Understanding Business Law and its Impact on Business Organizations

This document provides an overview of business law and its impact on different types of business organizations. It discusses the sources of UK law, the role of the UK government in forming new laws, and the impact of different laws on business organizations. It also explores the nature, types, and formation of different types of business organizations, as well as the advantages and disadvantages of companies over partnerships. The document includes a case study on winding up a company and provides a comprehensive understanding of business law in the context of business organizations.

Business law

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Sources of UK Law.....................................................................................................................3
Role of UK Government in forming any of new law..................................................................4
Impact of different law on business organisation........................................................................5
Nature, Types and Formation of different types of Business Organisations...............................6
Differentiating Unincorporated and Incorporated (referring management and funding)............7
Advantages and Disadvantages of a company over partnership.................................................7
Case law 1:...................................................................................................................................8
Case law 2:.................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The concept of business law is necessary to be understood whenever any of the person wants
to setup the business organisation. It is because number of formalities are needed to be fulfilled.
The main purpose of preparing this report is to understand that how business can be setup in UK
where what types of law does prepare will be discussed. Sometimes business have to suffer from
issues and disputes and for that various cases will be discussed below which will help to clear
out the things in detail. How Alternative Dispute Resolution can help any of the business entity
has been also explained below. In short, various sections will be covered which are important
while dealing in commercial sector.
MAIN BODY
Parliamentary sovereignty
The parliament and monarch were formed in the early 17th century. Its sovereignty refers
to the supremacy of the legislation. It basically, consists of many powers which have been
changing over the years. The United Kingdom is divided historical and geographically by the
previous ruling political countries into England, Scotland and Northern Ireland. In the shortest
explanation it has full authority of creating laws and statues, the court does not contain whole
independence, no parliaments are connected, no law made by parliament can be questioned. The
Royal Queen provides a speech at the opening of parliament in October- November that is called
the “Speech from the throne”. It guides an outline for the new programmes of government for the
year. It is basically a tradition to show culture and history of the country (Cox, 2015).
Sources of UK Law
The main elements that connects the whole law system are divided in 4 sections:
Legislation: It is the powerhouse of the country that provides its citizens a clean, safe,
developed and healthy environment. There are two divisions to legislature that is primary which
sets the guideline and provide outlines for the law and secondary provides the procedure of law
making and transforms it into an Act of parliament.
Common law: It is the formation of laws by the courts judgements this practice is
followed by many countries judiciary system. In some certain cases the judgements provided by
the judge is so power full and effective that the government seeks to make it a law. It is also the
source of united kingdoms 'unwritten constitution'.
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European union law: The sole purpose of this union is to support and encourage
peace in the countries. It represents the members of the state government; it relates to several
matters from agriculture to laws. The workings here is very simple first, the council makes the
laws or policies second, ministers elected by the people debate upon them in parliament and later
the commission executes the laws passed (Mayss and Reed, 2018).
European convention on human rights: The ECHR is formulated for the protection of
human rights, the idea for it was generated after the World war II. It provides protection to all the
forty-seven countries, some of the rights provide by them are right to life, liberty, fair trail and
many more. Anyone who was not justified by act of human rights in UK should seek remedy by
the ECHR.
Role of UK Government in forming any of new law
The law making process in the United Kingdom follows a trail of steps and procedures to
be followed before becoming a law. Basically the drafts of laws have to be passes through two
places that is the House of Lords and House of Commons. Then it is approved by the Royal
Queen. Later it is added in the Acts of the Parliament.
A Bill is the explanation of the law that shall be proposed to the houses. The bill can be a
public, private or a private member bill. It is created by the civil lawyers involving the
government.
The bill goes through the steps mentioned below to become an Act in the Parliament:
1. FIRST READING: It is basically the formal stage. Basically, the heading of the bill and
its details are read in the house of commons.
2. SECOND READING: The details are discussing and debated at this stage. The key area
of the bill is being discussed deeply. Then voting in the favour and non-favour is made by
the ministers. That decides to continue the process or not. This system supports the
members to choose the party they assist and for the majority in the Parliament.
3. COMMITTEE STAGE: At this stage the bill is being passed on to the House of
Commons for the detailed inspection and a critical evaluation of the bill. If any demand
of amendments(changes) is made, then it will be done at this stage (Orts, 2017).
4. REPORT STAGE: At this stage the members of committee representing the bill with
the new amendments and debate topics discussed earlier in the House of Commons. The
bill is debated in the house and the evaluation is prepared.
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5. THIRD STAGE: A short discussion or debate is made if any new things are to be added
or else the final voting is done. After the voting in favour or non-favour is accumulated
the bill is either passed or rejected.
6. HOUSE OF LORDS: The bill is sent to the House of Lords to pass through all the
stages mentioned above. Then again is send back to the House of Commons for the
considerations if any amendments made earlier.
7. ROYAL ASCENT: The royal signature is the final and the most essential stage it is
mentioned under the Royal Ascent Act 1961.In this process after the signature of the
queen (monarch). The bill is implemented and made into the acts of Parliament.
Impact of different law on business organisation.
Laws are of various types within business law which has some purpose in an organisation. The
main thing is that how company understand because they have to apply it on regular basis so that
they don’t suffer from any kind of problem. It does have various profit for company because they
don’t let to create any of the even single issues. Let’s have a discussion about some of the law
which has its own importance for a business entity.
Company law: this is one of the law which guides how business entity have to take their
decision so that anyone will not be affected and even relevant information will be available with
the client and Companies House. The positive impact of company law is that it makes sure that
investor will have to know about each and every section at beginning due to which chances of
default reduces (Snyder and Maslow, 2018).
Employment law: The concept of this law is very simple that want to make sure that
what types of relation should be them between employee’s and employer. This law doesn’t allow
to create any of the dispute between employer and employee which is the biggest impact of
employment law because terms and condition are simple which is needed to be followed be each
side.
Contract law: This law is as simple as forming any of the sole proprietorship firm
because it has a clear vision that company should form contract paper whenever dealing with
anyone. The main positive of contract law is that party have to not get confused while doing
work because they can directly have an overview that how they need to work.
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Nature, Types and Formation of different types of Business Organisations
The structure to be chosen for the formation of the organisation depends on the type and
nature of Business. All the elements are considered before entering any one of them. Certainly
there are many types of business organisations bifurcated in the following:
Sole proprietorship:
A sole proprietor is the easiest, simple and self-employment form of business. All the
decisions of the business are taken by the entrepreneur. Profits and losses both are the owner's
responsibility. There is no legal documentation required.
Partnership:
When two or more number of people merge together to do a business venture, formulate
to become a partnership. They have to register under the company house in United Kingdom.
Afterwards a contract agreement is formed between them. That divides the responsibility, profits
and losses ratio between them (Merry Davis and Kingsbury, 2015).
Limited liability company:
Here the formation agreement divides the responsibility of the members. The prominent
benefits are paying less tax, separate entity (Salomon v Salomon & Co. Ltd) and limited liability.
The formation procedure is time taking and involves some legal paperwork. First to register
under company house that involves some documentation after selection certificate of
incorporation is issued. Then the contact agreement is sighed. (MEANING,
CHARACTERISTICS AND TYPES OF A COMPANY)
Corporation:
It is the most beneficial form of business organisation. Raising funds for corporation is by
commercializing in markets to customers who are willing to pay for them and becoming the
shareholders. It is separate entity, apart from its owners. Formation of a corporation is a time
taking process that involves:
I. Appointing the Directors (min. three) and a Secretary.
II. File the Articles of incorporation.
III. Issue certificates to the first shareholders.
IV. Registration of securities with SEC (securities and exchange commission).
V. Apply for the Tax registration certificate (business license).
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Differentiating Unincorporated and Incorporated (referring management and funding)
Referring to: Unincorporated Incorporated
Management Managing a unincorporated company
is easier and less complex process.
All the liabilities and responsibilities
are divided between members. Here
one can use the loss or failure of
anything to decrease the self-tax
value to be paid. The capital
investment is less as compared.
There is always a risk over the
owners personal assets (Frankle and
et. al., 2015).
Managing a incorporation is a complex
task as it requires time, resources and
paper work. The directors and other
higher hierarchy have the most
responsibility at the initial stages of the
company. Keeping proper records is
very essential. Once the company has
established it started giving returns of
the work for a long run.
Funding
(raising capital)
1.using personal assets.
2. bank loans are difficult because of
low return rate of businesses.
1.selling corporate stock.
2.selling securities and assets.
3.easy access to bank loans due being
incorporated.
Advantages and Disadvantages of a company over partnership
There are several Advantages and Disadvantages of a company in context if compared to a
partnership some are mentioned below:
Advantages:
1. Easy funds: It is difficult for a partnership to raise funds for more expansion due to less
options. A company raises funds by selling stock shares and expand.
2. Tax: In a partnership taxes are paid individually by the partners on their share of profits
where as in a company pays tax on the overall profits reducing the compensation and the
money earned from stock selling (Mikami, 2016).
Disadvantages:
8. Minimum capital requirement: To start a partnership no minimum capital is required.
Most of the funding is added by all the partners which is enough for a start-up. Whereas
starting a company one needs at-least 5 lacks and above.
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9. Winding up: In liquidating a partnership firm is easy and quick and no legal formalities
are involved. Just a contract formation of dissolving partnership. As in a company there
is a long legal procedure to be followed. Company's hierarchy is to be followed until the
shareholders, members and the board of directors are not involved the company cannot be
dissolved.
Case law 1:
WINDING UP:
It is the situation where the company or organisation is unable to pay the debts to its
creditor's and is unable to pay back or the owner of the company doesn't want to continue the
business and wind up anyway. In such cases the assets of the company is accumulated and
liquidated. By that money the creditors are paid, the debts are filled and the company is officially
dissolved (Morley, 2016).
TYPES:
Creditors voluntary liquidation: it is the situation where the company is to officially
shut down due to non-payment of debts to the creditor's and bank loans. The company is
declared insolvent or bankrupt All the assets or money left with the company is used to pay the
debts. The procedure for liquidation is easy:
3. The directors held a meeting with creditors to discuss the company's plans explaining the
condition of the company.
4. The shareholders are sent notice of the decision and at least 75% of the shareholders
should agree with the decision (Tepe, 2016).
5. A liquidator is appointed to accumulate the money that can be made after selling the
assets and make the balance.
6. The 'Companies House' should be notified of the decision.
7. Issue an article in the gazette for the public records.
Compulsory liquidation: when the company is declared insolvent and unable to pay the
debts of the creditors by the courts order. The creditors can seek the help of court to dissolve the
organisation in order to get the debts out of the company. Generally dissolving assets just to
receive the money does not attain much because of the minimal rate of selling them.
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Procedure for this is a little complex:
 The procedure starts with filling up form Comp1 and send it to the
 Next to fill a form Comp2 that will declare the last decision to wind up by the
company.
 At least 75% of the shareholders should agree with the decision. (Liquidate your
limited company.2019)
 The amount of debt shall decide which court will have held the judgement.
 A hearing date is assigned by the court, either the court will reject or accept the
petition.
 The company members shall be informed about the decision, send a article in the
newspapers for public records.
 Send a copy to court of the certificate of service.
Members voluntary liquidation: In this scenario the company is not bankrupt but the
owner seeks to wind up the company due to personal issue, want to setup a new business or any
other reason due to which the company is liquidated.
Procedure for it is a bit exhausting:
1. Provide the “declaration of solvency” certificate.
2. Sign the declaration or fill a form 4.25(for Scotland) that shall be signed in public notary.
3. A meeting is held with the shareholders within 5 weeks of notice.
4. Appoint a liquidator and dissolve the assets.
5. Provide an article in the newspapers for public records (Phillips, Howard, Vaaler and
Hubbard, 2019).
6. Declarations signed copy shall be send to the 'Company House' or form 4.25 (for
Scotland) within 15 days of the declaration.
Recommendation: the company should take a meeting with the creditors to change their
mind to dissolve the with compulsory liquidation. They should do the creditors voluntary
liquidation so that a good amount could be ascertain from it and it is easy process. If the creditors
do not agree with the directors, then they should do the compulsory liquidation.
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Case law 2:
To solve this dispute between Mr Anderson and amber Ltd they should follow the
Alternative Dispute Resolution given below:
ADR is basically the procedure to solve the issues between two parties without the need to go
and file a lawsuit in Court. There are three guides provided by ADR to solve the disputes:
Conciliation: It is the procedure where the parties appoint a conciliator and listen to both
sides together and separate and resolve the issue between them. Having a conciliator is a
good option to have since it will provide parties to get better chance of gaining their area of
interest in compensation and they can approach together with a better solution than going to
court and waiting for the results. These are legally binding in nature and cannot be changed if
once the decision is made.
Mediation: It is a less complex process where a common neutral third person is
approached to solve the lawsuit of the parties before it runs for the trail in court. First he
examines both sides issue, later points out issues with both sides. Afterwards, present the
proposal made by both the parties. Both the parties provide their side of the bargain and
negotiate on common terms of interest (Hansmann and Kraakma, 2017). Generally, in
mediation parties cannot be forced into any decision. They can always approach court if they
are not satisfied with the solution.
Arbitration: In this process an impartial third party(arbitrator) is appointed who provides
the arbitration award after hearing both sides. Arbitrator provides solving the issue with less
cost and time and removing the need to approach the court. In the arbitration process
generally both parties approach to negotiate with each other. There are two types of
arbitration Private: The parties want to keep a low key on the case and not involve court and
Judicial: here the party if not satisfied with the arbitration solution can seek help from court
later.
Recommendation: In the case or Mr. Anderson and amber Ltd they should consider
going for arbitration. As an arbitrator will provide better solutions to each party and provide the
guideline for the correct decision towards the dispute and resolve it with less complication. It
will save the time and both its not going to cost them as compare to the procedures of the court.
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CONCLUSION
It is necessary for any of the investor to know that how they can apply business law to earn
profit for long term basis. This is the law which cover longer range of area and every area have
its own importance. The Parliament House makes clear that they are bind to follow their
guidelines if they want to do anything within UK. Formation give the power to company to take
most of the legal decision. Whenever any of the case study is needed to be solved it is necessary
that understand that what are those law which applied on it. The successful and helpful concept
to solve the problem in current situation is Alternative Dispute Resolution.
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REFERENCES
Books & Journals
Cox, J. ed., 2015. Business Law. Oxford University Press, USA.
Mayss, A. and Reed, A., 2018. European Business Litigation. Routledge.
Orts, E. W., 2017. Corporate Law and Business Theory. Wash. & Lee L. Rev. 74. p.1089.
Snyder, D. V. and Maslow, S., 2018. Human Rights Protections in International Supply Chains
—Protecting Workers and Managing Company Risk: 2018 Report and Model Contract
Clauses from the Working Group to Draft Human Rights Protections in International
Supply Contracts, ABA Section of Business Law.
Merry, S. E., Davis, K. E. and Kingsbury, B. eds., 2015. The quiet power of indicators:
measuring governance, corruption, and rule of law. Cambridge University Press.
Frankle, D. H. and et. al., 2015. Proceedings of the 2014 Delaware Business Law Forum:
Director-Centric Governance in the Golden Age of Shareholder Activism. The
Business Lawyer. 70(3). pp.707-718.
Mikami, K., 2016. Cooperatives, transferable shares, and a unified business law. Annals of
Public and Cooperative Economics. 87(3). pp.365-390.
Morley, J., 2016. The Common Law Corporation: The Power of the Trust in Anglo-American
Business History. Colum. L. Rev.. 116. p.2145.
Tepe, M., 2016. In Public Servants We Trust?: A behavioural experiment on public service
motivation and trust among students of public administration, business sciences and
law. Public Management Review. 18(4). pp.508-538.
Phillips, M., Howard, H., Vaaler, A. and Hubbard, D., 2019. Mapping Industry Standards in
Undergraduate Business Education.
Hansmann, H. and Kraakman, R., 2017. The end of history for corporate law. In Corporate
Governance (pp. 49-78). Gower.
Online
Liquidate your limited company. 2019. [Online] Available Through:
<https://www.gov.uk/liquidate-your-company/apply-to-court>
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