debt: loan agreements and their typical covenants, and the practical differences between equity and debt funding for a company and its members.
- Security: fixed and floating charges, what a floating charge does on crystallisation, and the registration of charges — including what happens if registration is missed.
Insolvency
Both corporate and personal. The tests for insolvency, the options available — administration, company voluntary arrangement, receivership, liquidation both voluntary and compulsory — and the order in which creditors are paid.
The examinable sharp edges are the antecedent transactions: transactions at an undervalue, preferences, floating charges granted for no new value, and transactions defrauding creditors. Each has its own relevant time period and its own conditions, and questions routinely describe a director moving assets shortly before collapse and ask which challenge applies.
Business tax
Tax is examined the way a solicitor meets it: what is chargeable, on whom, at what point, and what relief might apply. Corporation tax on company profits and chargeable gains; income tax and national insurance for sole traders, partners and employees; capital gains tax on disposals with the main reliefs; and VAT at a working level — registration, standard and exempt supplies, input and output tax.
You are not being asked to compute a liability to the penny. You are being asked which tax bites and who pays it.
Where the marks go
- Thresholds. Ordinary versus special resolution, and board versus members. The most common wrong answer in the whole subject is the right procedure at the wrong level.
- Sequence. Approval before execution, disclosure before approval, filing after. Options that describe the right steps in the wrong order are everywhere.
- Partnership defaults. Candidates learn companies thoroughly and partnerships casually, then meet a question about profit sharing or expulsion where the default rules decide the answer.
- Insolvency time periods. Two provisions can both apply on the facts, and the periods separate them.
It is a large subject and it rewards repetition more than reading. Drill it by subtopic — resolutions one week, directors the next — and let the mistakes come back. The rest of the paper is mapped in the FLK1 subject guide, and the free warm-up sets include business law questions with the authority behind every option.