Business Law Report: UK Legal System and Business Operations

This assignment report provides a comprehensive overview of UK business law, beginning with an introduction to business law and its importance in the commercial world. It explores the concept of parliamentary sovereignty and delves into the sources of UK law, including legislation, case law, and equity, providing examples to illustrate these concepts. The report then examines the roles and responsibilities of the government in the law-making process, detailing the application of statutory and common law. Furthermore, it analyzes the influence of contract, company, and employment law on businesses, emphasizing the importance of adhering to legal frameworks. The report also differentiates between legislation, regulations, and standards to analyze their potential impacts on businesses. Finally, the assignment includes the framing of a case study to understand the nature and formation of various kinds of businesses, along with a suitable legal solution.

Business Law

INTRODUCTION
Business law is mainly considering as trade law which covers all the necessary Acts,
amendments and provisions related with commercial activities in order to support corporate
world with fraudulent actions (What is Business Law? 2018). However, legal bodies have
designed number of norms, rules and regulations for protecting buyer and seller from wrongful
activities. Along with this, helps in running business in smooth manner by accomplishing all the
business operations in legal way. It includes various things such as; principal and agent; carriage
by land or sea; merchant shipping; guarantee; marine, fire, accident insurance; bills of exchange,
contracts and many more.
Therefore, this assignment is going to highlight various sources of UK laws with the help
of several examples in order to enhance knowledge about commercial Acts. Along with this,
roles of governing body while making law and application of statutory law is briefly explained.
Moreover, influence of contract, employment and company law upon businesses is further
outlined in the project. Apart from this, an appropriate case is going to frame for understanding
the nature and formation of various kinds of business (Besley, 2015). Last but not the least,
suitable legal solution is also explained in the report.
SECTION 1
TASK 1
a) “Parliament is sovereign” and sources of UK laws
In legal bodies, number of institutions, associations, council members, executive bodies
and judicial members are involved for handling the political matters of a nation. But there are
some hierarchy which shows the difference between central authority, higher and lower (Burley,
2017). This statement “Parliament is a sovereign” states that Parliament is having supreme
power over any other legitimate bodies. In fact, number of states is having sovereign legislatures
which includes such as; United Kingdom, Finland, the Netherlands, New Zealand, Sweden,
Norway and so on (Solove and Schwartz, 2014). Therefore, according to given statement that
“every year governing bodies announces their programme related to law through Queen’s speech
at the state of inaugural of Parliament in the month of October or November” it has been
analysed that Parliament is acting as a supreme authority. Moreover, final decisions have been
taken by parliamentary members or Queen which shows their sovereignty in legitimate bodies.
3

UK laws are known as English law or Common law which is imposed on England and
Wales in order to control all the fraudulent activities. Mainly, United Kingdom is having three
main legitimate systems which are derives from a specific geographical region and covers
various historical reasons such as; English law, Scots law and Northern Ireland. In fact, UK is
not having sole lawful system as it was formed by governmental union of previous self-
governing countries. However, English law is designed into four significant ways named as;
legislation, case (common law), human rights and EU law. Moreover, fifth residual is through
custom. It has been understood that Parliament is consider as supreme law making institution by
having exceptions for EU law. Although, legislation designed by parliament started as a Bill
(Buxbaum, Hirsch and Hopt, 2012). Along with this, public bills are brought by MPs of
governing bodies which automatically influence the general public. Additionally, Private Bills
influencing individuals or locality are bringing by non-governing MPs. Furthermore, Bills can go
through various stages; first, second, committee, report stages and third reading before it sent to
the House of Lords where final amendments have made.
Legislation which get developed can comes from bodies or persons that were authorised
by Parliament for enacting laws. Thus, developed law can come from and be consistent with a
“parent” or enabling Act. For instance; Scotland Act 1998 enforced by Westminster Parliament
for creating a Scottish Parliament with legislative authority on certain subject such as; health,
education, criminal and civil law in various other areas.
Common law or case law is also seen as most significant part of law designing. Tribunal
get engaged in creating law through which statutes get interpreted (Clarkson, Miller and Cross,
2014). Furthermore, after creating statutes by parliament, they are going to cover broad range of
incidents and situations. As a result, statutes’ become non-specific and clarification required to
applied on certain circumstances before the court.
Consequently, it has been understood that in England there is a hierarchy of sources such
as; legislation (primary and secondary), case law that is regulation of common law and equity,
parliamentary conventions, general customs and books of authority. Apart from these sources,
there are some international origin are also there that are named as; International Treaties and
European Community law.
Basically, legislation is seen as primary source of law which consist of declaration of
legitimate rules by competent authority. Mainly, legislation is having distinct purposes such as;
4

to regulate, to authorize, to enable, to proscribe, offers funds, sanction, grant, declare or to
restrict. Moreover, parliamentary legislature designs new laws like; Acts of Parliament, amends
or repeals old laws.
Judicial precedent or case law is fully based on doctrine of stare decisions and mainly
related with jurisdictions based on English Common law but this concept has been adopted in
part by Civil law systems. Basically, in this source judgement or any final decision is passed by
judges in several significant cases that were recorded in order to become important source of
law. Therefore, whenever any situation creates where none of the legislature on specific point
arises then judges can use their sense of right and wrong for coming at final decision in order
resolve particular disputes (Duffy and Hynes, 2016). Hence, authoritative precedent judgement
becomes a guide in upcoming cases which is of similar nature.
On the other hand, equity is another source of law peculiar to England and Wales.
Basically, it’s a case law that is developed by Court of Chancery. Their main successes are;
trusts, charities, probate and equitable solutions.
By analysing all the above explained information, it has been understood that there are
number of sources are identified through legal bodies get inspired for designing certain laws.
However, their main objective is just to impose all the legal rules and regulations on overall
society for controlling probabilities of wrongful activities.
B) Role and responsibility of government in law constructing process and use of statutory and
common law
Parliament is known as highest legislative body in United Kingdom as maximum number
of legal decisions is taken by them only. Their main objective is to analyse and assess all the
work of governing bodies by conducting debate in between parliamentary members for making
new laws which is proposed by government (Gordon, Pohl and Bouchard, 2015). House of
Commons (elected MPs) and House of Lords simultaneously formalized the parliament.
However, a bill can further become an Act of parliament after giving vote and support by the
member of House of Lords and MPs. On the other hand, a bill can also become law if it is
rejected by Lords offered for re-introducing into HOL.
Members of parliament or House of Commons are those people who are democratically
appointed by public for representing them in parliament house. They are hired in every 5 years
5

with the help of general election. Basically, election is called sooner via Prime Minister if there
is any requirement.
On the other hand, House of Lords are consisting of hereditary peers, life peers and seen
as senior bishop in Church of England. However, there must be 12 senior judges whom were
sitting in House of Lords but now all of them are get separated from parliament and sit as
Supreme Court.
Governing bodies is going to introduce great majority of Act of parliaments. Initially
draft is going to designed which should include in proposed law. Draft is mainly known as bill
which will further sent for further readings and approval (Granat and Kimbros, 2012). Mainly,
stages of law in Britain legal system covers; introduction of bill, first reading, second reading,
committee stage, report stage, third reading, house of lords and Royal ascent. Basically, bill is a
draft which is designed by civil layers instructed by government for explaining the details of
proposed law. However, there are three major types of Bills are there such as; Public Bills,
private bills and private members bill as well as all statutes is begin as a bill. Mainly, Public Bills
influence overall nation or a larger part of it. In fact, this is designed by cabinet for modifying the
laws in country and preceded by Green paper such as; criminal Justice Act 2003, Constitutional
Reform Act 2005. On contrary to this, private member’s bills are designed by backbench MP and
requisite to enter into a ballot for winning the right for doing so. Furthermore, persuade
governing bodies in order permit enough parliamentary time for bill to go through such as;
Abortion Act 1967.
Now, bill is going to represent or read the title of bill in first reading of law making by
House of Commons. Secondly, it’s time to debate on full detail of bill in order to convince MPs
that whether they will vote in support or against. Thus, whip system is used in this phase for
acquiring support of members. Furthermore, Bill is going to referred by committee of House of
Commons for examining all the things in detail manner in Committee stage. Along with this,
further amendments might take place if it is required in this phase. Now, in report stage bill is
further negotiated and debated in order to gain vote by House members. In third reading, bill is
again represented to House for conducting small debate for voting either in favour or against
(Hillinger, 2015). After this stage, bill is now sent to House of Lords for going through all the 5
stages which is mentioned at prior. Therefore, in this amendments were designed and after that it
will sent back to House of Commons for final consideration of amendments. Last but not the
6

least; monarch needs to formally approve the bill in order to make a bill an Act of parliament.
This process will take place under Royal Ascent Act 1961. Statutory and common law are
applied in the justice court by observing the past cases and previous decision and according to
that necessary decisions are taken.
c) Influence of contract, company and employment law upon business
Legal bodies and their rules or regulations are having major influence on company
success because all the commercial norms help a firm while running their business in smooth
manner (Jones and Sufrin, 2016). In fact, number of certain terms and conditions are set which
is followed by an organization while getting involved in any contract for minimizing the
probabilities of confusion. However, commercial law has covered all the facts or figures, norms,
beliefs and provisions related with trade for imposing it on corporate world. For example;
elements of contract, employment laws and company law which direct an association while
performing business operations. In context of business, companies law, employment law and
contract law plays the vital role as business to need carry out all different laws where they must
fulfil the needs of companies’ law by preparing MOA (Memorandum Of Association) & AOA
(Article of Association). In employment law, organisation must take care of their employees by
providing appropriate among of wages and must complete all the regulations regarding
employment act. In contract act, company must complete particular contract and if they fail to
perform then they can be sued also. For ex: if A and B are in a contract regarding sell of car. But,
B didn’t purchase the car and also doesn’t mentioned any specified reason so in that condition A
have the opportunity to sue B.
Elaborate by differentiating between legislation, regulations and standards to analyse
potential impacts upon business.
The legislation, is one whose rules and regulation must be followed by each and every
one as per the given guidelines so it can be said that here company need to follow all the laws
which have been imposed by legislation. When it comes to regulation it can be easily said that it
helps to regulate that how rules can be followed by organisation. Also, standards are the one
which helps to determine that what standards must be maintained by an organisation because it
very important on regular basis to meet up with the quality of your product when business
activities are being carried on.
7

TASK 2
Nature and formation of various types of business
Companies Act 2006, can be defined as the legislation which governs the Companies
Act in UK. There are around 1300 sections in this law and one of the widest law ever enacted in
UK. The main aim to form this law is all about to simplifying the process of law with less
requirement of necessary duties.
In the above case, there are three partners in a partnership firm who wants to expand their
business by including extra fund. Their accountant is suggesting them to convert partnership firm
into limited company where they can easily raise fund and they can get different benefits under
Companies Act 2006.
As there are always different methods of forming an organisation, it is the choice of
owner which nature of organisation they want to form to get different benefits (Kitch, 2017).
According to its formation it will affect company and owner’s legal liability with different
treatments under taxation, rules and regulation according to its incorporation. The different
formation methods are:
Sole Proprietorship does not require any legal documents or might require less
compared to formation of other organisation. In sole proprietorship owner have the responsibility
of asset and liabilities, profit or loss. Risk is low as personal assets are involved in an
organisation.
Limited liability Companies are those companies where liability of owner is protected
with benefits in tax treatments. To incorporated a company under limited liability everyone must
file a paper work with state. Different fee structure is to be given at the of incorporation.
Partnership are those associations where two or more parties come together to form a
business. In this, the profit sharing ratio is set according to their personal contribution. The
liabilities of a partnership firm are unlimited and have obligation to pay debts as they are known
as direct owner of the business.
Joint Venture is a business arrangement where two or more business enters into same
contract to perform a specific task (Muchlinski, 2012). Generally, in joint venture the agreed
parties share the part of revenues and expenses. Although two or more organisation work
together in joint venture but it is always different from the process of merger.
8

Limited Partnership is a partnership in which the liability of a partners is limited up to
the amount of their individual investment. In this, business does not have any requirement to pay
tax as partners are bound to submit tax according to their income.
Corporation is a business activity which is owned by its shareholders where profit and
losses are generated through firm's operation. A corporation have a legal existence where it can
sue and also be sued with legal liability to pay tax. When owner of a company changes, it does
not have the requirement of dissolution (Murray, 2014). The process of raising fund is much
easier compared to other formation method but it is always a lengthy process and expensive too.
As mentioned by accounted, there are various ways to raise fund in company rather than
partnership firm. So, some of the ways to raise fund in corporations are listed below:
 By issuing fresh share in market company can raise required amount of fund and it is also
risk free in terms of company
 By issuing debentures, bonds, etc., an organisation can raise additional amount of fund
where they are bound to pay certain amount of interest to debenture holders.
 In early-stage of a company, they require fund but investors are not willing to invest in a
company so in that condition company can raise fund through venture debt where interest
rate is high compared to other process.
 By invoice discounting and factoring, company can raise short term borrowing to
improve working capital. It allows to draw money against its sales invoice.
 By way of peer to peer lending where company borrows loan from one who is willing
through online process.
 Government also provide start up loan at a very low interest rate which can be one of the
best way to raise fund for start-up companies.Critical evaluate difference between
unincorporated and incorporated business making
Incorporated organisation can be defined as a corporation which have a legal existence
in the eyes of law as it is incorporated under Companies Act. It can be either profit making or
non-profit making. The time process for incorporation of a business is near around 3 to 6 weeks
and it also protects your personal assets from business liabilities. In this, mainly funds are
managed through public issue, banks, deposits, etc. and many more. Some of the advantages and
disadvantages of incorporated company are listed below
Advantages:
9

 In incorporated organisation assets are always secured
 There is no personal responsibility for business debts.
Disadvantages:
 There is double taxation system if company provides dividend to its shareholder.
 Documentation process is lengthy.
Unincorporated association is an organisation where group of people work together,
which is not legally incorporated (Nard, 2014). There is no requirement of legal formalities in
unincorporated organisation. An unincorporated enterprise includes sole proprietorships,
partnerships and family trusts. As it has no legal existence, it cannot be sued in the name of
organisation but members can personally be sued. In unincorporated organisations funds are
mainly managed by individual themselves. Some of the advantages and disadvantages of
unincorporated business are:
Advantages:
 Owner enjoys whole profit by themselves after paying tax.
 There is no such requirement of documentation.
Disadvantages:
 Liability is not limited up to the organisation.
 Unincorporated organisation cannot hold assets on its name.
The difference between incorporated business and unincorporated business in terms of
formation are listed below:
Incorporate Business
 A name should be selected first which should not be linked with any religions,
government, or organisation etc.
 For official communication, proper address should be mentioned.
 First director should be appointed at the of incorporation. So, all responsibility can be
given to him.
 At the time incorporation even one shareholder is also required who can also become the
first director of the company (Parent, 2017).
 At Companies House, the full description of your company with its nature including SIC
(Standard industrial Classification) should be submitted.
10

 At the time of incorporation “Memorandum of Association” with complete information
about company with duly signed by all the shareholders should be legally prepared.
 While incorporating a business “Article of Association” should also be written where
rules and regulation are mentioned.
 If any member has PSC (People with Significant Control), form should be filled and
submitted.
Unincorporated Business
 The name of business is selected which should not harm others brand royalty.
 The business activities and objective should be decided.
 Agreements should be made with members regarding profit sharing ration and investment
(Puig, 2015).
 As liability is unlimited, members should be aware and agreed about the activities that
are to be performed in organisation.
Advantages and disadvantages of company over partnership firm
There are various advantages and disadvantages of company over partnership firm:
Advantages
 Life of a company never ends even if any member comes and goes as it enjoys the
perpetual succession but in case of partnership even a single partner can affect its
agreement.
 In case of companies, the source of raising fund is easier. But in partnership, it is most
difficult task to raise fund as member are required to bring personal assets.
 The main preference is given to company rather than partnership firm in the eyes of
government bodies (Raz, 2017).
 Goodwill of company always remain high compared to partnership firm.
 There are no limits for member in limited company but in case of partnership firm there
are certain rules and regulation regarding limits.
 The credibility of company is more secured as they are not easy to dissolved where in
case of partnership banks worries about a partnership firm as it can be easily ended and
always hard to recover the loan amount.
Disadvantages
11

 Company have a time consuming and lengthy process at the time of incorporation
compared to partnership firm.
 The decision-making process should follow all rules and regulation in comparison with
partnership firm.
Section 2
a) Recommend appropriate legal solution for resolving disputes using case laws or statutes.
CASE 1
In the given case, Champion Ltd. was given cash payment to shift its business to new
location. After that company found so difficulty for sustaining their customers as a result they
face financial problems due to this problem they were unable to make payment of creditors
(Stout and Blair, 2017). So, looking at this condition creditor want to file petition for winding up.
Winding up can be defined as the process of selling companies or partnership firm's asset
in order to pay the payment of creditors and distributing remaining assets to its shareholders
(Parent, 2017). There are two types of winding up process such as Voluntary winding up, and
compulsory winding up.
Voluntary Winding up
In voluntary winding up process, company appoints a liquidator who will calculate the
current value of assets to realise them. This process takes place when company is unable to pay
creditors and with help of mutual consent the liquidator is appointed to sell assets
A director can propose a company to stop trading as they are unable to pay debts. Then, at
least 75% of shareholders should agree for winding up. Once the resolution is passed the legal
proceeding starts to wing up the company
Compulsory Winding up
This process take place when court forces a company to appoint a liquidator who will
take the responsibility to sell the assets and distribute among creditors. This process is mainly
conducted because of creditor's. The procedure followed in compulsory wind up is:
It is mandatory for compulsory wind up a company must be owed £750 or more (Zander,
2015). Then, Creditors must prove in a court that company can't pay the amount. If winding up
12