Business Law and Corporate Governance

The provided assignment details various aspects of business law, including company formation, corporate governance, and dispute resolution. It emphasizes the significance of proper business structure in ensuring success and recommends choosing the right method for resolving disputes to save time and cost.

BUSINESS LAW

Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION 1......................................................................................................................................3
TASK 1............................................................................................................................................3
(a). Meaning of 'Parliament is sovereign' and various sources...............................................3
(b). Role of government in law-making and application of statutory and common law in
justice courts...........................................................................................................................5
(c). Application of company, employment and contract law and their potential impact upon
business...................................................................................................................................6
TASK 2............................................................................................................................................7
Formation of incorporated and unincorporated business and their management...................9
SECTION 2....................................................................................................................................11
Case 1. .................................................................................................................................11
Case 2. .................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business law governs the commercial transactions of a business. The provisions are
applicable on corporate contracts, hiring practices, manufacturing and sales of consumer goods.
An entity is required to abide by various laws from its incorporation to dissolution. Law provide
a uniformity, guide, protection and resolution to disputes that going to arise in life span of a
company. Partnership, company, bankruptcy and agency are regulated through their respective
laws where as dealings are regulated by contract laws (Clarkson and et. al., 2014). These are two
distinct areas of business law. In UK, companies are required to follow Companies Act, 2006.
However, there other laws that are mandatory to run business and they are Insolvency Act, 1986,
UK Corporate Governance Code, EU Directives and court cases. This report includes sources of
UK laws, role of government, application of statutory and common law in courts, impact of
company, employment and contract law upon business, differentiation between legislation,
regulations and standards for analysing its impact, nature and difference between unincorporated
and incorporated business and legal solution to resolve disputes through case laws.
SECTION 1
TASK 1
(a). Meaning of 'Parliament is sovereign' and various sources
English legal system have a partially written and codified, and acts have been enacted for
the written portion. This regulates rights of citizens, hence, laws are compulsory. There is a
specified procedure to get an act passed. Firstly, a bill is introduced by a member of parliament
belonging to either of the two houses. After that, various readings are done in order to improve it
for effective result in law and order. Finally, the bill is passed by getting the royal assent by
Queen. Hence, a law is passed after being passed by Crown. The courts do not have the power to
overrule legislations so passed and no amendments can be made in existing Acts without the
approval of Parliament. It is also called parliamentary supremacy or legislative supremacy. It has
the power to amend or repeal any previous provisions and is not bound by written law or
constitution. This doctrine has been made applicable due to many reasons such as to limit the
government's power. In earlier times, government used to alter rights of UK citizens after
entering into Treaties. To protect them from the conflict made this doctrine important.

There are three major law which are applicable on the UK citizens and people and they
are Statue, Common and Equity law (Wellings and Vines, 2015). Statue law is an Act of
Parliament. The procedures to make statue law begins with presenting bills before both the
houses. It may be a public bill or private bill. Common law are the laws made or enacted on the
basis of court rulings. Previous rulings given by older courts are foundation for its provisions. It
is also known as case law or precedent. Equity law is a branch of law that was developed as a
supplement to the strict statutory laws that may provide harsh punishments. In other words, it
decides punishment by laying justice and fairness along with the motive of the accused. Doctrine
of sovereignty of UK Parliament is the prime source of above-mentioned laws. However, there
are other sources as well which are categorised into two parts viz. Primary and secondary
sources. These have been discussed below:
1. Primary Sources: These are first hand information, that have not been used before.
 Case law: These are known as law reports and are fundamental sources of UK
law. It provide reliable information carrying facts, issues and decision along with
legal principles upon which judgement is made (Rasch and et. al., 2013).
 Legislation: The Parliament has the supreme authority to make laws that will be
applicable throughout UK. These are called legislation and everyone is bound to
abide by them. Such legislation is superior and cannot be challenged in courts.
2. Secondary Sources: These contain information that have been used previously either by
an author or research etc.
 Legal Encyclopaedias: Halsbury's Laws of England and Wales is the authentic and
comprehensive statement of laws applied in UK. Various authors and lawyers have
provided their interpretation and is arranged alphabetically.
 Parliamentary Publications: To know a law, it is necessary to know the reason and other
details such as its background for a particular provision. These can be gathered from
command papers, debates of parliament, house of commons and house of lords papers.
 Non-parliamentary publications: These include reports and consultation papers from
government departments and agencies and are available on the respective government
websites.

 Law commission: It has been constituted with an objective to review existing laws,
analyse the areas where reform or development is required, and present a report to be
consulted with interested parties and public at large (Leyland, 2016).
 Law Journals: It is a mix of articles and case commentary which helps in providing a
clear meaning of legal issues.
 Textbooks: It includes written matters regarding legal topics and can be find in academics
textbooks written by authors.
(b). Role of government in law-making and application of statutory and common law in justice
courts
Government has a major role to play in law making not only in UK but in other countries
as well. The economy, taxation system, legal system, social norms and many more parts gets
influenced by the government policies. The legislative role played by government in UK legal
system is to know the interests of UK citizens, pass the law and monitor the outcomes of law.
Apart from this, it has been empowered to amend, approve or reject draft bills along with the
consultation of Westminster Parliament. Further, they issue papers for public discussions before
the public to know their views and opinions to as to have more definite intention of its
applicability. There is a set procedure for making a law (Forth and et. al., 2013). A legislation is
formed by passing a bill. A bill may be presented by any member of the parliament. The process
is as follows:
 First reading : In this step, bill arrives in the parliament.
 Second reading : in this step, the bill is presented by a government minister before
House of Commons. Views of opposition and other parties are heard and voted by
everyone present in the Parliament.
 Committee Stage : After the bill gets passed from second reading by majority of votes,
they are then referred to standing committee for examination. It has 16 to 20 members
and headed by a member of Chairman's panel and has an authority to cast his vote only in
case of a tie.
 Report stage : The decision formed at committee stage is further examined and more
amendments are debated and further votes are taken on the proposed amendments. This
step can be lengthy (Waughray, 2014).

 Third reading : In this step, the bill is reviewed. Bill is passed and presented to other
Houses and whole procedure is repeated. At this stage, it can still be amended provided
both the Houses agreed on the amendments.
 The Royal Assent : This is the last stage of the whole process where assent is given by
the Queen to the bill by stating that all the previous parliamentary stages have been
completed and is declared to both the Houses. After receiving the assent, a bill becomes
law and is enacted throughout the UK.
Common Law and Statutory Law are applied in justice courts in a specific way. Courts
use statute law to make decision on the existence of an Act. The judges use this as it can not
take priority over other rules or legislations. The rules should be used in its literal meaning and in
ordinary form and can not be altered according to cases (Adachi, 2013). Interpretation of laws
could vary person to person, but the thumb rule of such laws say that there is only one meaning.
On the other hand, common law is applicable to both criminal and civil law as a Tort. It
influences judgements in those case which can not be determined by applying existing laws. This
given rise to new principles, which are used as references to conclude future cases. As per the
doctrine of judicial precedents, sub-ordinate courts are bind to follow decisions of higher courts
instead of statutory laws provided the courts fall under the same jurisdiction. These are
developed through written opinions of judges which are delivered at the end of a trial.
(c). Application of company, employment and contract law and their potential impact upon
business
 Company law: UK companies are required to get registered and follow Companies Act,
2006. it is applicable from the inception to winding up the entities. This Act has been
enacted with a view to simplify existing company law, classify directors duties, provide
protection to shareholders and to make administrative activities easy and simple. The
company has to prepare charter before incorporating a company. It is compulsory for
every corporation to follow Companies Act, 2006. Also, companies can not come into
existence without getting registered under this act. Along with this, rules are their which
are mandatory to follow (Ayios, 2018. ). Act provides for punishments for any
contravention or breaches. In case, a company fails to comply with required provisions, it
will face legal consequences which may lead to winding up. For example, the directors so
appointed by the company has to act and carry his duties as provided in Companies Act,

2002. if a director act in contravention of such duty or in the interest of company, then
this will amount to an offence. In such scenario, he will be removed from his post. Also,
he won't be allowed to apply for directorship in the same company for a specific period
as provided in the Act. Usually, such period is of 5 years.
 Employment Act, 2002: The provisions of this act governs wide range of issues from
workplace safety, pension plans to discrimination etc. It regulates the rights of employers
and employees and provide uniformity in at workplace. Along with this, it contains
offences for breaching its provisions. It is compulsory for every employer to comply this
law. It protects workforce from unfair dismissal, exploitation, harassment and so on. It
may impact a company in a negative way. This Act has been enacted for protecting
personnels working in the organization. For example, if an employer dismiss an
employee due to reason of pregnancy, then it will be an unfair dismissal and that
employee may seek actions against her employee by filing a case in employment tribunal
(Deakin and et. al., 2012).
 Contract (Applicable Law) Act, 1990: A business can not make dealings without
entering into contracts. A contract is formed when an offer has been made along with
some valuable consideration and which has been accepted by the other party. To make it
legally binding there has to be a legal intention to form a contract. The terms and
conditions should be entered very carefully as any mistake and misrepresentation will
make the contract void. A company execute contract between the buyer and the seller
when goods are bought and sold The Contract Act, 1990 is applicable on all the
organizations and citizens who have entered into a contract. It provides provisions that
govern formation and disputes arising from such contract. Also, it offers specific actions
that can be sought by the parties engaged. For example, A entered into a contract with B
to supply 10 containers of raw material within the specified time. A failed to deliver it in
time. In such case B can sue A and pray for specific relief.
Difference between Legislation, regulations and standards
Legislation Regulation Standard
These are the laws that have
been enacted by UK
legislature to promote law and
The process of monitoring for
effective implementation of
These provide specification or
guidelines for ensuring safety

order, protect people by
providing justice.
law is called regulation. and efficiency of legislation.
TASK 2
A company is a body corporate registered under companies act. It may be limited or
unlimited, private or public or even a company limited by guarantee (Dolzer and Schreuer,
2012). It is an artificial separate legal person with perpetual succession and a common seal. The
motive is to carry business activities.
Advantages of a company:
 Limited liability for shareholders.
 Easy to transfer shares
 more favourable taxation rate
 More capital and funds
Disadvantages:
 Expensive to form a company.
 Complex reporting norms.
 Personal liability of directors in case they fail to meet legal obligations.
On the other hand, partnership is an association of persons to carry business activities
with mutual interests. It is an unincorporated business entity (.Folsom and et. al., 2012). To form
a partnership firm, two or more persons are required. Profits and losses are shared as per the ratio
mentioned in deed. In absence of such ratio, these are divided equally.
Advantages:
 Easy to establish as incorporation cost are low.
 More capital available for business.
 Easy to change legal structure.
Disadvantages:
 The liabilities of partners are unlimited.
 Each partner is an agent of the partnership firm and is liable for actions by other
partners.
 Risk of disputes is high (Hamilton, 2015).

A business can be incorporated or unincorporated. Difference between these two have
been mentioned below:
Basis Incorporated Unincorporated
Business liability These are independent legal
entities, hence the owners of such
organization are not personally
liable for business debts. If the
business is short of money, there is
no legal requirement for owners to
pay the unpaid debts.
Owners of unincorporated
businesses are personally liable
for the liabilities of the
organization. In case it runs out
of funds, it will be on the owners
to meet the remaining
outstanding debts.
Unlimited life It has unlimited life as it does not
depend on the lives of its owners.
And only law or any other extreme
situation as provided in the act can
make it wind up.
These are just the extensions of
owners business, hence there are
high probability of a finite
lifespan. It is based on the lives
of its owners, and dissolved when
all of its owners are died.
Transferability of
interest
These are independent legal entity,
therefore, interest in the business
can be transferred by complying
with the provisions of applicable
laws without affecting the
business.
There is no legality of business,
hence, it is difficult to transfer
interest in the business to a third
party (Hayek, 2012). However,
the owner may sell business
assets, but will be unable to sell
his interest as such entities are
just extensions.
Taxpayer Status It is compulsory for the business to
pay tax on the income it makes.
Moreover, the owners will have to
pay tax again on the which has
been distributed by company. In
nutshell, one income is taxed
Due to the reason of it not being
independent, the owners are not
required to pay tax on their
personal income and losses. Here,
the income is taxed once only.

twice.
Access to capital It is easier to get funds for the
growth. Also, it can sell its
securities and stock and raise
capital for expansion.
It is harder to get loans for
business as there is no legal
structure.
Formation of incorporated and unincorporated business and their management
The formation process of these two businesses are completely different. Incorporated
businesses (companies) are formed by registering the name with Companies House. They can be
incorporated through company formation agents (Formation of company, 2018.). The process is
as follows:
 An application will be filed in Form No. IN01 along with the prescribed fee.
 A suitable name for the business must be provided in the information as required for
registration. Provided, such name should not resemble the name of any previously
registered company .
 An address of head office is required for communicating, to receive notice from
companies house.
 Further, Memorandum of Association and Articles of Association will be prepared and
filed to Companies House along with Form IN01. The form will contain the name basic
information about company, directors and company secretary.
 Details of company's shareholders and share capital.
 SIC code to explain the objectives of business.
 Once all the statutory requirements have been completed, the Companies House will
issue a certificate of incorporation by noticing the name in the register.
 A company will comes into existence from the date it receives this certificate.
Funding of Company: A company being a legal person have privilege to raise capital
over any other business entity (Macaulay, 2018). The sources through which it can finance its
activities are as follows:
1. Debt capital: This is the most common type of raising funds. It includes bank loans,
personal loans, bonds etc. An agreement is executed before going for this way.

2. Equity capital: Under this, company gather financial resources by disposing or selling
share of stock. Also, company has option to sell its additional shares for raising funds.
Management of affairs: A company can not act itself as its does not have its hands, eyes
or brains, hence, it need an agent through which it can conduct its business. For this purpose, it is
required to appoint requisite number of directors. Directors are responsible for managing
business transactions, properties and funds of company and execute contracts on its behalf.
On the other hand, unincorporated businesses like partnership as for by Jenny, Penny and
Marie in the given case. The only way to form a partnership firm is by executing an agreement
between the partners. There is not specific process formation process for such businesses. Also,
registration is not compulsory, however, a firm can get registered (Hammond, 2012).
Funding: Partnership firms are unincorporated business entity, therefore, it gets difficult
for them to raise funds. The easiest and common way to infuse capital is through the contribution
by its partners. Also, a new partner is admitted to firm only when increase the capital by
contributing in the capital. However, it can apply for business loan, but due its status of
unincorporated business, it is not easy to get such loan.
Management of business: A partnership firm is formed on the basis of mutual interest
of all the partners. They are the one responsible for carrying its activities. Also, a partner is held
liable jointly as well as severally in case of a default of a single partner, all or even when a firm
fails to repay its debts (Miller and Cross, 2012). In such a case, there is no separate existence, a
partner is not different from its firm. Further, a firm can be dissolved only when all the partners
have agreed for the dissolution or when the firm or its partners have become insolvent.
SECTION 2
Case 1.
In the given case, Champion Ltd. Had to move from its site location to a different place
due to which it experienced financial crisis because of decline in its customers. Creditors have
threaten to apply for “winding up petition” when the company failed to repay the loan it had
obtained from creditors and banks. Winding up petition is a legal action taken taken by creditor
or group of creditors against a corporate that owes them money. However, other people can also
file winding up petition. According to UK laws, if company has taken a credit of £750 or more,
the creditor has right to file the petition. Further, a liquidator is appointed to manage the assets

and debts of the concerned company. This is the last option when all other ways have failed to
apply for repaying the debt to creditors. This liability is paid by selling assets and paid pari
passu.
Case 2.
In this case, Mr. Anderson has breached the employment contract with Amber Ltd. In
which it was stated that, in either case, a 12 months' notice is to be served before resignation or
termination. Former joined a competitor company Beta and left the job during transitional
period. Amber Ltd is seeking an injunction to prevent Mr. Anderson from commencing
employment with Beta.
There are many remedies that can be applicable in these two cases. They are as follows:
Negotiation: It is the most common and universal dispute solution. The objective is to
settle the dispute in no time for maintaining efficiency in management, costs and relationship
with employees.
Litigation: It is the traditional way of resolving disputes. Under this, lawsuits are filed by
the defendant and on the basis of evidence, judge will determine the case (Marston, 2013).
Adjudication: It is a method for resolving dispute outside the court. Under this, a case
can be referred to an independent third party for adjudication at any time. Adjudicator conclude
the case by taking reasonable measures and his decision is final.
Alternate Dispute Resolution: It is speedy, less threatening, less tense, cost-effective
and private way to resolve disputes. A third party decides the matter and his determination is
final. It has three sub methods:
1. Conciliation- In this, independent neutral advisor is appointed to hear the part of one
disputes party and pass them to another. A solution is formed on the basis of both parties
views.
2. Meditation- it is a structured negotiation and is one of the important methods of ADR.
The third party hear disputed parties and decide an overall solution.
3. Arbitration- It is the remedy to resolve disputes by appointing a third party either decided
mutually or appointed by law (McAdams, T. and et. al., 2015). It is a less time consuming
method and less costly.
The best way to solve the problem in case 1 would be negotiation. A company's image
gets rotten when a winding up petition is filed against it. Therefore, negotiation with creditors

can be a great remedy. In 2nd case, injunction is right way to solve the problem. As the employee
is in possession of confidential information and has breached a major employment clause, hence,
it becomes necessary to prevent him through this remedy.
CONCLUSION
From the above report, it has been concluded that business law is necessary to conduct
activities smoothly. Compliance with the law is always appreciated, also, employees look
forward to work in such organizations. Business law provides uniformity and protect any unfair
practices. Also, there are other legislation that are applicable on an entity, which should be abide
by. Further, before formation of a business, right structure should be chosen to avail the benefits
as proper structure is the key to success of business. Further, disputes are inevitable, hence, they
should be resolved promptly. It is important to choose the right method for resolving in order to
save the cost and time.

REFERENCES
Books & Journals:
Clarkson, K., Miller, R. and Cross, F., 2014. Business Law: Texts and Cases. Nelson Education.
Wellings, B. and Vines, E., 2015. Populism and sovereignty: The EU act and the in-out
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Routledge.
Leyland, P., 2016. The constitution of the United Kingdom: a contextual analysis. Bloomsbury
Publishing.
Forth and et. al., 2013. Inside the workplace: findings from the 2004 Workplace Employment
Relations Survey. Routledge.
Waughray, A., 2014. Capturing caste in law: caste discrimination and the Equality Act
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Adachi, Y., 2013. Building big business in Russia: The impact of informal corporate governance
practices. Routledge.
Ayios, A., 2018. Trust and Western-Russian business relationships. Routledge.
Deakin and et. al., 2012. Markesinis and Deakin's Tort Law. Oxford University Press.
Dolzer, R. and Schreuer, C., 2012. Principles of international investment law. Oxford University
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Folsom, R. H. and et. al., 2012. International business transactions: a problem-oriented
coursebook. ThomsonReuters.
Hamilton, R., 2015. Hamilton and Freer's the Law of Corporations in a Nutshell, 6th. West
Academic.
Hayek, F. A., 2012. Law, legislation and liberty: a new statement of the liberal principles of
justice and political economy. Routledge.
Macaulay, S., 2018. Non-contractual relations in business: A preliminary study. In The Law and
Society Canon (pp. 155-167). Routledge.
Miller, R. L. and Cross, F. B., 2012. Business Law, Alternate Edition: Text and Summarized
Cases. Cengage Learning.
McAdams, T. and et. al., 2015. Law, business, and society. McGraw-Hill Education.
Marston, W. M., 2013. Emotions of normal people. Routledge.
Hammond, K. J., 2012. Case-based planning: Viewing planning as a memory task. Elsevier.
Online:
Formation of company. 2018. [Online]. Available through: <https://www.gov.uk/limited-
company-formation>.