Business Law: Understanding the Legal System and its Impact on Businesses

This report explores the fundamental aspects of the UK legal system, focusing on its impact on businesses. It delves into the sources of law, the role of government in law-making, and the application of statutory and common law in courts. The report further examines key business laws like company, employment, and contract law, illustrating their potential impact on organizations. It also provides practical legal solutions for business problems such as contract termination, insolvency, and liquidation, comparing and contrasting different approaches. The report concludes by advocating for the use of Alternative Dispute Resolution (ADR) as a more efficient and effective method for resolving business disputes.

Business Law
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Contents
Introduction...........................................................................................................................................3
LO1 Explain the basic nature of the legal system..................................................................................4
P1 Explain different sources of law and laws that organisations must comply with..........................4
P2- Explain the role of government in law-making and how statutory and common law is applied in
the justice courts................................................................................................................................6
M1-Evaluate the effectiveness of the legal system in terms of recent reforms and developments.....8
LO2 Illustrate the potential impact of the law on a business..................................................................9
P3 Using specific examples illustrate how company, employment and contract law has a potential
impact upon business.........................................................................................................................9
M2 Differentiate and analyse the potential impacts of regulations, legislation and standards.........11
D1 Provide a coherent and critical evaluation of the legal system and law, with evidence drawn
from a range of different relevant examples to support judgements................................................12
LO3 Suggest appropriate legal solutions to business problems...........................................................13
P4 Suggest appropriate legal solutions for a range of business problems e.g. termination of contract,
rescue from insolvency and liquidation...........................................................................................13
P5 Provide justifications for the use of appropriate legal solutions.................................................14
M3 Assess the positive and negative impacts of legal solutions to business problems....................15
LO4 Recommend appropriate legal solutions based upon alternative legal advice provided...............16
P6 Recommend legal solutions based upon a different country’s legal system and/or a different
legal framework...............................................................................................................................16
M4 Compare and contrast the effectiveness of these recommendations..........................................17
D2 Critically review and evaluate the use of appropriate legal solutions in comparison with
alternative legal advice....................................................................................................................18
Conclusion...........................................................................................................................................19
References...........................................................................................................................................20
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Introduction
Knowledge about business laws can help the businessmen and managers in sound decision-
making. In the democracy like that of UK, having an effective legal system is mere necessity.
Talking about the English legal system, it ensures that justice should be accessible to both
poor and rich people. There are innumerable laws that apply to the business world. These
laws help in defining the ethical deeds, providing stability and discarding some uncertainties.
In addition to this, they can serve in resolving the disputes. This report basically targets four
key aspects of business laws. In the first section, it talks about the nature of the English legal
system and legislation that influence the organisation in the UK. It elaborates the process of
law-making in the UK and differentiates between the common law and statutory laws.
Second section explains various important business laws in context of given business
scenario. Moreover, the potential effects of the law on an organisation are also assessed. In
the last section, certain legal solutions and advices are given in context of the provided case
studies.
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LO1 Explain the basic nature of the legal system
P1 Explain different sources of law and laws that organisations must comply with.
a) Discus the meaning of this statement and the various sources of UK Laws
The sentence “UK’s Parliament is sovereign” means that the parliament is the supreme legal
authority in the UK. The parliament sovereignty is the key principle of the UK constitution
that provides the Parliament the power to form or end any law. Even the judicial bodies like
the Supreme Court cannot overrule the decisions of the Parliament. Moreover, no Parliament
has the right to form laws that future parliament cannot amend. Parliament sovereignty is the
most significant element of the UK constitution. The constitution of the UK is partially
written and completely un-codified. Therefore, the Parliament enjoys limitless powers. There
are certain laws passed by the Parliament itself that limits the implementation of
parliamentary sovereignty (Bubb, 2014). These laws are mentioned below:
 Human Rights Act, 1998
 Joining the European Union in 1973
 The decision to form the UK Supreme Court that ended the House of Lords functions
as the highest judicial body.
Various Sources of Law
There are two prime sources of laws, namely primary sources and secondary sources that can
be further divided into sub-sources.
Primary sources: These are the first hand and original source of information. These are
explained below:-
 Precedents: These are the common-law doctrine that is based on the previous
decisions of courts that are usually cited by the courts of lower or same level. The
reference is only taken when the disputes or issues are identical to some previous
case.
 Customs: These laws are established and verified by a particular community or
society setting. Mostly, these laws deal with certain community’s standards that were
set by people in the past (Bubb, 2014).
 European Laws: These laws are established by the member states of EU. These are
established by the Court of Justice and every member of the EU has unanimously
agreed to follow them. These laws can overrule the UK’s statutory laws.
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 Legislations: These are also called statutory laws and are created by the Parliament of
the UK. These are applicable to every citizen of the UK (Cotterrell, 2017).
 International Laws: These laws are established by some International bodies, such
as WHO, UNESCO, UNICEF, etc. These laws are usually regarded and accepted by
the member nations.
Secondary Sources: These consists of magazines, books, journals, and newspapers that
usually consist of some articles specifically based on laws, Acts, regulations, and legislations.
These are the best references to start any research. They provide the basic terminology that
are often used in law suits (Barkan, et.al, 2015). In addition to this, professionals may refer to
related issues and they are easy to understand and read than most of the primary sources.
They usually synthesise the relevant information found in the primary sources.
In the English legal system, there are three terms that often create confusion among the
citizens: the barrister, the solicitor, and the judge. There is a significant difference in the roles
of the three different people in the legal system.
 Solicitor is said to be a legal professional who handles day-to-day legal issues of their
clients. Most of a time, they try to settle the matter outside the court, but if needed,
they can represent their clients in the courtroom.
 Barristers are the legal professional who spends most of their time in the court
resolving the daily legal matters of their clients. Barristers are usually guided by the
solicitor in handling the lawsuit.
 The job of the judges is to hear the arguments of solicitors or barristers. They have to
act neutral while making the decisions on the case. They are responsible to assess the
credibility of the evidences and then order the ruling on the matter.
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P2- Explain the role of government in law-making and how statutory and common law
is applied in the justice courts.
The constitution of the UK is partially written. Therefore, several legislation are created by
the Parliament of the UK. The law-making process depends on the two crucial bodies: 1) The
House of Commons and 2) The House of Lords. The government is elected by people of
the UK after every five years and the chosen candidates represent the House of Commons.
The government tries to maintain the law and order in the region (Barkan, et.al, 2015).
Therefore, it attempts to attend to different issues and challenges that the country is facing.
The issues may arise from the campaigning by nationals, special interest group, minorities,
etc. To resolve the issue, the selected government proposes a bill in the Parliament. The
debate takes place between the government and the opposition parties. Once the bill is
approved in the Parliament, it is sent to the House of Lords.
The House of Lords is the Supreme Court. The court re-evaluates the bill and if needed, it
may suggest some changes in the bill. Once the evaluation is done, the bill is sent back to the
House of Commons again to make the suggested changes.
Once the amendments are done, the bill is sent back to the monarch i.e., the Queen. In the
constitution of the UK, some powers are given to the Queen that includes the power to
approve the bill. Every bill has to be approved by the Queen (Royal Consent). Once the bill
is approved by the Queen, it will be gazetted and the Act is passed (Cotterrell, 2017).
A brief of the law-making is explained below:-
 An issue emerges on the government’s manifesto.
 Subject experts are contacted.
 Cabinet ministers formulate the proposal
 Proposals are reshaped into bills.
 Parties debate on the proposed bill
 Parliamentary stages comprise First reading, Second Reading, Committee stage,
Report Stage, Third Reading.
 A bill is passed
 A bill is transformed into an Act
 The judicial laws are made under the act.
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Applying the statutory and common laws in the court
Laws are essential to govern a nation and they contribute to the history by taking references
from the past cases and making decisions of the future. Rules, regulations, and legislation are
mandatory in order to maintain tranquillity and peace among the people. Most of a time, it
has been noticed that while making verdicts, the judicial body refers to either common laws
or statutory laws. The former are also called precedents or case laws and applied to new
cases. These laws are basically the decisions that are made by the judges of the higher court.
These laws are recorded in the yearbooks and are referred to make decisions in the new cases
in the same level or lower order courts. On the other hand, statutory laws are established by
the parliament and are codified by the government. These laws are also known as session law
or written laws. These are applicable to every citizen (Cuniberti, 2013). These can be formed
by local municipalities, state or national legislature. Statutes are also called codes. These laws
being superior to common laws can overrule them in case of any conflict between the two.
The common thing between the two types of laws is that both of them can be challenged in
the higher level courts.
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M1-Evaluate the effectiveness of the legal system in terms of recent reforms and
developments.
In the United Kingdom, the Law Commission is required to formulate a programme to
examine various branches of law in order to make reform in the existing legislations. The
laws are reformed under the Law Commissions Act 1965. After every 3 to 4 years, the
commission asked for suggestions for a particular law. Law reform program are needed for
the sustainability of the legal system of the UK. The final decision is taken after considering
the various points. First, the need for the law reformation is discussed and the significance of
the issues that it covers is examined. The resources available for the reform are analysed. The
legal system is pivoted on the Rule of Law and consists of administrative institutions, judicial
and regulatory bodies, and comprehensive legal framework that are responsible for
implementation and enforcement of the laws and policies. Region like the UK is continuously
changing and therefore, it needs some important reformations in its legal system. Apart from
this, government also ensures that businesses that are operating in the UK are least affected
by the reform processes (Siem and Deakin, 2014). Inclusion of environmental liability under
the Company Act 2006, protection of the citizens’ personal data as suggested in the General
Data Protection Regulation 2018, avoid discrimination in Equality Act 2010, and many
more are certain reforms that were brought in the existing legislations of the UK. These laws
define the course of action for both employees and employers, and ensure that standards are
being followed.
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LO2 Illustrate the potential impact of the law on a business.
P3 Using specific examples illustrate how company, employment and contract law has a
potential impact upon business.
Laws and legislation direct the businesses to prevent themselves against any deceitful event.
These can have both positive and negative impacts on the business. Laws obligate the
director and organisation to follow some pre-defined standards and implement them in their
working premises. The Company Act 2006 has defined certain duties of the directors of the
organisation:-
 The directors must act in accordance with the organisation’s constitution and use only
those powers that are assigned to them.
 They are responsible to promote the success of the firm for the benefits of its workers.
 They are liable to exercise reasonable skill, café, and diligence.
Now coming on the case study where JPM Publishing is planning to float as Public Limited
Company in order to raise the funds from the external parties for expansion. There are many
challenges that company might face while doing so. First, it may lead to equity dilution and
the owners may lose the governing rights. Going public not always beneficial as the process
is time-consuming, expensive, and add a burden of paperwork on the company. Moreover,
some additional responsibilities, such as formulation of efficient HR and CSR policies come
on the organisation’s shoulders. In addition, a few obligations that are discussed below also
come on the firm.
1. Health and Safety Regulations: In the UK, the Health and Safety at Work Act 1974, sets
out the directions and liabilities for the employers. Once declared the public limited
organisation, JPM Publishing will have do risk assessment and provide essential training to
the employees. The company is liable to provide the safest working environment to the
employee (Marmot, et.al, 2012). Certain key points of HWSA 1974 are enlisted below:-
 The employer is liable to ensure regular maintenance of instruments, plants, and
machineries so as to make them reasonably risk-free and safe.
 They are bound to provide risk-free and safe storing, handling, and transporting the
material.
 They are directed to provide necessary training, educations, and guidance, necessary
for the safety of employees.
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 Provisions for making adjustments in the job so as to maintain welfare at work for
workers.
2. Equal Opportunities Regulations: The Equality Act 2010 obligates the employers to
treat every worker equally. The primary goal of this act is to ensure that no discrimination
takes place in the internal and external working environment based on sex, age, colour, race,
income, etc. It also obligates the employer to make adjustment for the physically challenged
employees to help them in competing with the normal employees. JPM publishing is going
public. Therefore, it has certain public sector equality duties. They have to take into account
practices and policies that affect individuals with some protected characteristics, such as
mental and physical health problems. Directors are liable to make changes in the organisation
policies and functioning as given below:-
 Making changes in the traditional ways of working
 Providing infrastructure and other physical features, such as doorways, ramps, lift,
etc.
 Providing assistance to them.
3. General Data Protection Regulation (GDPR): The Data Protection Act 1998 ensure
that the personal data and information should not be misused by any public or private
enterprise. JPM Publishing being operating in the UK is subjected to this law as well. In
May, 2018, a new regulation called General Data Protection Regulation (GDPR) came into
existence. It obligates the businesses in the UK handle and process the personal data of the
citizens of the UK with utmost security.
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M2 Differentiate and analyse the potential impacts of regulations, legislation and
standards.
With the rise in economic power of private parties in the business world, number of laws that
regulate them has also increased. No doubt that regulations, legislation, and standards are
important from the perspective of both employee and employer. They promotes a healthy
competition in the market and control the large businesses from regulating the market. They
help the organisation in dealing with the market uncertainties and fluctuations. They reduce
the legal implications arise during operating the business functions. Standards help in
enhancing the process management and improving the public welfare. They also ensure the
health, safety, and environmental protection. On the other hand, regulations on organisations
can benefit a wide variety of stakeholders, such as financial institutions, customers,
employees, corporate individuals, and interest groups. Regulations define the product and
processes characteristics which organisations have to comply with. Regulations lead to
increase in the operating and maintenance cost, but it increases some benefits too. The basic
difference between the two is in the compliance. Conformity with the standards may be
voluntary but this is not the case with regulation. Regulations may affect the trade, whereas
not following the standards may affect the market share of the business. Talking about the
effect of legislation on the organisation, imposing a large number of legislation on an
organisation may lead to lower efficiency. This can also constraint the businesses to operate
at its potential.
Comparing the impacts of standards, legislation, and standards is irrelevant and vague. This is
because their consequences usually driven by the market scenarios.
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D1 Provide a coherent and critical evaluation of the legal system and law, with evidence
drawn from a range of different relevant examples to support judgements.
In the democracy like that of UK, having an effective legal system is mere necessity. Talking
about the English legal system, it ensures that justice should be accessible to both poor and
rich people. For this purpose, the Exceptional Case Funding (ECF) scheme was launched by
the government un order to financially assist the needy people. The legal system is always
open to reformation and had gone through some major reforms in the past. In context of a
business world, legislations, such as Contract Law, Company Act 2006, Data Protection Act,
and Equality Act 2010 are some basic components of the partially written constitution of the
UK. These legislations have to be followed by each and every organisation operating in the
UK. These legislation promotes a healthy employee relation, business-customer relationship,
and help in building the brand image.
Law reforms are important to run the business world parallel to that of rapidly changing
environment. Sometimes they are opposed by the business communities. For instance, the
Consumer Rights Act 2015, was criticized and opposed by the business enterprises in the
UK, but the reform was essential in order to protect the customer from illicit practices
followed by the businesses.
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LO3 Suggest appropriate legal solutions to business problems.
P4 Suggest appropriate legal solutions for a range of business problems e.g. termination
of contract, rescue from insolvency and liquidation.
Case 1:
In the first case of Champion Ltd., the company is facing financial problems after moving
away from its location as a result of which the company faces decline in the customers. The
creditors have threatened the company for winding up petition under the Insolvency Act
1986. This act empowers the creditors to liquidate the company’s assets. In case the court
grants the winding up order, the company will be liquidated. The liquidation can be done in
different forms as described below:-
 Creditors Voluntary Liquidation (CVL): In this case, the liquidation is called by
the director of the company, instead of the creditors. In this, a meeting is called and
all the creditors are invited in it. In the meeting, a liquidator party is appointed that
take the possession of all the property of the firm, including its yearbooks and records.
 Compulsory Liquidation: In this case, the creditors force the organisation into
liquidation against the wish of the director of the company. In this an official receiver
(OR) takes the responsibility of the liquidation process. The role of the OR is to
analyse the company’s assets and pay the outstanding debts.
 Members Voluntary Liquidation: This liquidation process is initiated by the
stakeholders of the organisation. In MVL, the organisation is solvent and company’s
creditors are paid their all amount and the remaining fund is credited in the directors
or stakeholders’ account.
In this case, instead of compulsory liquidation, company can take up other measures like
Company Voluntary Arrangement (CVA) as defined under Enterprise Act 2002. Company
can also carry out certain negotiations with the creditors in order to develop a repayment
plan.
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Case 2
In the second case, Mr. Anderson had an employment contract with Amber Ltd., that he
broke in order to join Beta ltd. Amber Ltd can send a prohibitory injunction notice under
section 25 of Civil Jurisdiction and Judgement Act 1982. This injunction would stop Mr.
Anderson from joining as CEO at Beta Ltd. The company seems to be in an advantageous
position. If the case is taken to the court, there are more chances for Amber Ltd., to win the
case. The court may direct Mr. Anderson to pay off for the losses the company had incurred
due to his sudden resignation. To stop the proceedings, Mr. Anderson can also revert back by
filing for freezing the prohibitory injunction order. The best possible suggestion for both the
parties is to resolve the issue through negotiation in order to save each other’s time and
money.
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P5 Provide justifications for the use of appropriate legal solutions.
In the case of Champion Ltd., compulsory liquidation i.e., winding up is the last instrument
left with the creditors to get their money back. This would lead to losing the control of the
company from director’s hand. This has large negative impacts as the information of the
liquidation of the company can go public after seven days of filing a petition. This can result
in freezing of the bank accounts without any prior notice. This also increases the liability on
directors as they would be made responsible for paying off the debts. Therefore, resolving the
issue of outstanding debts, company should choose other measures like Company Voluntary
Arrangement (CVA) as defined under Enterprise Act 2002. In this case, various methods of
Alternative Dispute Resolution (ADR), namely negotiation, arbitration, mediation can also
be brought in use (Amato, 2015).
In case of Amber Ltd., the company got affected in terms of time, resources, management,
and much more. Therefore, sending prohibitory injunction notice under section 25 of Civil
Jurisdiction and Judgement Act 1982 can help it from stopping Mr. Anderson to join Beta
Ltd. The court can ask him to work at Amber Ltd. till his contract with the organisation
expires or pay organisation for the losses incurred.
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M3 Assess the positive and negative impacts of legal solutions to business problems.
Case 1: Champion Ltd and the winding up petition
Since the company may go liquidation, Company Voluntary Arrangement (CVA) is
suggested in this case.
Positive Impact: The director would remain in power and have the full control over the
organisation. In addition, it is cost-effective and time-saving method. The information about
the company’s financial condition would not get disclosed in public.
Negative Impact: CVA may affect the organisational credit worthiness and rating. This may
affect future investments. This also affect the stakeholders trust and confidence in the
company.
Case 2: Mr. Anderson and Amber Ltd.
To freeze the prohibitory injunction orders, negotiation method (ADR) is suggested to
resolve the issue.
Positive Impacts: It cut the cost of resolving the issue and save a lot of time of both parties.
It is quite a flexible method where parties enjoy more flexibility in choosing the rule of the
procedure. The best thing is that the outcomes can be made confidential.
Negative Impacts: This method may not provide the surety to resolve the issue. This means
that money and time is at a stake in this method. In addition to this, there can be a possibility
of bias decision-making.
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LO4 Recommend appropriate legal solutions based upon alternative legal advice
provided
P6 Recommend legal solutions based upon a different country’s legal system and/or a
different legal framework.
In context of the given case study, the most suitable method of resolving the corporate
disputes is Alternative Dispute Resolution (ADR). Every organisation would like to settle the
dispute at the earliest so to save time and money. For Amber Ltd, taking the case in the court
cannot be beneficial because it is costly and time-consuming as it may take decades to
resolve the issue. On the other hand, ADR saves both time and money of parties. In addition
to this, it gives control in the hand of the disputants and provide them an opportunity to
discuss their issues. For Mr. Anderson the latter option is not beneficial as it may ruin the
relationship between the two parties. ADR method contains mediation, arbitration, and
negotiation (Lee, et.al, 2016).
Mediation: In this method, a neutral third party is hired by the disputants to reach settlement.
The third party act as a mediator and carries out communication between them. Mediator do
not act as arbitrator or judge.
Arbitration: In this method, the decision-making lies in the hand of the third party called
‘arbitrator’. He makes decision after hearing to both parties and take the best decision that
respects the interest of both disputants.
Negotiation: In this method, two disputants reach a settlement that favours the interest of
both of them. This can be made through a dialogue between the two without involving the
third party.
Choosing ADR method can provide more innovative solution to the parties. Only limitation
to this method is that it does not guarantee the resolution of the disputes.
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M4 Compare and contrast the effectiveness of these recommendations.
In case of Mr. Anderson and Amber Ltd, nothing could work as good and effective as ADR.
The key to success of ADR lies in the way it is brought into use. It takes the system approach
that takes into account every dispute-resolving option, where filing for prohibitory injunction
does not consider other options. Also, the latter can ruin the relationship between the two.
ADR increases the chances of compliance with the agreed decisions (Lee, et.al, 2016). In
some rare cases, it has been found that ADR also takes time to resolve the issues that
increased the cost for the disputants. Going to the court may not leads to mutually beneficial
solutions, but ADR can do it easily.
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D2 Critically review and evaluate the use of appropriate legal solutions in comparison
with alternative legal advice.
Disputes can occur anywhere, no matter how well an organisation is doing in its field of
interest. To settle the dispute, company must look at different ways to resolve the issues.
They are basically two ways to resolve any issue: Litigation and Alternative Dispute
Resolution (ADR). The former is a lawsuit and end result may not be satisfied for both
parties. It has only one major advantage over the ADR method that it provides surety of the
final decision. With the help of litigation, money disputes can be resolved, one can put an end
to certain illegal activities, and organisations can interpret statutes. Apart from this, it is more
appealing, enforceable, and safe process. Sometimes court also order to resolve the issues to
be resolved by ADR methods. One of the criticism of the lawsuits is that they can be
intimidating- the rich against the poor. ADR can be utilise in negotiating any kind of
settlement between two opposing parties and offers numerous advantage over court
proceedings. It does not involves a large paperwork or consumes a lot of time. Litigation on
the other hand can drain the resources of both disputants. ADR offers the disputants a
freedom to choose their mediators or arbitrator. The decision-making in this method takes
care of the active participation of both parties. ADR keeps the dispute under the cover by
making it confidential, whereas in the litigation method things get registered in public record
(Siem and Deakin, 2014). ADR provides the freedom to the parties to schedule the sessions
as per the convenience of the participants. In addition to this, disputants can also take the case
into the court if they feel unsatisfied with the agreement.
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Conclusion
Here, it was shown that how business laws are important for business organisations,
employers, and employee. The corporate laws help in regulating business contracts,
manufacturing, sales, and hiring practices. In the United Kingdom, business laws are in the
province of both the Parliament and the judicial bodies. In the course of writing this report, it
was seen that how business laws can be used to resolve the disputes that affect the business
organisation. Being aware of the basic business laws, owners can make decisions that might
benefit the business in a long run. This report basically targets four key aspects of business
laws. In the first section, it talks about the nature of the English legal system and legislation
that influence the organisation in the UK. It elaborates the process of law-making in the UK
and differentiates between the common law and statutory laws. Second section explains
various important business laws in context of given business scenario. Moreover, the
potential effects of the law on an organisation are also assessed. In the last section, certain
legal solutions and advices are given in context of the provided case studies.
20

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