Legal Systems and Legislation Impacting Businesses

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Unit 7: Business Law
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Contents
Introduction......................................................................................................................................3
Section1. Nature of legal systems and legislation impacting businesses........................................4
Task1................................................................................................................................................4
Parliament is sovereign and sources of UK laws.........................................................................4
Government’s role in the process of law-making........................................................................5
Application of statutory and common law in the justice court....................................................6
Impact of employment, company and contract law on business in UK......................................6
Differentiation between regulations, standards, and legislation for analyzing their potential
impact on business.......................................................................................................................7
Task2................................................................................................................................................9
Difference between incorporated and unincorporated business................................................10
Advantages and disadvantages of the company and partnership...............................................11
Section2. Legal solutions to business problems............................................................................14
Case1. Legal solutions to Champion Limited................................................................................14
Case2. Legal solutions to a dispute between Mr. Anderson and Amber Limited.........................15
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
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Introduction
All the laws are encompassed by the business law that dictates the forming and running of the
business. The rules are established by the business laws that all the businesses are under
obligation to follow. Business law is also referred to as commercial laws. The main purpose of
the business law is order maintenance, protection of liberties and rights, dispute resolution, and
standard establishment. Numerous laws’ sources exist in the UK among them the legislation and
case laws play a significant role in the legal system of the UK. In the first section of this report,
the government’s role will be explained in relation to the process of the law-making. Further, the
discussion will be made with respect to the employment laws, contract act, and company’s law.
The differentiation will be made between standards, regulations, and legislation. The second
section of this report covers the two different cases in which the appropriate recommendations
will be made with respect to which the legal solutions will be provided for resolving the dispute.
There are different business types such as partnership, sole proprietorship, corporation, and LLP,
the managing and funding of the same will be explored along with the advantages and
disadvantages of partnership and company.
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Section1. Nature of legal systems and legislation impacting businesses
Task1.
Parliament is sovereign and sources of UK laws
Parliamentary sovereignty is termed as the UK constitution's principle. Parliament becomes the
supreme legal authority that can create or end laws. The legislation cannot be overruled by courts
and no laws can be passed by the parliament that cannot be changed in the future. Parliamentary
sovereignty is considered a significant part of the constitution of the UK. Unlike in the US where
there is a single written constitution, in the UK there is no written constitution and parliament is
central to the state’s institutions (Gordon, 2015).
There are various sources of law that are obligatory and binding and they enable the government
of the UK for exercising the governance. In England and Wales, there are mainly following law
sources –
 Legislation- Both primary and secondary legislation is covered in the legislation. The
UK parliament is responsible for the enactment and approval of the new laws. The debate
for the primary legislation is made and passed by the UK parliament and it includes
private bills of members and bills that are sponsored by the government. The bills then
become Act when passed and are referred to as statutes. The introduction of the
secondary legislation is empowered by the governments which are done by the issue of
regulations known as statutory instruments (Miller, 2015).
 Common law or case law- These are created in court by the judgment of judges instead
of in parliament. The previous judgments are used by the courts for making a decision
regarding those cases for which there is no statutory legal provision or no interpretation
can be made regarding the statutory law.
 Equity- This source of law is peculiar to E&W and is developed by the court of
chancery. These are the legal principles in the different jurisdictions that follow the
tradition of English common law (Besley, 2015).
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 European Union law- It is the international source of law and all the European nations
are abiding to follow the laws of EU and UK being the member nation of EU is under the
obligation to adopt the EU laws. Directives, treaty provisions, precedents, and decisions
are included in EU laws.
 International treaties- International treaties and conventions are signed by the
government but only after their ratification they become binding. Incorporation of the
international convention can be done into statutes. These treaties mainly aim at protecting
the rights of citizens.
 Custom- Customs are followed by the judicial authorities at the time of decision-making.
These are generally not written but if the existence of the practice prevails for a long time
like since the time immemorial, it becomes the law sources (Hanrahan, et. al, 2013).
Government’s role in the process of law-making
The great majority of parliamentary acts are introduced by the government. The civil lawyers
made a draft under the instructions of the government. The details regarding the proposed law
are explained in this. For the enactment of the law, the presentation of the bill is made in the two
houses of parliament and such bills include public, private bills and private members bills
(Dixon, 2013).
 Public bills- cabinet prepare it for making changes in the country’s law and are preceded
by Green Paper.
 Public member bill- Backbench MP prepares such bills and some of these bills become
an act. They are required to enter into the ballot for winning the right to do so. Then the
government is persuaded for allowing enough parliamentary time for the purpose of the
bill to go through.
 Private bill- Large public companies, local authority, and public corporation are
proposing such type of bills.
Different stages are involved for the law enactment-
 First reading- In the house of commons, the reading with respect to the bill title and its
inclusion is made (Puetter, 2012).
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 Second reading- At this stage of the whole process, the debate with reference to the bill
details and amendment is made. The voting by the MPs is conducted if the bill should be
accepted or proceed further. At this stage, the whip system is used for getting the support
of the member.
 Committee stage- This is the stage where the reference is made to the House of
Commons for the bill so that the detailed examination of the same can be done. Further
amendments can be made to the bill if necessary.
 Report stage- House is reported by the committee for the amendments and debates
made. Voting and debating are conducted by the house.
 Third reading- The representation of the bill can be made to the House which can be
debated shortly after which the voting is done regarding the acceptance or rejection.
 Royal Ascent- the bill is formally approved at this stage and then it becomes the act of
parliament after getting the signature of a monarch. The enforcement of the law takes
place and it becomes effective from that date which is mentioned in the bill (Rasch,
2013).
Application of statutory and common law in the justice court
o Statutory law- It is the law which is written and is passed by the body of the legislature.
These are considered as the most significant source of law and are in the form of acts,
codified statute or codes the interpretation of which is made by the court for the impartial
and fair judgment. While giving the judgmental decision, the statutes are concerned
primarily by the judges and officers (Grabowski, 2013).
o Common law- Common law is also known as the case law which is a body of law that is
derived from judicial decisions of similar tribunals and courts. These are used as the
precedents in the case where the applicable law or law reliability does not exist. The
lower courts are abided by these judicial decisions under similar circumstances
(Wellings, and Vines, 2015).
Impact of employment, company and contract law on business in the UK
o Employment law- the relationship between the employer-employee is regulated by the
employment law. It focus on protecting the interest and rights of employees and that no
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exploitation of employees is done by the employers and they are provided with the good
working environment, fair wages, and with the basic necessities such as safety
equipment, clean water of drinking, facilities of sanitation, and many others (Bagenstos,
2013). National minimum wage act, 1998 should be considered and payment of the wage
should be made as per the provisions of this act (Lewis, and Thornbory, 2012).
o Company law- The corporations in the UK are formed under Companies act, 2006 that
regulate these corporations. For running and organizing the business, the company is the
legal vehicle that governs the Insolvency act, 1986, European Union directives, and
corporate governance code. The responsibilities and duties of the directors and managers
of the company are incorporated into the legislative laws of this act. If the company is
complying with corporate governance is ensured by the legislation and that the company
operates in good and reliable faith. The main objective of the UK parliament's legislation
is protecting the stakeholder’s interest (Coyle, and Turner, 2013).
o Contract laws- the civil matters are dealt with this area of law and the establishment and
enforcement of the law are made in this. This law mainly focuses that the parties to an
agreement are ensured with their right and duties under this law and in case there is a
breach of contract then the aggrieved party will be compensated. The contract law in the
UK is also termed as the English Common law as it is basically dependent on the
common laws (McKendrick, 2014).
Differentiation between regulations, standards, and legislation for analyzing their potential
impact on business
Regulation- These are the rules that are based on and meant for carrying out the particular
legislation. The regulatory agency enforces these regulations and is mandatory to carry out
legislations’ provisions. The law implementation is provided by these regulations and
organizations and authorities are assisted by the procedures provided by them. the proper
implementation is made is ensured by the regulations. The procedure of the application of
legislation is included in the regulation.
Legislation- UK parliament enacts the laws which are applicable to all the organizations and
citizens of the UK. These are the primary law source and ensure that the interest and rights of
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people are promoted and protected. The determination is made under this regarding the
responsibilities and rights of authorities and individuals to whom the legislation applies.
Standards- It is quality’ standard which is set by the British standard Institution for engineering
and building process and for the selling of product; the main motive of the standard is ensuring
the safety, efficiency, and quality of goods and services that are provided to customers are
maintained. Every corporation is required to follow these standards which are the codified norms
(Haskel, and Sadun, 2012).
Every organization in the UK has to mandatorily adopt the legislation and get them registered
under the Companies Act, 2006. The regulations are also required to be followed by corporations
in the UK and articles of a corporation shall mention all of its standards which it is obligatory to
follow.
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Task2.
As per the facts of the case of JPN who started their partnership firm “JPN Publishing” after
graduation want to expand their business by extra funding and they are advised by their
accountant to get their business registered as LLP (limited liability partnership). There are
different types of business in the UK. The JPN Publishing can expand their business by
converting into any type of the following business-
 Sole Proprietorship- This is the type of business which is run or operated by only one
person who is known as a sole trader and there is no legal difference between business
entity and owner. All the profits are received by the sole trader and he has unlimited
duties and responsibilities regarding all the debts and losses. The proprietor owns the
assets of the business and hires employees for getting assistance for working. Unlimited
liability is faced by the owner. In case the business is not able to pay the creditors may go
after the owner's personal asset. The small business entities usually adopt sole proprietor.
It is considered as the least expensive ownership form for organizing.
 Partnership- It is the formal agreement between two or more parties for operating and
managing the business and sharing of profits. The Partnership act, 1890 is applicable in
the UK under which the liabilities of partners are unlimited in the partnership firm and
are held personally liable for the business debts and losses. Partners have to pay tax on
their profit share. With an increase in the number of partners the fundraising of the firm
can also be increased (Miller, 2013).
 Limited liability Partnership- Limited Liability partnership act, 2000 is applicable on
UK LLP who can get them registered by at least two persons. There is no requirement to
have a written agreement and there is limited liability of every member up to the
contribution amount made by them. No partner is responsible for the misconduct and
negligence have done by another partner.
 Corporation- The incorporation of companies in the UK is done under the companies
act, 2006. Various regulations and rules are provided by the legislation that the
companies have to follow. The company is a separate legal entity from its owners. The
registration of the companies is made at Companies House for the lawful purpose. One or
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more members can form the company by making subscription of their names to the MOA
(memorandum of association). Corporation’s shareholders are the shareholders who elect
a board of directors for overseeing the major decisions and policies.
Difference between incorporated and unincorporated business
Basis Incorporated Business Unincorporated business
Business liability They have independent legal entity and
owners are not liable for the debts of the
business.
They are the extensions of
their owner and the owners are
liable personally for the
liabilities of the business.
Differing rates of
tax
Separate business tax returns are filed.
One individual tax return is filed. Cannot
claim for the personal credit.
Flexibility while dealing with
taxes. Personal tax credits can
be claimed
Ongoing filing and
paperwork
For the preparation of annual reports,
and quarterly reports for the government
the recording of corporate meetings,
annual shareholder meetings are a must.
Extensive paperwork is included in
making preparation for these meetings
(Light, and Munk, 2016).
Paperwork is not required in
unincorporated business (Dan,
2013).
Unlimited life It is independent and not tied to any
person's life.
Such businesses can last as
long as owners live.
management It is managed by a member of business
and managers. In the structure where the
management is in the hands of members
the day to day operations of the business
are managed by the company's member.
The managers and directors of the
company have the delegation power.
Partnership firm- The
management is in the hands of
the partners and there is equal
sharing of several and joint
liability. All the partners are
equally held liable for the
firm’s activities.
Sole proprietorship- The sole
trader is the only owner of
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such business and hence the
management of the business in
their hands. They are
responsible for all the
decisions.
Funding An incorporated business can get funds
from various sources including the issue
of share and debentures, funds from
promotors, retained earnings. The
medium-term financing can be made
available through funding from financial
institutions, commercial bank, and lease
finance. For the short term bill
discounting, trade credit, and creditors
can be used for fundraising.
The sole trader raises the fund
through personal investment
made by them or they can
approach the bank for taking
loans.
The investment is made by
partners in the partnership
firm. Crowdfunding can also
be used for raising money.
Advantages and disadvantages of the company and partnership
Partnership Advantages Disadvantages
 It is easy to establish a
partnership firm
 There are a less legal
formality and fewer
legal obligations
 There are mutual
support and
companionship by
which the burden gets
shared in relation to
the capital expenditure
and expenses that are
 There is sharing of
liability also along
with the sharing of
profits even if the debt
is incurred by any
other partner of the
firm
 Disagreement risks and
friction among
management and
partners
 Each partner is the
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needed to run business.
 The partnership
business’ affairs can be
kept confidential
 Better decision-making
can be done
 Profits can be accessed
easily between the
partners
 More capital can be
invested in the
business with the
introduction of more
partners.
 Each partner bring
own contacts, skills,
knowledge, and
experience to the
business (Holloway,
and Parmigiani, 2016)
 The load can be
lightened by the
partner by labor
sharing which can
positively impact the
personal life of
partners
 Risk can be shared in
such type of business
 The potential benefit
of tax
partnership’s agent and
is liable for the other
partner’s actions
 All the assets of the
partnership have to be
valued in case of
leaving or joining of
partners and this can
cost heavily to the firm
 No independent status
of the business as it
has no independent
legal existence that is
distinct from its
partners.
 The prestige is lacking
as compared to the
limited company.
 It is difficult to raise
the money just like the
sole trader
 The profit needs to be
shared which raise
many difficult
questions.
 A lot of energy and
time is absorbed in this
that can disturb the life
and work balance
(Holloway, and
Parmigiani, 2016)
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