Business Law: Roles and Responsibilities of a Sole Director

This report discusses the roles and responsibilities of a sole director in business organizations. It explores the legal provisions under the Companies Act that govern the role of a sole director. The report also provides insights into the duties and responsibilities that a sole director must fulfill to ensure the smooth functioning of the company.

PROBLEM

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
Case scenario 1............................................................................................................................3
Legislative provision...................................................................................................................3
PART 2............................................................................................................................................5
Case scenario 2............................................................................................................................5
Legislative provision...................................................................................................................5
PART 3............................................................................................................................................7
Case scenario 3............................................................................................................................7
Legislative provision...................................................................................................................7
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Businesses are the most essential part of the country as it helps in uplifting the economy.
It basically undertake the commercial activity with a sole motive to generate profit and maximise
the revenues. The businesses are generally governed by the business law and is considered as the
branch of civil law which deals with both private and public law. It regulate the corporate
contract, manufacture and sale of the goods, hiring practices and many other. Business law is a
vast field which involves contract law, employment law, companies law, data protection,
intellectual property rights and many other (Clarkson and Miller, 2020). There are many types of
business organisation which work and function according to their structure which involves sole
proprietorship, partnership, companies and etc. Every business organisation is regulated by
different legislations like for instance the partnership is governed by the Partnership Act and the
companies are regulated by the Companies Act. This report shall deal with three case scenarios
which are relating to business law.
PART 1
Case scenario 1
Gemma is a sole director of new company which is Clean machine Limited which is
engaged in supplying protective equipments to the small businesses in Bedfordshire. She is
unable to know her roles as a sole director and wants to know about the legal provisions which
govern the role of the sole director.
Legislative provision
Companies are the artificial personality which have their separate legal entity. It has its
common seal and a perpetual succession which means that the owner may come and go but
company shall remain forever. The companies are governed and regulated by the Companies Act
which is the lengthiest legislation on the company.
There are many types of companies which involve public company where the share
capital is raised by inviting application to purchase the shares of the company and the private
company where the capital is raised by the equity or debt and there is no public involved in the
ownership of the private company (Abril, 2016).

There are another two types of company based on the liability where the limited company
involves limited liability of the directors to the extent of their capital and the unlimited company
where the directors have unlimited liability for the company.
The companies law of 2006 regulates the working of companies in UK which provides
the entire working of the corporations from its incorporation to its winding up. The companies
law is broken into two parts which includes corporate finance and corporate governance. The
former is concerned with the two options of money raising for the limited companies. They can
raise funds from either equity or debt finance where equity is the traditional method of issuing
share in order to build capital and the debt involves getting loans.
The concept of corporate governance mediates rights and the duties among the
employees, shareholders and the directors.
Being a sole director is very advantageous where the director is able to make quick
decisions and there is very little or no disruption in the business. But the drawback lies in the
liability where the director cannot escape from its responsibilities and liabilities as it is the sole
director of the company (Keay and et. al., 2020). As Gemma is the sole director of her company
Clean Machine Limited, she has different roles or duties which she owe towards the company.
These arise from the common and statutory law. The duties or roles of sole director is discussed
below which are set out under section 172- 177 of the Companies Act, 2006 -
 The director is duty bound to promote the success of the company which requires the
director to at in good faith and also prevent the director to put his/her interest forthwith
rather than the benefit of the company.
 It must exercise reasonable skill, diligence and care while taking any decision. In case,
this duty is breached, the director may be liable under the tort of negligence so it is
important that the director must follow its role.
 It must also avoid the conflict of interest either indirect or direct one. The director must
work on to avoid the conflict by taking such measures (Allen, Kraakman and
Subramanian, 2016).
 The director must take decision after considering the factor such as nature of the
business, foster good relationship with customers and suppliers, long term consequence
of business and many other so that fair decision can be made which is for the benefit of
the company.

 Another role of sole director is to make its records available to the public for the
inspection.
 The director is entrusted with the role to report the changes which are made to the
company's documents like in memorandum of association to the Companies House and
the HMRC.
 The director has to make sure that it has accurate accounts and records of the company so
that no legal consequences is arisen.
 The director must exercise its power in accordance with the powers which are granted in
articles of Association which sets the rules as to how a company is run.
 If the company has the sole director it does not mean that it has to be one man band. It
may hire the professional advisor or experts so that it can seek expertise advice. But it
must always exercise its own judgement in its decision making process (Crouch, 2017).
The above are the duties or role of the sole director which Gemma must fulfil so that it
can ensure smooth functioning of her company. These roles will help Gemma in running her
business in an effective and legal manner.
PART 2
Case scenario 2
Gemma had employed Charanjit as the cleaner for her company Clean machine Limited.
She had observed that Charanjit is regularly late for his work and his attitude is also poor
towards her and other employees. Gemma regularly oversee his work and remind him to clean all
the allocated areas. Now she wants to terminate his employment contract.
Legal issue-
Whether Gemme can terminate the contract of employment of Charanjit ?
Legislative provision
The employment law is a vast area of law which protect the rights of the employees from
being exploited. This legislation covers various Acts under this which involves Health and Safety
at work Act, National Minimum Wages Act, Equality Act, Employment Relations Act and many
other (Wen, 2016). These Acts provide the rights to the employees and places a duty on the
employer to protect these rights.

The employment contract is a contract between the employer and employee which states
the terms and conditions of the work. This contract sets out the employee's rights,
responsibilities, employment conditions and duties which are the terms of the contract. As soon
as the employee joins the job, it is entitled to the employment contract which may be in written
or oral form. The basic terms are required to be in written form which involves notice period,
trial period, fixed terms and many other.
The UK law provides two rights on termination of the employment contract which
includes firstly the statutory right of not being unfairly dismissed and secondly the common law
right which involves not to be dismissed in case of breach of contract which is also called the
wrongful dismissal (Holloway and et. al., 2017). Hence, the employer may terminate the
employee by giving the contractual notice but it does not mean that it can be fair dismissal, in
case of unfair dismissal, the employee is entitled to claim the unfair dismissal.
Termination mainly arises when the employer makes it clear by wishing to end the
employment relationship. The employer may terminate the contract -
 When there is expiry of the fixed term of contract,
 constructive dismissal which arises when the employee terminate the contract of
employment in such circumstances without the notice due to the conduct of the employer.
Gemma may dismiss Charanjit in this case scenario and the dismissal need to be fair
when under the following circumstances-
Section 98 of the Employment rights Act 1996 provides the two stage test which determine that
the dismissal was fair or not. The two stage test is discussed below-
1. the employer shall show that the principle reason for the dismissal is potentially fair,
and,
2. the tribunal shall notice that whether in a circumstance, the employer have acted fairly
and reasonably in treating such reason to be sufficient for the dismissal of the employee
(Sprague, 2016).
The potential fair reasons for the dismissal may include-
 The employee is not capable or qualified to do the job role effectively.
 The conduct of the employee is not adequate. For example dishonesty, absenteeism,
failure to obey lawful order, harassment and many other.
 The redundancy

 The reason for dismissal is justified as to holding the employee's position.
 The employee would not continue to work in a position without contravening the
restriction or duty which is imposed under the enactment.
The onus to prove that the reason was justified and reasonable is on the employer and is there is
more than one reason, the employer has to show which is the principle reason.
The employer is duty obliged to dismiss the employee by giving a notice which must be
for a legal minimum period. As per employment rights act, the legal minimum notice period is
one week for the employee who has been employed for a period between 1 month to 2 years and
one week for each year of the completion of employment but up to a maximum period of 12
weeks (Goldberg and Wilkinson, 2020).
The employer is allowed to dismiss without a notice if the employee has committed any
gross misconduct. It is usually an incident which is so serious that there is no way left for the
continuation of the employment. Example for gross misconduct can be fraud, theft, violence, etc.
The employer may dismiss the employees if-
 the employee is incapable to do the job role to the required standard.
 The employee is capable to do the job role but is unwilling to do the job properly.
 The employee has committed any misconduct (Alfouzan, 2020).
In this case scenario, Charanjit is not performing his job role properly and the employer
has to continuously over look his work. This shows that he is unwilling to perform his role
effectively and also he is continuously late for the job which shows his unwillingness to do the
job role efficiently. Here Gemme is entitled to dismiss Charanjit as he is not willing to do his job.
Gemme may terminate the contract of employment of Charanjit.
PART 3
Case scenario 3
Gemme has entered into a contract with Precious Time Limited. They are the suppliers of
Clean Machine Limited. There has been some issues and problems between the two companies
and Gemme is being advised by her fellow friends to take the Precious Time Limited to court but
she is unsure about it.

Legislative provision
In this case, there are many alternatives available for resolving the dispute. Resolution of
dispute involves solving the dispute through the process of litigation which involves more time
and cost. The process of litigation requires the individual to visit court and has a detailed
procedure to claim remedy or resolve the dispute (Pfaff and Halsey, 2019). Apart from litigation,
there are other alternative resolutions through which the parties can settle their dispute.
The Civil Procedure Rules of 1986 states the alternate dispute resolution which includes
arbitration, mediation, negotiation, conciliation and many other. These methods are cost and time
effective and have same relevancy as the litigation have. These methods involve the consensual
process where the parties must agree to refer the dispute to ADR and court cannot compel them
to do so. It is also flexible in nature as the parties are free to agree as to whether the proceedings
must continue or be stayed during the process of ADR.
Advantages of alternate dispute resolution-
 The ADR are confidential which provides the parties a freedom to deal with their
sensitive issue.
 These are cost effective as it involves less cost then litigation and are also less time
consuming as compared to litigation.
 It helps the parties to reach the decision through consent so that future or existing
relationship is preserved
 it helps in producing the more wider and flexible range of dispute as the parties may
focus on achieving the best solution which shall be based on their needs and not
something which may be imposed by court (Goldberg and Wilkinson, 2019).
Under this case study, Gemme may opt for any of the alternate resolution which is
discussed below- Mediation- It is the most common form of the alternate dispute resolution. In this, an
independent mediator is appointed who gives suggestion to the parties for resolving the
dispute. To achieve the objective of resolving the dispute, the mediator continue to seek
the views of parties either jointly or individually, as and when necessary. The parties
who agree for mediation, they must start the preparation of agreeing the time and place
of mediation, nominating and identifying the mediator and send summary to mediator

regarding the brief of case. The decision of mediator is not binding rather it works as
suggestion for the parties and it is up to the parties as to whether agree to it or not. Conciliation- It is similar to the mediation process but the difference lies as to the fact
that the conciliator is appointed by the outside body and the parties do not select them. A
neutral conciliator is appointed who try to settle the dispute by suggesting settlement
options. The conciliator is unbiased and help the parties who have involved in dispute to
achieve the settlement by the process of steering negotiation so that an amicable solution
is reached (Charkoudian, Eisenberg and Walter, 2019). The conciliator suggest the
parties and if the parties want to make the suggestions legally binding, it must be in the
written form to give it a legal binding effect. Negotiation- It is another form of alternate dispute resolution which may took place
either in oral or written form. It is a kind of informal approach which took place
between the parties or their lawyers. The main main aim of this resolution is to bring the
parties at win win situation where both both wins something and no one loses anything.
A negotiator is appointed who works between the parties to reach the amicable solution.
It is the cheapest and quickest way for soling the dispute. It is not binding until parties
give it a binding effect by signing an agreement to give it a legal binding effect (Lee, Yiu
and Cheung, 2016).
 Arbitration- This is the most effective form of alternate dispute resolution where the
parties appoint an independent arbitrator who solve the dispute between the parties. The
parties are heard by the arbitrator and after reviewing and scrutinising the evidence, the
arbitrator pass an award which is a decision. It is binding on the parties. This process ios
cheaper then litigation and the parties agree to the place of arbitrator and the fees are
paid collectively by all parties. The arbitrator after hearing the parties and examining the
evidence on record, makes the decision to the parties and parties are bound to obey with
the decision. In case any party does not obey the award of arbitrator, the court may pass
an order to make the award enforceable.
In this case scenario, Gemme's company Clean Machine Limited and Precious Time
Limited may refer their dispute to arbitration rather than going to court as it is less time
consuming and cost effective. It will also the parties to save their good will and keep the matter
confidential. The binding effect of the award will make the decision effective and relevant which

will help parties to resolve their dispute easily without the intervention of the court. However,
Gemme may opt for any other option as well as they all have common objective to bring the
parties to amicable situation so that both wins something and no one looses anything.

CONCLUSION
It is concluded from the above report that business law regulates the businesses so that
they adhere to rules and regulations. There are many types of business organisation which
includes partnership, sole proprietorship and companies. These are regulated by their laws like
companies are governed by Companies Act and partnerships are governed the Partnership act.
There are three case scenarios discussed in this report where the first relates to the roles or duties
of sole director in the company and the second case scenario deals with the dismissal of
employees where the employer Gemme have legal right to dismiss Charanjit as its conduct was
not adequate due to his late coming to office and also he was not willing to do his job role
effectively. Lastly the third case scenario deals with the alternate dispute resolution which
involves mediation, negotiation, arbitration and conciliation. The methods of alternate dispute
resolution are time and cost effective which helps the parties to save their reputation and keep
their issues confidential and offers speedy disposal of cases.

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