A candidate emailed me last month with a question that captures the whole problem with this subject. She had answered a practice MCQ about a director who wanted the company to buy a warehouse from his own wife. She spotted the conflict, chose the answer about breaching the duty to avoid conflicts of interest, and got it wrong. The correct answer turned on whether the director could be counted in the quorum at the board meeting under the model articles — and, separately, whether the transaction needed shareholder approval as a substantial property transaction.
She knew the law. She just did not know which layer of it the question was aiming at. That is Business Law and Practice in a sentence.
Why Business Law and Practice is the quiet difficulty in SQE1 FLK1
Of the seven FLK1 subjects, this is the one candidates most often underestimate. Contract and Tort feel like law. Business Law and Practice feels like admin — company forms, resolutions, percentages, filing deadlines — until you sit a mock and realise that the assessment rewards procedural precision far more than it rewards general principle.
Remember what you are facing: 180 single best answer questions in each FLK paper, 5 hours 20 minutes per paper. There is no space to reason from first principles about whether 75% or a simple majority applies. You either have the threshold, or you guess.
Most Business Law and Practice questions are asking one of three things: who decides, by what majority, and what happens if they get it wrong. Train yourself to identify which one before you read the options.
The seven general duties: what SQE1 actually tests
Sections 171 to 177 of the Companies Act 2006 codify the general duties owed by directors to the company — not to individual shareholders, and that distinction alone disposes of a fair number of distractors.
Under s.171, a director must act within powers and use them for their proper purpose. Section 172 requires the director to act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of the members as a whole — the test is largely subjective, which is why an honest but commercially disastrous decision may still be compliant. Contrast s.174, the duty of reasonable care, skill and diligence, which uses a dual test: the objective standard of a reasonably diligent person carrying out that director's functions, raised (never lowered) by the director's own actual knowledge and experience. A qualified accountant who serves as finance director is held to an accountant's standard.
Section 173 protects independent judgment. Section 175 requires directors to avoid situations where they have, or can have, a conflict — and note that for a private company the board may authorise the conflict, provided the articles do not prevent it, with the interested director's vote disregarded. Section 176 bars benefits from third parties, and this one cannot be authorised by the board at all; only the members can ratify.
Then the declaration duties, which examiners love because candidates blur them. Section 177 requires a director to declare the nature and extent of an interest in a proposed transaction to the other directors, before the company enters into it. Section 182 covers an interest in an existing transaction. The consequence differs sharply: breach of s.177 attracts the civil consequences applicable to the general duties, while failure to declare under s.182 is a criminal offence punishable by a fine. If an MCQ mentions a fine, it is testing s.182.
Ratification is governed by s.239: the members may ratify a director's negligence, default, breach of duty or breach of trust by ordinary resolution, but the votes of the director concerned and any connected person are disregarded.
Board meeting or general meeting? The decision map you must memorise
Go back to my candidate's warehouse question. The director is interested in the transaction, so under Model Article 14 he cannot vote or count in the quorum on that board decision. There are exceptions: where the members disapply the restriction by ordinary resolution, where the interest cannot reasonably be regarded as likely to give rise to a conflict, or where it falls within a permitted cause such as a guarantee given by or to the director, a subscription for shares, or a pension or insurance arrangement.
Quorum for a board meeting under the model articles is two, unless the company has a sole director. If removing the interested director from the count destroys the quorum, the board simply cannot make that decision — and that is frequently the "best" answer.
At member level, keep these figures automatic:
- Ordinary resolution — a simple majority of votes cast (over 50%).
- Special resolution — at least 75%.
- Written resolutions (private companies only) — the threshold is measured against the total eligible voting rights, not just those who reply. A written resolution lapses after 28 days unless the articles say otherwise.
- A general meeting requires 14 clear days' notice; short notice for a private company needs the consent of a majority in number holding at least 90% in nominal value of the voting shares.
One trap recurs constantly: removing a director under s.168 requires an ordinary resolution, but it cannot be done by written resolution, and special notice of 28 clear days must be given to the company. The director also has the right under s.169 to make written representations and to be heard at the meeting. And do not forget Bushell v Faith [1970] — weighted voting rights on a removal resolution can lawfully defeat the vote.
Transactions requiring shareholder approval — and the numbers behind them
This is pure recall, and it is free marks if you drill it.
A substantial property transaction under s.190 arises where a director (or a person connected with them) buys from or sells to the company a non-cash asset that is substantial. Substantial means value exceeding £100,000, or exceeding 10% of the company's asset value and more than £5,000. Approval is by ordinary resolution of the members; without it, the transaction is voidable and the director must account for any gain.
A director's service contract with a guaranteed term of more than two years needs an ordinary resolution under s.188. A loan to a director needs an ordinary resolution under s.197, with a memorandum setting out the terms made available to members — subject to the statutory exceptions, such as minor loans not exceeding £10,000 in aggregate.
Then the housekeeping. Special resolutions must be filed at Companies House within 15 days. Appointments and terminations of directors must be notified within 14 days. Confirmation statements and PSC register updates are the sort of detail that looks trivial on a revision sheet and then appears as the deciding factor in an MCQ.
When the business fails: partnerships, wrongful trading and clawbacks
Business Law and Practice does not stop at incorporation. The Partnership Act 1890 still sits in the syllabus: s.1 defines partnership as persons carrying on a business in common with a view of profit; s.24 supplies the default terms — equal profit share, no entitlement to salary, unanimity for changing the nature of the business; s.5 governs the authority of a partner to bind the firm; s.14 catches holding out. Contrast this with Salomon v A Salomon & Co Ltd [1897], the foundation of separate legal personality, and you have the risk comparison that scenario questions love.
On insolvency, know the difference between personal liability and clawback. Wrongful trading (s.214 Insolvency Act 1986) bites where a director knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation and failed to take every step to minimise potential loss to creditors. Fraudulent trading (s.213) needs actual intent to defraud and is therefore much harder to establish.
Clawback claims are about the company's past transactions: transactions at an undervalue (s.238, relevant time of two years), preferences (s.239, six months, extended to two years for connected persons, with a presumption of the desire to prefer), and avoidance of certain floating charges (s.245). Build a small table of time periods and connected-person variations — questions here are almost always decided on the date, not the principle.
What to actually do this week
Reading the chapter again will not fix this subject. Try these instead.
Write a single side of A4 headed "Who decides?" — board only, board plus ordinary resolution, board plus special resolution. Every corporate transaction in the syllabus goes into one of those three columns. Then a second sheet of thresholds and deadlines: 50%, 75%, 90%, 14 days, 15 days, 28 days, £5,000, £10,000, £100,000. Recite them cold, twice a week.
When you do practice questions, force yourself to name the section number before you look at the answer options. If you cannot, that is your revision gap identified in ten seconds. Have you tried answering a full block of 30 Business Law questions under timed conditions? The pace is the real teacher here.
How CELE SQE can help
Our SQE1 preparation covers all 13 subjects across FLK1 and FLK2, with Business Law and Practice taught the way it is examined — procedure, thresholds and consequences, not abstract theory. Courses run from £1,750 for the short-term option, £2,750 mid-term and £3,720 long-term, with single-FLK study at half the price and £150 off for early-bird bookings or within three months of your exam. If you only need drilling, the SQE1 question bank subscription is £575 per month, and the textbooks are £950 for the full set. Questions? WeChat SQE100, [email protected], or celebar.com — we have supported candidates since the very first sitting in 2021.