Business Law: Analysis of UK Legal System and Business Implications

This report provides a comprehensive overview of business law within the UK legal system. It begins by defining business law and outlining various sources of law, including statutes, common law, and equity. The report then explores the role of the government in law-making, detailing the parliamentary process from bill introduction to royal assent, and discusses the application of common law and statutory law in justice courts. It analyzes the impact of company, employment, and contract law on business operations, differentiating between legislation, regulations, and standards. Furthermore, the report examines the legal formation, management, and funding of different business organizations, such as companies and partnerships, and concludes by offering legal solutions to potential business problems. The report highlights the importance of understanding and adhering to business law for successful business operations and provides a valuable resource for students studying business law in the UK.

Business Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ACTIVITY 1....................................................................................................................................1
Different sources of law in UK...................................................................................................1
Role of government in making law and application of common law and statutory in justice
courts...........................................................................................................................................2
Impact of company, employment and contract law upon the business.......................................4
Legal formation of different types of business organisations.....................................................6
Management and funding of different types of business organisations......................................8
Legal solutions of range of business problems...........................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business law can be defined as a branch of law which contains the rules regarding law
commencement, running and winding up of any business. Each corporation need to follow each
rule mentioned in the business law while performing their regular business operations. The
present study shows nature of the overall legal system of the UK by describing various sources
of law, role of government in development of law along with the effectiveness of legal system in
context with recent reforms and developments. It also shows the application of common and
statutory laws over the justice courts. The assignment also provides information about impact of
employment, contract and company law over various business operations and difference between
legislations, regulations and standards. It also provides a brief description about legal formation,
management and funding of various business structures. At the end the study also provides some
appropriate examples as to provide legal solutions of some business problems.
ACTIVITY 1
Different sources of law in UK
Law can be defined as the administrator of the overall system of the country including
civil, criminal and business systems of the country. Law provides a guide as to perform any
activity within the country. There are various sources through which laws are being framed in the
country like:
 Statutes: Statutes are the main source of law. These can be defined as local and state
legislatures of the country (Twomey, Jennings and Greene, 2016). Statutes need to be
interpret in the same sense in which they are framed. Statutes are usually originated from
the act of parliament.
 Common law: Common laws are the combination of justice provided by the higher
jurisdictional authorities of the country. Common laws are applicable on the lower
jurisdictional courts. They need to consider common laws while providing justice for any
problem. Justice of higher jurisdictional courts are the source or common laws.
 Equity: Equity laws has been made in the country for the purpose of maintaining
equality within the country. Purpose of development of equity laws was to eliminate
illegal discrimination from the country. Trust, ethical standards etc. are major sources of
the equity law (Margulies, 2018).
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Role of government in making law and application of common law and statutory in justice courts
Role of government in making law
In UK, laws are being made by the act of parliament. For the purpose of developing any
law in the country, a bill need to be passed through various stages in the parliament. The process
of passing the bill starting from putting the bill in front of parliament till getting royal assent is
performed by the authorised ministers of the government. The law making process performed by
ministers of government are as under:
First reading
At this stage ministers thoroughly read the details of the bill (Nyoni and Hart, 2018).
They discuss each clause of the bill in the house of parliament at this stage.
Second reading:
In this stage, ministers vote for the clauses of bill to be implemented by considering their
pros and cons. They also vote for the amendments to be made in the bill.
Committee stage
After voting for clauses and amendments, bill is transferred to committee where
committee members discuss about the bill and amendments made at earlier stage.
Report stage
After discussing the bill and taking decisions about the same, committee members report
their decisions to the whole house. Each member of house have right to propose for the
amendments in the clauses of bill.
Third reading
No amendments can be made at this stage. The bill along with all the amendments are
discussed in this stage.
After passing all the above stages, bill is transferred to other house of parliament where
all these stages are being repeated. In case of any amendment made by another house, the bill
also need to be transferred to the first house and the process goes on until both huses agreed upon
same clause (Forman, Lo, Shilling and Sweeney, 2015).
Royal assent
After completion of the above stage, the bill becomes law. Law is being presented in
front of Queen of UK. When Queen gives her assent by signing the law, the law becomes the act
and becomes applicable over each person of the country.
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As all the above mentioned law making procedure is being performed by the authorised
ministers of government, it can be evaluated that government plays a vital role in making the law
in UK.
Application of common laws and statutory in justice courts
Common laws are made by the justice provided by the higher judicial courts. These are
made by combining all justice provided by the courts. The common laws are applicable on the
lower divisional courts only.
On the other hand, statutory are the legislations of the country. They are provided by the
local and state level legislatures. These are applicable to each person of the country including
judicial courts. Each judicial court need to take into account all the statutory while providing
justice (Khan, Scheule and Wu, 2017). Further, as per the constitution, statutory need to be
interpret in the same sense in which they have been written.
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Illustration 1: Stages of Passing Bill
Source: (UK Civil Service - Skills – Parliamentary, 2018)

In the following way common laws and statutory are being applied over the judicial
courts. For example, in case, any business does not pay the minimum amount of wages to its
employees and they file petition against the company, the court will refer the statutes applicable
on the case i.e. employment laws and justice provided by any other law previously (Horton,
2017). On the basis of both the court will provide the justice in the present case.
Effectiveness of legal system in terms of recent reforms and developments
There are various reforms and developments which are made in the legal system of UK
(Gombola, Ho and Huang, 2016). In the UK there is replacement of judicial functions of house
of Lords and creating a supreme court. Moreover, there the recent reform includes constitutional
reform Act and establishment of supreme court. This removed the top level appellate court of
judiciary from the House of lords. Another reform includes Fixed term parliament Act which set
out date of general elections. The recent development includes Consumer Right Act, 2015 which
replaces consumer contract regulation 1999.
Impact of company, employment and contract law upon the business
Business units are being affected by various laws as they need to follow numerous laws
while performing their normal course of business operations. Impact of some major laws are as
under:
Company law
A business structure framed as per the provisions of company law is majorly being
affected by the Company Act 2006. Company law contains the rules regarding each activity of
the company including formation, running and winding up of the business. In this regard,
businesses are affected by the company law (Kanagaretnam, Lobo and Wang, 2015). For
example, as per the provisions of company law, company have a separate legal entity from its
owners. This rule affects the business operations s due to this law, each transaction made
between the owner and company need to be recorded in the books of accounts.
Employment law
Major operations of the businesses are performed by the employees. In this regard, its
business operations are also affected by the employment laws like minimum wages act, pf act,
etc.. For example, Each business need to employ any employee as per the rules mentioned in the
employment law. Further, salary to be paid to employee, incentives, PF amount, insurance
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amount, etc. need to be provided to each worker as per the employment law. These directly
affects the cost of the company over its human resources (Hawkins, 2017).
Contract law
Contract act 1990 defines the contract law of UK which contains the rules regarding
buying, selling of goods and services, which is the key activity of each business organisations
(McConville, 2017). Therefore, businesses are also affected by these laws. Contractual
agreements made by the business need to include all the rules applicable to it, as non
applicability of any of the rule makes the contract as void. A void contract can not be enforces by
the law which enhances the uncertainty in the contract. It directly affects the financial resources
of the company.
Difference between legislations, regulations and standards and their impact on business
All the above terms i.e. legislations, regulations and standards are different from each
other. Legislations are the rules that are needed to be met in order to comply with the laws. These
are passed by legislatures of the country. Basically legislations defines the rules mentioned in the
law no compliance of which may attract the legal proceedings over the defaulter. On the other
hand, regulations can be defined as a detailed instruction which provides directions to comply
with the law. They show the reason behind the development of any law.
Whereas, standards provides the minimum range of quality that are needed to be included
in the product or services provided by the company (Clayton, 2015). All legislations, regulations
and standards of any law applicable to the country have to be followed by the businesses.
In this regard, they have major impact over the business operations. A business need to
operate its business activities taking into account each legislation and regulations of law
applicable to them. Further, they also need to maintain the quality of product or services as per
the set standards of the country (Aaron and Caterina, 2017). It effects the normal manufacturing
process of the organisation. In addition, non compliance of any of the legislations, regulations or
not meeting standards of the country may attract the legal penalties over the business
organisation.
M2 Differentiate between legislation, regulation and standard to analysis potential impact
ion business
Legislation includes statutory laws which are formulated by legislature of through Act or
parliament. The laws which are made on the basis of proposed draft by government. Whereas,
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regulations are those which are made so that legislation are followed properly. It is process of
monitoring and enforcing the law. Standards are rules which are approved and monitored for
compliance. These are the principles and norms which must be followed to comply with various
regulatory framework (Meidinger, 2017). For example, Equality Act, 2010 which is legislation
and must be followed by every organisation to perform their business activities. If organisation
are not following this rules and regulation then they have to face various consequences.
Legal formation of different types of business organisations
There are numerous types of business structures like company, partnership, LLP, etc.
Law has provided different formation procedure for each type of business structures. Businesses
has to be framed by considering the legal procedure of the formation. Legal procedures of some
business structures are as under:
Company
Companies are the business structures that have been framed as per the procedure
mentioned in the company act 2016. The procedure of formations of company is as under:
 Setting up: Forst of all, an idea is for formation and running a company's business need
to be generated for the setting up business of the company (Sozinova, 2016).
 Company name: A specific name is to be decided which has not been obtained yet by
any other business organisation.
 Company address: A company need to set a particular address at which office of the
company would be set up.
 Appointment of directors: After deciding company's address, directors are needed to be
appointed for the purpose of running the business activities (Savelyev, 2017).
 Shareholders: Shareholders are the real owners of the company. In this regard, company
need to issue its shares to its shareholders. Directors and promoters becomes the
shareholders of the company at the time of its formation procedure.
 Memorandum and Articles of associations: A company need to prepare its
memorandum and articles of association. These documents contain the rights, duties of
directors, capital of the company, range of business of the company, etc.
 Register the company: after completion of all the above stages, company need to get
registered with the applicable registrar (Amenta, 2015).
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 Register for corporation tax: Registration for corporation tax is important for the
purpose of paying tax and deciding tax liability of the company.
Limited liability Partnership (LLP)
Limited liability Partnership businesses are kind of partnership businesses. Difference
between partnership[ and limited liability partnership is that in partnership, all the partners have
unlimited liability whereas, limited liability partnership provides limited liability to its partners.
Its formation procedure is as under:
 Verify Qualification status: Each businesses are not allowed to form a LLP, therefore,
first of all business need to check whether it is qualifies of being LLP or not.
 Name: After checking the qualification status, they need to decide the name of LLP
which has not been allotted to any other business (Sadgrove, 2016). They may also need
to apply for the name to registrar.
 Draft LLP agreement: This stage is voluntary. Partners can prepare an agreement
containing the various clauses of the partnership including profit sharing ratio, capita
amount, etc.
 Designation of registered agent: Some states also requires the LLP to register any
company or individual that are states in the state in which LLP is going to be registers, as
its agent. In case, LLP has its own physical office in the state, it can make its own
physical office as its agent.
 Register for Employer Identification number: LLP need to get this number for the tax
purpose. On the basis of this it can hire employees and open their bank accounts as well.
 Obtain required licence: LLP need to obtain licence of operation do the business as to
legally running any business activity.
 Buying required insurance: LLP also needs to obtain some insurances before starting
the businesses like employee insurance, worker's compensation insurance, etc.
In this regard, after completing above procedure, an LlP can be legally formed in UK
(Cieślik, Namieśnik and Konieczka, 2015).
From the above analysis, it can be evaluated that each type of business structure need to
follow different type of formation procedure for the purpose of framing any business structure
legally.
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Management and funding of different types of business organisations
Same as different formation procedure, laws in UK have provided different procedures
for the management and funding of each type of the business organisation ( Danastri and
Christine, 2017). For the purpose of managing a company, a separate management need to be
appointed in the company. On the other hand, LLP is managed by its working partners only.
Hierarchy of management in a company is in horizontal formate as it employees, CEO,
general managers, team leader, etc. for the purpose of managing its overall business activities.
Whereas, management of LLP is processed in the vertical formate as it is managed by all ithe
partners which contains the same position in the business.
Funding of company is being processed by issuing shares. The law has been provided
right to companies to raise fund through issuing shares to the general public. On the other hand,
LLP can not raise fund by issue of shares. If the LLP business needs funds, its partners need to
bring the capital of their part.
In this regard, it can be analysed that management and funding procedures are different
for different types of business organisations.
Advantages and disadvantage of different types of business
Sole trader advantages :
 sole trader maintain full control of their business
 The sole trader enjoys the whole profit.
Disadvantages :
 They have unlimited liability.
 Sole trader find it difficult to raise finance to perform their business activities.
Partnership advantages
 The partners have shared responsibility (Advantages and Disadvantages of Partnership,
2018).
 They share risk and responsibility.
Disadvantages
 Partners have unlimited liability (Fang, Ye and Law, 2016).
 Partners have to pay tax in the same manner as sole trader.
Company advantages
 They have limited liability up to the amount invested by them.
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 They enjoy taxation benefit.
Disadvantages
 It is more expensive to form rather than sole trader and partnership.
 Company name is subject to certain restrictions (Advantages and Disadvantages of
Partnership, 2018).
Legal solutions of range of business problems
Example
Facts related to case
ABC plc is a private company which makes the contract with a manufacturing concern X
ltd. For purchase if some raw material worth 200,000 for 500 kg of raw material containing
specific quality. Afterwards X ltd. Supplied raw material as per the agreement and asked for the
payment as per the contract. ABC plc refused to pay the debt on the ground that the raw material
supplied did not contain the quality as decided in the contract. Further, X ltd. Filed winding up
petition in the court.
Issue
 Whether, X Ltd. Have right to file the petition?
 Whether ABC Ltd. Have any legal right against the petition?
Rules
 Winding up: Winding up refers to a process in which company needs to dissolve itself
and pay all the liabilities. The winding up situation arises due to insufficiency of assets
with the company for paying its debts.
 Petition for winding up: In case, company fails to pay debts of its creditors, they have
right to file a petition in the court for the purpose of declaring the company insolvent and
order it to wind up itself and pay their debts.
 Winding up procedure: After filing petition of winding up against the company, court
analyses the actual financial position of the company. If the court finds insufficiency of
assets against the liabilities, it may declare the company as insolvent and order to for
processing winding up procedure. In this case, company needs to appoint a liquidator
which performs overall winding up procedure. Liquidator sales each assets owned by the
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company for the purpose of payment of debts. Each debts are being paid on pro rata basis
by the liquidator.
 Injunction: The term injunction refers to stopping someone to perform any activity. In
case the party against which any petition has been filed have a valid reason behind the
non performance, they have right to file a petition in the court for providing injunction
order.
Application:
All the above rules are applicable to the present case as, due to non payment of debts, X
Ltd. Has right to file partition against the ABC Ltd. Further, in case, the court gets satisfied with
the petition and finds insufficiency of assets against the debt, it may declare the ABC Ltd. As
insolvent and order it for processing the winding up procedure. In addition, as the ABC Ltd. A
valid reason behind non payment, it can also file petition for the injunction orders in court.
Conclusion:
On the basis of above rules cases and their application on the present case, it can be
concluded that, Creditor of ABC plc. i.e. X Ltd. Has right to file the petition against ABC Ltd.
On the basis of non payment of the debt. Further, ABC plc also has right to file petition against
the petition for winding up. As per the above scenario, as the non payment to X Ltd. Was due to
getting raw materials under the quality decided in the contractual agreement. Therefore, the
injunction order may be provided to the ABC Ltd. As it has a sufficient ground of non payment.
Further, order for providing raw material containing sufficient quality may also be provided to X
Ltd. In order to complete the performance of the contract.
Legal sources:
There are different types of legal sources through which the legal solution of any case can
be provided like judicial courts, arbitrates, etc. A business can get solution of any business
problem through any of the legal source.
If the business organisation wants to get the solution through arbitrate, they can apply to
authorised arbitrators. Further, while entering into any contract, they can include a clause of
arbitration solution along with the name of any individual or corporation through which the
solution of any conflict would be determined.
On the other hand, for getting the solution through judicial courts, not clause in needed to
be entered in the agreement. The major difference between these two resources is that in arbitrate
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solution, parties can be involved while providing the solutions. On the other hand, no
involvement of the parties are made by the court while providing the legal solutions. Further,
getting solution through courts is quite lengthy procedure compare to the solution through
arbitrates.
CONCLUSION
From the above study, it can be concluded that legal system of the country have a major
impact over the business. Government plays a vital role in development of law in UK. Each type
of business structure have different formation procedure, management and funding procedure as
well. Each business organisation is different from other types of business organisations. In
addition, numerous laws like company law, contract law, employment laws etc. have major
impact over the business organisations. Legislation, regulations and standards are different from
each other and each effects the business operations. A business need to comply each law and
standards applicable to it while performing their business operations as non compliance of any
law attracts the legal penalties over the business organisation.
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