international finance and administration · 2020-02-04 · 22 iosco is recognised as the...

© The Chartered Governance Institute 2019 of 21

International Finance and Administration Mark scheme November 2019


Section A

Question number

Answer Mark

1 A common law system is a system of law under which the judges are guided by previous decisions of the courts under the doctrine of judicial precedent. (1)

Reward other valid responses

Total 1

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Answer Mark

2 The perpetuity period. (1)

Total 1

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Answer Mark

3 Award 1 mark for any one of the following

The ratio decidendi of a case is:

any rule of law or legal principle that is treated by the judge as necessary for the basis of the decision made (1); or

a necessary part of the judge’s direction to the jury (1).


Total 1

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Answer Mark

4 A: Foreign Account Tax Compliance Act (FATCA)

Total 1

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Answer Mark

5 Award 2 marks for any two of the following

Customers know which investments they wish to purchase or sell. (1) Customers are not given any advice by the firm when they make

investment decisions. (1) The only responsibility of the portfolio manager is one of ‘best execution’

– implementing the customer’s investment decisions at the best price available. (1)


Total 2


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Answer Mark


Customs duties (1)

Excise duties (1)

Insurance premium tax (1)

Value added tax (VAT) (1)


Total 2

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Answer Mark

7 Equity

Total 1

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Answer Mark

8 True

Total 1

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Answer Mark


Global charities may use Foundations for making donations. (1)

Foundations can be used within commercial transactions, especially where an ‘orphaned’ special purpose vehicle is required. (1)

Foundations can be used for international structuring. (1)


Total 2

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Answer Mark

10 A regressive tax systems is where the rate of tax falls as the level of income that is subject to tax rises. (1)

Total 1

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Answer Mark

11 The beneficial owner is the individual(s) or company that retains a direct or indirect ownership interest in the assets of an entity. (1)


Total 1


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Answer Mark

12 True

Total 1

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Answer Mark


Authorise organisations to provide financial services business. (1)

Supervise that organisations adhere to the jurisdiction’s laws, orders and codes. (1)

Provide for enforcement and sanctioning when organisations breach laws or regulations. (1)


Total 2

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Answer Mark

14 Two types of partners in a limited partnership:

a limited partner (whose liability is limited to the amount of its capital contribution, provided it does not take part in the management of the partnership) (1) and

a general partner (whose liability is unlimited) (1).

Total 2

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Answer Mark

15 Award 1 mark for any one of the following

Hedge funds. (1)

Private equity funds. (1)

Collective funds that principally invest in specialist assets other than securities and bonds listed on the main global stock exchanges. (1)


Total 1


Section B

Question number

Answer Mark

16 Award up to 6 marks for any of the following points

A special purpose vehicle (SPV) is incorporated in order to enter into any agreements (1) relating to a particular transaction (1), isolate a purpose or transaction from other activities (1) or parties involved with a transaction (1). Where it is necessary that a vehicle should not be treated as being controlled or owned by any party to a transaction, the SPV will usually be owned by a charitable purpose trust (1) and are referred to as ‘orphaned structures’, as they are said not to be beneficially owned by anyone (1). Used to enter into securitisation (1) or debt defeasance (making debt null and void) transactions (1). Assets of all types are repackaged and securitised (1). Reward other valid responses

Note to Marker: To obtain a mark per point, the answer must be clearly described as detailed above.

Total 6

Question number

Answer Mark

17 Award up to 4 marks for any four of the following

Assets that are not subject to CGT.

An individual’s main residence. (1)

Money that forms a part of an individual’s income for income tax purposes. (1)

Personal belongings worth £6,000 or less when they are sold. (1)

Special investments such as Individual Savings Accounts (ISAs). (1)

UK government bonds (gilts). (1)

Wasting assets e.g. cars. (1)


Total 4


Question number

Answer Mark

18 Award up to 6 marks for any six of the following

Factors that should be considered when planning an investment portfolio for a client:

The accessibility of the investment. Some clients may need to be able to access the funds at relatively short notice or in the case of an emergency. (1)

The client’s attitude to risk. (1)

Ethical investment requirements. (1)

Family circumstances – for example, whether there is a dependent child or spouse to provide for. (1)

Income or capital growth requirements. (1)

The client’s investment time horizon. (1)

Sufficient protection against inflation (e.g. cash does not usually form a large part of an investment portfolio for significant periods of time). (1)

The tax efficiency of the investment portfolio. (1)


Total 6

Question number

Answer Mark

19 i. Adviser charging (1):

This element aimed to ensure that consumers are offered a transparent and fair charging system for the advice they receive. (1)

ii. Independent advice (1):

This element aimed to ensure that consumers are clear about the services that they receive. (1)

iii. Professionalism: (1)

This element aimed to ensure that consumers receive advice from highly respected professionals, thereby inspiring confidence and building trust. (1)


Total 6


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Answer Mark

20 Answer should include any two options from the following

Retention tax option: (1)

Under this option, the service provider retains tax at a predetermined rate (1) and pays this to the relevant country’s authorities without giving details of the resident to whom the payment relates. (1) Voluntary exchange of information: (1)

Under this option, the service provider will not retain tax from savings and instead provides its own tax authorities with information about the client to whom the interest relates. (1) This option requires the express authorisation of the individual. (1) Exemption: (1)

The paying agent will not be required to apply the retention tax or exchange of information, where a beneficial owner presents to the paying agent a certificate drawn up by the competent authority of their EU member state of residence for tax purposes. (1) Some centres have since moved (following changes in 2015) to fully automatic exchange. (1)

Total 6

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Answer Mark

21 Award up to 6 marks for any of the following

A life interest trust is also known as an interest in possession trust. (1) The beneficiary is referred to as the ‘life tenant’ and has an absolute right (an interest in possession) to enjoy the trust property or income arising from the trust property during their lifetime. (1) The beneficiary entitled to the income is usually referred to as the life tenant. (1) Only on the death of the life tenant may the other beneficiaries (referred to as the remainder-men) stand to benefit. (1) Upon the death of the life tenant, the terms of the trust may provide for the trust property to be held on trust for the remainder-men (1), with the trustee having discretionary powers (1), or they may provide for the capital to be paid in fixed proportions to the beneficiaries and the trust wound up (1). Trustees must manage the trust fund in a manner that does not unduly affect the interest of either the income or capital beneficiaries. (1)

Total 6


Question number

Answer Mark

22 IOSCO is recognised as the international standard-setter for securities markets.(1)

It provides comprehensive technical assistance to its members, including those regulating emerging markets. (1)

The principles of IOSCO are based upon the following three objectives:

1. protecting investors; (1)

2. ensuring that markets are fair, efficient and transparent; (1) and

3. reducing systemic risk.(1)

The IOSCO principles must be implemented practically under the relevant legal framework in order to achieve these objectives. (1)


Total 6

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Answer Mark

23 Award up to 6 marks for any six of the following

The concept of separate legal personality was established in the well-known case of Salomon v Salomon & Co Limited. (1)

A company has its own separate legal personality from that of its owners and directors. (1)

A company itself may be sued. (1)

A company may sue others in its own right. (1)

A company can hold assets and incur liabilities.(1)

A company can enter into contracts in its own right. (1)

A company cannot be ‘owned’ in the normal sense – the shareholders only own the shares of the company not the company itself. (1)


Total 6

Question number

Answer Mark

24 Features of incorporated limited partnerships (ILPs):

These are the same as general partnerships, apart from the fact they are a body corporate. (1)

ILPs have a separate legal personality from that of the partners. (1)

ILPs can hold assets and contract in its own name. (1)

As it is a body corporate, an ILP also offers the benefit of perpetual succession. (1)


Total 4


Section C

Question number

Indicative content

25

15 marks

Answers to this question must note that Adam already has a current account but now needs a savings account. Answers must cover different types of accounts, linking it to the scenario and including which account/accounts would be recommended and why. Adam already has a current account but now needs a savings account. It would not be recommended that he puts money in a current account due to lack of interest. Types of savings accounts:

Fixed-term deposits (features)

Adam would need to deposit a sum of money with the bank for a specified period of time. Some banks impose a minimum balance requirement. Fixed terms could range from daily to weekly or monthly, or could even be fixed for one year or more. No withdrawals or additions can usually be made to the fixed deposit – the account does not offer the payment facilities that are available on a current account. The interest rates paid on a fixed deposit increase, the longer the funds are committed and the interest is applied to the account at the end of the term. The bank can offer a better rate of interest as it knows that it has use of the money for a specified period. Penalties for breaking a fixed deposit are usually severe and a customer must therefore ensure that they will not require access to the funds during the term.

Instant access accounts (features)

Instant access accounts may require a large initial investment. The interest rate payable is usually preferable and tiered in accordance with the level of funds in the account. These accounts allow instant access to funds without the loss of interest. The terms of instant access accounts may provide that no interest will be payable if the account falls below a minimum balance – for example, £5,000. Savings accounts (features)

The terms and features of savings accounts available differ from bank to bank. Some accounts allow funds to be withdrawn on demand with instant access, while others require the customer to give the bank notice before funds can be withdrawn. The notice period can vary from one week to three months or longer. Some savings accounts require regular savings of a minimum savings amount each month while others are suitable for those with a large lump sum. Interest at varying frequencies may be applied to savings accounts (e.g. on a monthly or six-monthly basis). Recommendation for Adam in the scenario – may include the following.

Splitting the funds between:

Fixed deposits which are for a longer term e.g. 12 months or longer will offer better rate of interest, but would suggest that these are only used for any excess funds not required for the property purchase.


Instant access account – higher rate of interest than current account, can withdraw funds as required for the property purchase. Savings account – higher rate of interest than current account, can withdraw funds as required but may need some notice. Marking note: Marks will be rewarded for the rationale and explanation of the recommendation based on what is known in respect of the client. Also, answers could mention mortgage and other assistance with the purchase of the property or other services generally offered by banks which could be offered by the Regular Bank in the scenario.

Level Mark Descriptor

0 No rewardable material.

Level 1

(Fail)

1–7 The answer may attempt to identify the different types of accounts apart from the current account but the answer is likely to be unclear and inaccurate.

The answer demonstrates limited understanding of the different types of accounts. This is communicated in a basic way with simple or generalised statements.

Points made are superficial and not directly linked to the scenario in the question.

The answer includes limited discussion of the different types of accounts that are available to Adam.

Any discussion does not include recommended account/accounts and is not supported by relevant examples.

Level 2

(Pass)

8–9 The answer includes a sufficient explanation of the different types of accounts apart from the current account and described in detail.

The answer demonstrates understanding of the different types of accounts and expresses ideas with clarity.

Points made are relevant and linked to the scenario in the question.

The answer includes discussion of the different types of accounts that are available to Adam.

The discussion includes recommended account/accounts and is supported by relevant examples.

Level 3

(Merit/ Distinction)

10–15 The answer includes a clear, accurate and comprehensive explanation of the different types of accounts apart from the current account and described in some detail.

The answer demonstrates a good understanding of the different types of accounts and these are communicated in a logical writing structure.

A range of points made are relevant and linked to the scenario in the question.

The answer includes a good discussion of the different types of accounts that are available to Adam.

The discussion includes clear recommended account/accounts and is supported by relevant examples.


Question number

Indicative content

26

15 marks

Candidates are expected to refer to the scenario and provide advice to Joyce on the essentials required to form a valid contract and the items Joyce should check before signing the contract.

A valid contract is an agreement between parties made with the intention for it to be legally binding and supported by consideration. The law requires that some contracts must be made in writing, such as those involving the sale of land. The essential elements of a contract are:

agreement (evidenced by an offer and an acceptance);

consideration; and

intention to create legal relations. For the contract to be enforceable, the parties to it must have legal capacity to contract and the contract must not be illegal. Minors and enemy aliens will not have capacity. Offer:

An offer is a definite expression of willingness to be bound on specific terms without further negotiations. An offer cannot be vague or uncertain. There must also be a clear intention to be bound by the terms of the contract. An offer can be in any form (written, oral or by conduct) and must be communicated to the offeree and must be open at the time when it is accepted. An offer may be made to an individual or open to a number of individuals. An offer must be distinguished from the mere supply of information that is not intended to be acted upon and instead is intended to enlighten the other party. An invitation to treat is not an offer. Acceptance of an offer is an unconditional agreement to all of the terms of the offer, although acceptance in contracts may be ‘subject to contract’. The general rule is that acceptance must be communicated to the offeror to be effective. Consideration

All contracts must be supported by some form of consideration from each party, unless they are made by deed. Consideration must be provided by both parties to contract before it is likely to be binding. Consideration need not be adequate, but must be sufficient. Past consideration is not sufficient consideration and is therefore not valid. Performance of existing duties is not sufficient consideration. Illegal acts do not amount to sufficient consideration

Legal intention

The parties to a contract must have an intention that the arrangement would be legally binding (that they would enter into a legal relationship). Legal intention need not be explicit or in writing, and may be implied from the circumstances.


The following assumptions are generally held by the courts:

Social, domestic and family arrangements are not usually intended to be binding; and Commercial arrangements are usually intended to be binding. For a contract to be binding, the parties to it must have the legal capacity to enter into it – in other words, they must have the legal power to enter into the contract. Advice to Joyce – examples of things that could be mentioned in answers include:

Ownership – Joyce should check the land registry to confirm that her neighbour owns the land.

Legal capacity – can Joyce’s neighbour enter into the contract e.g. is the neighbour a minor?

Price – is the price correct for the land? Does it seem reasonable? Joyce should check property prices etc.

Are there any other people being offered the land?

Is the contract in writing – essential for a land transaction.

Recommend Joyce speaks to a lawyer and asks them to review and advise on the contract – recommend someone at the law firm you work for.



Level 1

(Fail)

1–7 The answer may attempt to identify the essentials required to form a valid contract but it is likely to be unclear and inaccurate.

The answer demonstrates limited understanding of the essentials required to form a valid contract and the items to check before signing the contract. This is communicated in a basic way with simple or generalised statements.


The answer includes limited advice to Joyce on the essentials required to form a valid contract.

Any advice does not include relevant examples of items Joyce should check before signing the contract.

Level 2

(Pass)

8–9 The answer includes a sufficient explanation of the essentials required to form a valid contract and described in detail.

The answer demonstrates understanding of the essentials required to form a valid contract and the items to check before signing the contract and expresses ideas with clarity.


The answer includes advice to Joyce on the essentials required to form a valid contract.

The advice includes relevant examples of items Joyce should check before signing the contract.

Level 3


10–15 The answer includes a clear, accurate and comprehensive explanation of the essentials required to form a valid contract and described in some detail.

The answer demonstrates a good understanding of the essentials required to form a valid contract and the items to check before signing the contract and these are communicated in a logical writing structure.



The answer includes good advice to Joyce on the essentials required to form a valid contract.

The advice includes clear and relevant examples of items Joyce should check before signing the contract.


Question number

Indicative content

27

15 marks

Answers to this question should include the following points.

The Financial Action Task Force (FATF) is an inter-governmental, policy-making body that was established in July 1989 by the Group of Seven (G7) summit in Paris in order to coordinate an international response to the problem of money laundering. FATF works to generate political will to bring about national legislative and regulatory reforms in the money laundering and terrorist financing areas. The objectives of the FATF are to set standards and to promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. FATF also works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse. FATF drew up 40 recommendations as an initiative to combat the misuse of financial systems by persons laundering drug money. These have since been revised and a further nine special recommendations have been created, aimed at combating the funding of terrorism. The most recent revision of FATF recommendations addressed new priority areas such as corruption and tax crimes, as well as dealing with new threats such as the financing and proliferation of weapons of mass destruction, transparency issues and corruption issues. The FATF is recognised as the global standard setter on AML and CFT issues by the United Nations, the IMF and the World Bank. The 49 recommendations (known as the 40+9 recommendations) set the international standards for combating money laundering and terrorist financing. In order to achieve global implementation of its recommendations, the FATF relies upon a network of FATF style regional bodies (FSRBs), in addition to its own members. There is no legal requirement for countries to follow the FATF’s recommendations and it has no legal enforcement or official sanctioning powers. FATF is a highly influential organisation, as was demonstrated by the results of its non-cooperating countries and territories (NCCT) initiative. The 40+9 recommendations set out that countries should take immediate steps to become party to, and implement fully, the Vienna Convention, the Palermo Convention and the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism. Countries are also encouraged to ratify and implement other relevant international conventions, such as the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the 2002 Inter-American Convention against Terrorism.




Level 1

(Fail)

1–7 The answer may attempt to identify the achievements of FATF in coordinating an international response in the fight against money laundering and terrorism but it is likely to be unclear and inaccurate.

The answer demonstrates limited understanding of the achievements of FATF. This is communicated in a basic way with simple or generalised statements.

There is little application of relevant knowledge and understanding.

Any discussion does not include relevant examples of the FATF coordinating an international response in the fight against money laundering and terrorism.

Level 2

(Pass)

8–9 The answer includes a sufficient explanation of the achievements of FATF in coordinating an international response in the fight against money laundering and terrorism and described in detail.

The answer demonstrates understanding of the achievements of FATF and expresses ideas with clarity.

There is application of relevant knowledge and understanding.

The discussion includes relevant examples of the FATF coordinating an international response in the fight against money laundering and terrorism.

Level 3


10–15 The answer includes a clear, accurate and comprehensive explanation of the achievements of FATF in coordinating an international response in the fight against money laundering and terrorism and described in some detail.

The answer demonstrates a good understanding of the achievements of FATF and these are communicated in a logical writing structure.

There is a good application of relevant knowledge and understanding.

The discussion includes clear, relevant examples of the FATF coordinating an international response in the fight against money laundering and terrorism.


Section D

Question number

Indicative content

28

15 marks

The trustees’ powers may be said to comprise both administrative powers and dispositive powers. Administrative powers are those powers that relate to the way that the trustee administers the trust (e.g. the way in which they manage and invest the trust fund). Dispositive powers are those powers that relate to the distribution of the trust property. Some trust instruments provide that the powers may only be exercised with the consent of a protector. The following are the types of power that may be granted to the trustees. Receive original and additional property The trust deed confirms that the trustee is able to receive the original trust property as well as additional property upon the same trust after and/or throughout the trust period. Funds added to the trust property are known as additional settled funds or assets. Management of income and capital The trustees of a discretionary trust are usually given wide powers to distribute the trust property. The ‘trusts of income and capital’ clause may give the trustee discretionary power to pay income or capital to any of the beneficiaries or to hold some or all of the trust fund upon a separate trust for any of the beneficiaries. Trustees may be given powers of accumulation, which allows them to retain income and add it to the capital of the trust fund. The trusts of income and capital clause may also set out how the trust fund will be distributed at the end of the trust duration if the trust has a set duration. Powers of appointment and advancement Trustees may have very wide powers to appoint new trusts or to transfer trust property to a new trust (if there is a beneficiary in common) or to a company formed by the trustee. Powers to ignore interests The trust deed may set out that the trustee may ignore the interests of a beneficiary when considering whether to apply the trust property for the benefit of another. Payment to persons not of full capacity The trustees may be able to transfer trust property to the carer of a minor or interdict. Powers of addition and exclusion Trustees usually have the power to add additional beneficiaries to the class of beneficiaries or to remove a person from the class of beneficiaries or exclude a person from benefitting from the trust property. Exclusions can usually be revocable (capable of being undone) or irrevocable. Exercise of trustees’ powers and discretions The trust deed may set out that the powers of the trustee can be exercised at their absolute discretion and as they think fit. Powers of delegation The trustee may have the power to delegate their power to others, providing the delegation is done in good faith. Retirement and appointment of new trustees The trust deed may set out the provisions regarding the retirement of the existing trustees and the appointment of a new trustee. The trustee is often granted the power to appoint a new trustee. The trust deed may also provide a release from liability for the retiring trustee. Remuneration of a trustee The trust deed may provide for the remuneration of the trustee. In some jurisdictions, the trustee may not otherwise have a right to be remunerated under the law.


Other powers detailed in the trust deed include: - power to deal with the trust property as if they were the beneficial owner; - powers of investment; - power to form companies – it is usual for the trust deed to state that the trustee is not

bound to be involved in the affairs of an underlying company; - power to make loans or to borrow; - power to employ agents or professionals.

Disclosure The trust deed may set out that the trustee need not disclose information about how they reached their decisions when exercising their powers. Power to vary the settlement It may be the case that the terms of a settlement may be varied.



Level 1

(Fail)

1–7 The answer may attempt to identify trustee powers but it is likely to be unclear and inaccurate.

The answer demonstrates limited understanding of the powers that may be granted to the trustees by the terms of the trust. This is communicated in a basic way with simple or generalised statements.

There is little application of relevant knowledge and understanding of trustee powers.

Any discussion does not include relevant examples of the powers that may be granted to the trustees by the terms of the trust.

Level 2

(Pass)

8–9 The answer includes a sufficient explanation of trustee powers and described in detail.

The answer demonstrates understanding of the powers that may be granted to the trustees by the terms of the trust and expresses ideas with clarity.

There is application of relevant knowledge and understanding of trustee powers.

The discussion includes relevant examples of the powers that may be granted to the trustees by the terms of the trust.

Level 3


10–15 The answer includes a clear, accurate and comprehensive explanation of trustee powers and described in some detail.

The answer demonstrates a good understanding of powers that may be granted to the trustees by the terms of the trust and these are communicated in a logical writing structure.

There is a good application of relevant knowledge and understanding of trustee powers.

The discussion includes clear, relevant examples of the powers that may be granted to the trustees by the terms of the trust.


Question number

Indicative content

29

15 marks

Answers to this question should reference Paper Flowers Limited and include the following.

Memorandum of Association: A memorandum of association is a short document (usually only a page) that proves the subscribers’ intention to form a company under the Companies Act 2006, as well as stating that they agree to become members of the company. In the case of a company that will have a share capital, the memorandum records their agreement to take at least one share each. Articles of Association A company must have articles of association, which are sometimes referred to as the internal regulations of the company. They are concerned with how the company should be managed by its directors and set out the voting and other rights of members. The articles must be contained in a single document and be divided into paragraphs numbered consecutively. The company’s constitution binds the company and its members as though they had individually covenanted to obey their provisions. The articles of association therefore constitute a contract between the company and its members, as well as between the members themselves. Content: Memorandum of Association The name of the company – Paper Flowers Limited. The location of the company’s registered office – this will be the office of Agency Limited if it is providing registered office services. The objects of the company – to design and sell paper flowers. A statement that the liability of the members is limited. The amount of the company’s authorised share capital and a statement that the capital is divided into shares of a stated amount. Articles of Association

Interpretation – definition of terms in the Articles. Liability of members – this is limited to the amount, if any, unpaid on the shares held by

the members. Directors powers and responsibilities. Directors decision making powers. Directors meetings. Appointment of directors. Directors’ indemnity and insurance. Shares – allocation. Share certificates. Share transfers. Dividends and other distributions. Capitalisation of profits. The liability of members. Organisation of general meetings. Voting at general meetings. Administrative arrangements.




Level 1

(Fail)

1–7 The answer may attempt to identify the purpose of the Memorandum and Articles of Association but it is likely to be unclear and inaccurate.

The answer demonstrates limited understanding of the purpose of the Memorandum and Articles of Association and the key clauses that will be contained in both documents. This is communicated in a basic way with simple or generalised statements.


The answer includes limited discussion of the purpose and the key clauses of both documents.

Any discussion does not include relevant examples of the key clauses and reference to PFL which is to be incorporated.

Level 2

(Pass)

8–9 The answer includes a sufficient explanation of the purpose of the Memorandum and Articles of Association and described in detail.

The answer demonstrates understanding of the purpose of the Memorandum and Articles of Association and the key clauses that will be contained in both documents and expresses ideas with clarity.


The answer includes a discussion of the purpose and the key clauses of both documents.

The discussion includes relevant examples of the key clauses and reference to PFL which is to be incorporated.

Level 3


10–15 The answer includes a clear, accurate and comprehensive explanation of the purpose of the Memorandum and Articles of Association and described in some detail.

The answer demonstrates a good understanding of the purpose of the Memorandum and Articles of Association and the key clauses that will be contained in both documents and these are communicated in a logical writing structure.


The answer includes a good discussion of the purpose and the key clauses of both documents.

The discussion includes clear, relevant examples of the key clauses and reference to PFL which is to be incorporated.


Question number

Indicative content

30

15 marks

Answers to this question should include the differences between General Meetings and Annual General Meetings (AGMs) and a recommendation to Hassan in the scenario as to whether he should attend the AGM.

General meetings are meetings of the members, and are usually called by the directors. Annual general meetings are a special type of general meeting. As Hassan is a shareholder, he has the right to attend and vote at both a general meeting and an AGM. It is good that he is asking for advice as this will enable him to understand the features of the meetings and decide whether he wishes to attend. It will also help him understand his rights in respect of the meetings. General Meetings: Directors may call a general meeting. Directors are required to call a general meeting in circumstances where the company has received requests to do so from members representing at least 5% of the paid-up capital with the right to vote at general meetings of the company or, where the company has no share capital, members who represent at least 5% of the total voting rights of all the members with a right to vote at general meetings. The period of notice required in order to call a general meeting which is 14 days but it may be called by shorter notice than that otherwise required if the members agree. The shorter notice must be agreed to by a majority of the members with a right to attend and vote at the meeting – for a private company this is 90%. The following must be included in the notice of a general meeting:

date of the meeting; time of the meeting; place of the meeting; whether it is an annual general meeting or other general meeting; the text of any special resolutions that are to be voted upon; and the members’ right to appoint a proxy.

Hassan can attend the general meetings and vote at the meetings. Whist Hassan can attend the meetings, as he only has a small number of shares, if this is less than 5% of the paid up capital then he would be unable to request a general meeting. However, if there was a matter that he felt needed a general meeting then he could work with other shareholders so that they had more than 5% and therefore could request that the general meeting was held. Whilst he can attend and vote at the meeting he does not have an obligation to attend or vote. Annual General Meetings There are special rules surrounding the annual general meeting (AGM) of a company. The Companies Act 2006 provides that private companies are not required to hold an AGM unless their articles state that they must – Allsorts Ltd articles must have stated this as Hassan has received the notice of the AGM. The business of an AGM may include:

receipt of the report and accounts laid before the meeting; declaration of the final dividend; election of the directors who have been appointed since the last AGM; the re-election of the directors who have retired by rotation; and the re-appointment of the auditors of the company.


Hassan can attend the AGMs and this is his opportunity to voice any concerns or comment on any matters in respect of the company. He does not need to attend the meeting if he does not wish to. He can also give the authority (Proxy) to someone else to attend or vote on his behalf. Recommendation to Hassan: As he is a shareholder, he can attend in person or by proxy. If he wishes to voice his opinion in respect of the matters being discussed at the AGM e.g. re appointment of directors, remuneration of directors then attending the AGM gives him the opportunity to do this. He does not have an obligation to attend and if he is happy with the way the company is being managed, he may feel that there is nothing to be gained by attending the meeting. Marking note: The answer should include providing Hassan with a recommendation and this should be supported by giving reasons why he should or should not attend the AGM and also the implications of attending or not attending.



Level 1

(Fail)

1–7 The answer may attempt to identify the differences between the two types of meetings but the answer is likely to be unclear and inaccurate.

The answer demonstrates limited understanding of the differences between the two types of meetings and why they are held. This is communicated in a basic way with simple or generalised statements.


The answer includes limited application of relevant knowledge and advice of the differences between the two types of meetings.

Any advice does not include a recommendation whether Hassan should attend the AGM.

Level 2

(Pass)

8–9 The answer includes a sufficient explanation of the differences between the two types of meetings and described in detail.

The answer demonstrates understanding of the differences between the two types of meetings and why they are held and expresses ideas with clarity.


The answer includes application of relevant knowledge and advice of the differences between the two types of meetings.

Any advice includes a recommendation whether Hassan should attend the AGM

Level 3


10–15 The answer includes a clear, accurate and comprehensive explanation of the differences between the two types of meetings and described in some detail

The answer demonstrates a good understanding of the differences between the two types of meetings and why they are held and these are communicated in a logical writing structure.


The answer includes a good application of relevant knowledge and advice of the differences between the two types of meetings

Any advice includes a clear recommendation whether Hassan should attend the AGM.

international finance and administration · 2020-02-04 · 22 iosco is recognised as the...

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