Business Law in UK : Assignment Solution

Business law

Table of Contents

INTRODUCTION
English legal system is one of the oldest among all that are governing economies at
world level of various nations. Rights and obligation are elaborated in number of ways through
various laws. Legal system of the world is consist with civil law, common law and religious law.
Businesses are growing and expanding at national and international level that makes it necessary
to be aware with business law of different nations. Business law in UK is quite similar to other
countries but differs to some extant (Baldwin, 2012).
An American corporation is planning to set up an it consultancy in UK and to understand
business environment laws that governs business needs to be studied. This will help in
identifying various form of business that can be legally formed in UK.
TASK 1
P1 Different Sources of law in UK
Laws in UK has evolved over the years and this evolution requires certain basis on which
changes can be made (Sources of law, 2015.). There are number of sources through which
different laws are designed and amended over the years to create effective legal system in the
country. Sources of law are described as-
Legislations: These are considered as one of the important source for law formulation
that belong the testimony of formal system by the capable authorization. Legislations frames new
laws with the act of parliament and amends and replaces old law. In UK emissary legislating
includes statutory instruments, orders of council and laws.
Case laws: This source of law involves judgement on a case that is decided in the court
and is very different from the existing laws. Judgements that are new and bring some addition to
the law becomes important source of law (Berings and Adriaenssens, 2012). When any
legislature is not specified in the law then decision is provided on the basis of own sense of what
is right and wrong in the given scenario.
In Pepper v Hart [1992], case that involves issue related to a individual who worked as
an teacher in a school for charging tax on the park in manner of reduced school fee. The House
of Lord decides in this case that teachers should rely on the statement in Hansard made at the
time of the Finance Act. This statements specifies no taxes will be paid on the amount
represented to teachers as parks in any form ( Pepper v Hart, 1992).
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Statutes: These are originated from parliament and is binding through a system of
judicial precedent. Starting of statute is done with a draft for the law that is presented as proposal
to the houses of parliament and decision to make a law passes with royal consent.
European Union Law: Countries are part of unions that governs rules and regulations at
world level. UK is member of European union and laws that are passed by the union needs to be
followed by UK. This acts as a source of law for all the four countries in UK.
Illustration 1: Sources of law, 2015
Source: Sources of law, 2015
P2 Role of government in law formation
Parliament based in London is the highest authority to pass laws in UK. Parliament
performs a legislative function in UK because in addition of introducing new laws and legislation
Before passing a laws for the country drafting of law is done (Cohen and Kietzmann, 2014).
Drafting a law requires information that is collected through various sources that is available in
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the legal system. Information that is required for drafting law must be reliable as legal system
affects a whole nation whole together. Government deals with general public through serving
them and operating through various departments this leads to advantage of large amount of
information required for drafting laws. After collection of data all the relevant information is
segregated with permutations and combinations. A draft is prepared for the law that specifies
requirements of the new law and changes it will bring for betterment of the society as whole.
This draft is presented to the parliament as bill and to become a law this bill must be approved
with House of Lords and House of Commons. Royal consent is mandatory to pass a new law in
the country with the approval of both the houses.
In the recent reforms of BREXIT it is seen that government in UK plays an important
role in implementing new trade policies. As after exit of Britain whole economy got shattered
and to restore economic conditions in the country government helped traders by implement line-
ant policies to improve trade in the country (Fortney and Gordon, 2012).
TASK 3
P4 Forms of business organisation definite lawfully in England
In the present case an American Corporation is setting up an operation in England to take
advantage of post BREXIT opportunities. Manager of business is unfamiliar with the exact
nature of the legal environment in the UK. To expand business of IT consultancy in England all
the aspects of business law needs to be taken right. Establishment of business decision at its first
step requires selection of form in which business organisation will be incorporated. Legally a
business can choose ant form which is most suitable for them in relation to management, funding
and scale of operations by the business organisation. Their are options like partnership, private
limited companies and limited liability partnerships is available to American corporation for
setting up IT Consultancy in England (Hadfield, 2014).
Process of various forms of business organisation in England is prescribed as follows-
Partnership: It is defined in Partnership Act, 1890 as a formal establishment of business
organisation by two or more individuals with the objective to earn profits from business
operations. A partnership will becomes an illegal association when there is no agreement to
govern operations will be conducted in partnership business. Partnership agreement states profits
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and losses sharing ratio among partners and rate to interest paid or charged to partners. A
partnership deed is an binding agreement in case of dispute arises among partners (Mark, 2012.).
Setting up-
In partnership business responsibility relating to management or other activities related to
partners such as-
 financial loss generated in business activity
 purchase and sale of stock while conducting operations
Partners share in profits are divided among them and each partner pays taxes on their
share of profits. A partner can be an unreal individual formed by law such as company. To start a
partnership business
 choose name of business which will be known and registered to operate business
operations under
 choose nominated partner in business
 partnership in UK is registered with HM revenue and customs and nominated partner
send tax return for the firm (Partnership business, 2019).
 For online registration form SA400 and for offline registration form SA401 is filled.
Private Limited Companies: Businesses in UK are established in the form of LLC that
will help in conducting operations at larger scale then partnership businesses. LLC is
incorporated with a simple registration process. A business that possess separate legal entity in
eyes of law and can not called general public for purchase of share is termed as private limited
company. Formation requirement for private limited company are as follows-
Limited company name- One name of the company through which registration will be
done is proposed. This name will be approved id it is not offensive, connected with government
name or another existing companies name. Name must not be misleading, confusing and no
character in name should be of some symbols.
Share capital and company accounts- At least one share must be issued for a private
limited company. Limited companies can be created with any number of shares of any value.
Accounting period is calculated from the day of incorporation. Accuracy must be maintained in
preparation of financial statements that to be filled within 9 months from the end of financial
year.
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Registered office- All the private limited company must have a registered office in the
country where company is incorporated (Markus and Loebbecke, 2013). Till the time business
do not have permanent address address of lawyer or accountant is given so that any government
notification can be received on time.
Process of formation of private limited company is as follows-
To form a private limited company in UK an online form that will capture the name of
company, address, sate of birth and occupation of directors and secretary must be present. After
filling an online form
 Certificate of incorporation
 The standard model article of association
 Memorandum of association
All these documents will be received as the formation process takes maximum two
working days to be completed.
Limited Liability Partnership: A Limited Liability Partnership is a new form of
partnership with limited liability of partners. The judicial constitution of LLP specifies that
obligation of each partner is up to the amount contributed in business. This limited liability
feature makes each partner's assets safe against liability that arises in business. Incorporation of
LLP is initiated in simplest manner by filling a form LLIN01 from the companies house.
Members in an LLP can be a person or legal association of individuals (Puig, 2015). At least two
of the partners in LLP legally designated as members with all the partners designated as self-
employed. In form LLIN01 information regarding name of partners, addresses and date of birth
with registered office address of the LLP is mentioned. In the present time fees charged by
company house for registration of an LLP is £40. annual accounts of LLP is filled with
companies house and accounts must be filled within 9 months from the end of financial year.
Registration of partnership and companies:
Rules for registration of partnership firs is different in UK. American corporation wants
to expand its business of IT Consultancy in England that implies partnership regulations of
England. Regulations in England make it compulsory registration of a partnership firm.
Registration of a firm provides protection to the third party against any misrepresentation and the
evasion of any liability.
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The United Kingdom where business of IT Consultancy is being established has had a
system of company registration since 1844. the legislation governing company registration
matters is the Companies Act, 2006. All the companies to get legal existence in the eyes of law
must be get registered with companies house (Salimbene, 2017). England and Wales are treated
as a single jurisdiction. Companies that are going to have their registered office in England must
be registered with companies house in England only.
It can be said that when business will be established in England in the partnership or
company form both needs to be get registered as per the law prevailing in the country to operate
business.
Regulations for appointment of directors and company secretary to start a company:
A director in a company is an individual who is involved in the operations of business to
accomplish business objectives. When a new business is registered in England as company there
is requirement to appoint certain number of directors to get it registered with the companies
house. Companies act, 2006 defines requirement of directors for a private company as one
director and public company minimum two directors are required. One director in the company
must be a natural person holding directors office and taking required business decisions. No
company can continue its business operations for more then three months when any of the
requirement of section154 and section 155 is not made(minimum number of directors in
company). No person before age of 16 is allowed to be appointed as director in any company
(Strahilevitz, 2012).
A company secretary is a individual who is accountable for conducting all the business
operations in legal and formal manner to avoid any legal compliances as per companies act. As
per companies act in UK a company must appoint one company secretary who will usually be
the senior board member.
P5 Management and funding of different forms of business organisations
Partnership: All the operations in partnership business are managed through partners. It
is not compulsory that all the partners are involved in operating activities in business. A
partnership firm can also have sleeping partner who will not at all involve in business operations
rather contribute in capital in business and will be liable to get share in profits. Management of
partnership business is effective when all the responsibilities are divided as per skills and
capabilities of the partners. When knowledge of more the one individual is involved in managing
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business operations then chances of losses in business gets reduced. Involvement of more
partners for management of operations in partnership may lead to conflict among partners
opinion. This situation hampers profitability of business and major conflicts may bring end to
partnership firm (Thuronyi and Brooks, 2016).
Partnership businesses can be funded through partners capital and borrowing from
outside. Partnership act do not provide any legal regulations for rising capital in partnership
business in UK. A partnership agreement that governs partners in business may specifies
minimum and maximum contribution a partner can make in business. Capital investment in
business by partners can be done in form of cash or through any fixed assets. Availability of
funds to partnership business through borrowing is not as much as to businesses that are
established as corporations and company. Funds can be borrowed through banks, non banking
financial institutions.
Private limited company: Companies manage their business operations through
directors who involves in the business operations and appoint managers at all the levels to
smooth business operations. Ownership and management is different in companies as
shareholders are the owners and they are not involved in managing business operations. This
helps in improving management of the organisation as qualified, skilled and experienced
management team is available with the company to manage business operations. True and fair
representation of financial statement is done by managers and decisions are taken in business
interest by managers that helps businesses to grow in long run (Ciocchetti, 2012).
Funds in a private limited company is provided through the shareholders who is investing
in business. As a public limited company private companies can not issue share to large number
of public. Shareholders are limited in the company but availability of funds is more then
partnership business. A company operates at large scale and has more visibility in the open
market. This helps companies to generate more funds from the market. When business is
performing well and has more future growth can be ascertained then investors are attracted
which brings more funds in business.
Limited Liability Partnership: This form of business enjoys flexibility in its operations
as management is done by partners in business. LLP is hybrid of partnership and company which
possess features of both type of organisation. The one benefit that this for of partnership enjoys
is the limited liability. Management of operations is done through group of professionals who
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have lot of experience in conducting business operations. LLP has a formal structure that
requires a written partnership agreement and usually required reporting as per legal jurisdiction.
By pooling resources, the partners lower the costs of doing business and increasing LLP's
capacity for growth. Funds by an LLP is generated through partners capital and through loans
from other financial institutions. As capital investment amount in LLP is limited requirement of
funds are settled by loans this creates financial pressure on business to make repayment.
Business organisations that are formed with more formal nature attracts more funding then
informal organisations and due to this formal nature LLP grabs more funds then partnership.
When partnership is compared with private limited companies for rising of funds then it
will be seen that availability of funds to company will be much higher then a partnership
business. Capital invested in the business plays important source of funding and as companies
have more number of shareholders huge amount is taken as capital investment. This gives
companies more funds which is free from interest payments as only profits earned will be paid to
capital investors.
Advantage and disadvantages of forming a partnership as compared to company:
Partnership: When business is established in partnership form then it will have
following advantages-
 Partnership business is easy to establish as it requires only partnership agreement to start
business in this form.
 Profits in the partnership business directly belongs to owners that works as a motivation
to earn more profits.
 Management and ownership is in the same hands that reduces chances of fraud by
managers of business for their own good.
Their are certain disadvantages to partnership business which are as follows-
 Partners are jointly and individually liable for the actions of the other partners.
 Partnership businesses are managed through partners involved in business this leads to
situation of conflict when difference of opinion arises.
 Partnership business do not have separate entity distinct from its owners this leads to end
in partnership business due to death of partners in business.
Company: Starting a business in form of company brings certain advantages and
disadvantages. Certain advantages of company is as follows-
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 Liability of owners in company is limited up to the amount invested as share capital.
 Transfer of ownership is easy
 Access to wide range of capital and skills
 Business sustains for long duration of period
Disadvantages company possess in compression to partnership:
 Establishment of company is expensive then partnership
 Separation in ownership and management reduces decision making power of owners in
business
 Management of the company may involved in fraudulent activities and reduces profits in
business. This is not in partnership business as management is done by owners.
Different forms of businesses are discussed that can legally be formed by American
Corporation to set up an IT Consultancy in England. Different forms of businesses are evaluated
on the basis of their formation process, management and requirement of funds. After considering
all the advantages and disadvantages in businesses it is advisable to IT Consultancy company to
be established as a Private limited company. This form is selected on the basis of availability of
funds in the business and the effective management system of companies. Together with this
business will have separate legal entity and existence of business will not depends on owners
existence.
CONCLUSION
From the above project report it has been concluded that business environment has
changed completely over the years and to avoid illegal existence of businesses more laws that
guides businesses needs to be introduced in the country. Formation of law is based on various
sources that acts as a basis for laws in the country. Government in UK plays important role in
formation of laws and to restore the economy with new policies. Business in UK can be
established in any form which is legal and all the requirements for incorporation must be fulfilled
to bring business into legal existence.
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REFERENCES
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