PAPER GE05: FUNDAMENTALS OF ETHICS, CORPORATE GOVERNANCE AND

BUSINESS LAW
Syllabus overview

The learning outcomes in this paper reflect the legal framework for business and provide the
underpinning for commercial activity. It includes the areas of contract law, employment law, financing,
administration and management of companies. The globalisation of business is recognised by the
inclusion of alternative legal systems, as well as the English legal system. Judicial precedent is included in
relation to professional negligence.
Wherever business is conducted, the highest professional standards must be demonstrated for the
benefit of all stakeholders. With this in mind, the place of ethics and ethical conflict is considered, as
well as the role of corporate governance and its increasing impact in the management of organisations.

Syllabus structure
The syllabus comprises the following topics and study weightings:

A Ethics and business 15%

B Ethical conflict 10%
C Corporate governance 10%
D Comparison of English law with alternative legal systems 10%
E The law of contract 20%
F The law of employment 10%
G Company administration and finance 25%

Assessment strategy
There will be a three hour exam, comprising different types of questions covering the whole syllabus
based on the weights given in respective sections. Students need to attempt all the questions to secure
a pass grade.
GE05 – A. Ethics and business (15%)

Learning outcomes
Indicative syllabu
On completion of their studies students should be able to:
Lead Component Level
1. demonstrate an (a) apply the values and attitudes that provide 3 • The importance of ethics.
understanding of professional accountants with a commitment • Values and attitudes for prof
the importance of to act in the public interest and with social • Legal frameworks, regulation
ethics to business responsibility; business.
generally and to (b) explain the need for a framework of laws, 2 • The role of national ‘Professi
the professional regulations and standards in business and their for Accountancy’ and ‘Auditi
accountant. application; • The role of international acc
(c) explain the nature of ethics and its application 2 IFAC.
to business and the accountancy profession; • The nature of ethics and its r
(d) distinguish between detailed rules based and 2 and the accountancy profess
framework approaches to ethics. • Rules based and framework
• The ‘Seven Principles of Publ
integrity, objectivity, accoun
honesty and leadership.
2. explain the need (a) explain the need for continual personal 2 • Personal development and li
for CIMA members improvement and lifelong learning; • The personal qualities of reli
to adopt the (b) explain the need to develop the virtues of 2 timeliness, courtesy and resp
highest standards reliability, responsibility, timeliness, courtesy • The ethical principles of inte
of ethical and respect; • Professional competence, du
behaviour. (c) explain the ethical principles of integrity, 2 confidentiality.
objectivity, professional competence, due care • Disclosure required by law.
and confidentiality; • The concepts of independen
(d) identify concepts of independence, scepticism, 2 accountability and social res
accountability and social responsibility; • The CIMA and IFAC ‘Code of
(e) explain the reasons why CIMA and IFAC each 2 Accountants’.
have a ‘Code of Ethics for Professional
Accountants’.

GE05 – B. Ethical conflict (10%)

Learning outcomes
Indicative syllabu
On completion of their studies students should be able to:
Lead Component Level
1. explain the various (a) explain the relationship between ethics, 2 • The relationship between et
means of regulating governance, the law and social responsibility; • The distinction between ethi
ethical behaviour. (b) describe the consequences of unethical 2 contracts.
behaviour to the individual, the profession and • Corporate governance and s
society. • Unethical behaviour.
• The consequences of unethic
2. explain how ethical (a) identify situations where ethical dilemmas and 2 • The nature of ethical dilemm
dilemmas and conflicts of interest occur; • Conflicts of interest and how
 conflicts of interest (b) explain how ethical dilemmas and conflicts of 2 • Ethical conflict resolution.
arise and may be interest can be resolved. • The CIMA Code of Ethics for
resolved. Accountants – ‘Fundamental

GE05 – C. Corporate governance (10%)

Learning outcomes
Indicative syllabu
On completion of their studies students should be able to:
Lead Component Level
1. explain the (a) define corporate governance; 1 • The role and key objectives o
development of (b) explain the interaction of corporate governance 2 governance.
corporate with business ethics and company law; • The interaction of corporate
governance to (c) describe the history of corporate governance 2 the law.
meet public internationally; • The development of corpora
concern in relation (d) distinguish between detailed rules based and 2 internationally e.g. in the UK
to the management principles based approaches to governance. and the USA.
of companies. • Rules and principles based a
governance.
2. explain the impact (a) explain the effects of corporate governance on 2 • The impact of corporate gov
of corporate directors’ powers and duties; powers and duties.
governance on the (b) describe different board structures, the role of 2 • Types of board structures, th
directors and the board and corporate social responsibility; corporate social responsibilit
management (c) describe the types of policies and procedures 2 • The role of the board in esta
structure of public that constitute ‘best practice’; governance standards.
limited companies (d) explain the regulatory governance framework 2 • Corporate governance codes
and how this for companies and benefits to stakeholders. Governance Code.
benefits • Policies and procedures for ‘
stakeholders. companies.
• The regulatory governance f
companies.
• Stakeholder benefits.

GE05 – D. Comparison of English law with alternative legal systems (10%)

Learning outcomes
Indicative syllabu
On completion of their studies students should be able to:
Lead Component Level
1. explain the (a) explain the manner in which behaviour within 2 • The purpose of the civil and
essential elements society is regulated by the civil and the • The sources of English law: c
of the English legal criminal law; statute, European law and o
system and the (b) explain the sources of English law; 2 • The distinction between the
tort of negligence. (c) illustrate the operation of the doctrine of 2 equity.
precedent by reference to the essential • The system of judicial preced
elements of the tort of negligence and its • The essential elements of th
application to professional advisers. including duty, breach and d
the liability of professionals i
advice.
2. describe the (a) describe the characteristics of the legal 2 • Alternative legal systems, inc
 essential elements systems found in other countries;
of alternative legal (b) describe elements of Shari’ah law;
systems. (c) describe the role of international regulations.
GE05 – E. The law of contract (20%)
Learning outcomes
On completion of their studies students should be able to:
Lead Component
1. explain how the (a) identify the essential elements of a valid simple
law determines the contract and situations where the law requires
point at which a the contract to be in a particular form;
contract is formed (b) explain how the law determines whether
and the legal status negotiating parties have reached agreement
of contractual and the role of consideration in making that
terms. agreement enforceable;
(c) explain when the parties will be regarded as
intending the agreement to be legally binding
and how an agreement may be avoided
because of misrepresentations;
(d) explain how the terms of a contract are
established and their status determined;
(e) describe the effect of terms implied into
contracts by sale of goods and supply of goods
and services legislation;
(f) describe how the law controls the use of
excluding, limiting and unfair terms.
2. explain when the (a) describe the factors which cause a contract to
law regards a be discharged;
contract as (b) explain how the law of frustration provides an
discharged and the excuse for non-performance of the contract;
remedies available (c) explain the remedies which are available for
law) systems.
2 • The general characteristics o
2 France, Germany, Poland, Ita
and Cyprus.
• The general characteristics o
the USA, Malaysia, China and
• Elements of Shari’ah law incl
Shari’ah law and the Five Pill
• The benefits of international
commerce and professional
work of key bodies e.g. IFAC,
Indicative syllabu
Level
2 • The essential elements of a v
• The legal status of statemen
parties. Offers and acceptan
2 of the rules to standard form
modern forms of communica
• The principles for establishin
intend their agreement to ha
2 and how a contract is affecte
misrepresentation.
• Incorporation of express and
conditions and warranties.
2 • The main provisions of the S
and the Supply of Goods and
2 • Excluding and limiting terms
Terms Act 1977 and the Unfa
Contracts Regulations.
2
2 • Discharge of a contract by pe
and breach.
2 • The law relating to frustratio
• The law relating to damages
2 • The remedies of specific per
 for breach and serious and minor breaches of contract. rescission, and requiring a co
nonperformance. agreed price.

GE05 – F. The law of employment (10%)

Learning outcomes
Indicative syllabu
On completion of their studies students should be able to:
Lead Component Level
1. explain the (a) explain the differences between employees and 2 • The tests used to distinguish
essential elements independent contractors; independent contractor.
of an employment (b) explain how the contents of a contract of 2 • The express and implied term
contract and the employment are established; employment.
remedies available (c) explain the distinction between unfair and 2 • The rights and duties of emp
following wrongful dismissal. • Notice and dismissal.
termination of the • Unfair and wrongful dismissa
contract.
2. explain the impact (a) explain how employers and employees are 2 • The main rules relating to he
of health and safety affected by health and safety legislation; work, sanctions on employer
law on employers (b) describe the consequences of a failure to comply 2 and remedies for employees
and employees. with health and safety legislation. • Social security compensation
• Civil liability for occupationa

GE05 – G. Company administration and finance (25%)

Learning outcomes
Indicative syllabu
On completion of their studies students should be able to:
Lead Component Level
1. explain the nature, (a) describe the essential characteristics of the 2 • The essential characteristics
legal status and different forms of business organisations and the traderships/practitionership
administration of implications of corporate personality; companies limited by shares
business (b) explain the differences between public and 2 personality.
organisations. private companies and establishing a company • ‘Lifting the corporate veil’ bo
by registration or purchasing ‘off the shelf’; by statute.
(c) explain the purpose and legal status of the 2 • The distinction between pub
articles of association; companies.
 (d) explain the ability of a company to contract;
(e) explain the main advantages and disadvantages
of carrying on business through the medium of a
company limited by shares;
(f) explain the use and procedure of board meetings
and general meetings of shareholders;
(g) explain the voting rights of directors and
shareholders;
(h) identify the various types of shareholder
resolutions.
2. explain the law (a) explain the nature of different types of shares,
relating to the the procedure for their issue and acceptable
financing and forms of payment;
management of (b) explain the maintenance of capital principle and
companies limited the reduction of share capital;
by shares. (c) explain the ability of a company to take secured
and unsecured loans, the different types of
security and the registration procedure;
(d) explain the procedure for the appointment,
retirement, disqualification and removal of
directors;
(e) explain the powers and duties of directors
when in office;
(f) explain the rules dealing with the possible
imposition of personal liability upon the
directors of insolvent companies;
(g) explain the rights of majority and minority
shareholders;
(h) explain the division of powers between the
board of a company and the shareholders;
(i) explain the qualifications, powers and duties of
the company secretary.
Recommended Books:
1. CMA Study Text on Paper IE 01: Principles of Accounting
2. Steven J. Skinner, John M. Ivancevich (2002), Business 21st Century
3. Mallin, Christine, A. 2010. Corporate Governance (3rd edition), Oxford: Oxford University Press
4. McKendrick, Law of Contract.
5. A Text Book on Law of Contract , under National Law Book Company, Nilkhet Dhaka, by Md. Haider
Ali, 2nd Edition, 2011.
6. A text book on Easy understanding of The Law of Contract (Theory and Practice) has been published,
publisher: Hira Publication, by Syed Sarfaraj Hamid , 4th Edition,2011.
2 • Company registration and th
2 purchasing a company ‘off th
• The purpose and contents of
association.
2 • Corporate capacity to contra
• The advantages and disadva
2 limited by shares.
• Board meetings: when used
2 the meeting.
• General Meetings of shareho
the procedure at the meetin
• The voting rights of directors
• Ordinary, special and written
uses.
2 • The rights attaching to differ
• The procedures for issuing sh
• The issue of shares for an im
2 • Payment for shares.
• The maintenance of capital p
2 for which shares may be issu
purchased and the provision
for the purchase of the comp
2 • The reduction of capital.
• The ability of a company to b
procedure to be followed.
2 • Unsecured loans, and the na
and floating charges.
2 • The appointment, retiremen
directors and their powers a
• Fraudulent and wrongful tra
2 transactions at an under-valu
• The rights of majority and m
2 • The division of powers betw
shareholders.
2 • The qualifications, powers an
company secretary.