English Legal System and Company Law: A Comprehensive Analysis

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Introduction
The present assignment deals with the legal system of English law and the status of the company
and the role of the directors. The assignment is divided into two parts, part A deals with English
legal system and part B deals with the law of the company and the role of the directors. Both the
laws are very important in their own aspect. The law is evaluated with the help of the primary
and secondary sources. The case laws are also incorporated to justify the theory.

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Task 1
One of the most prevalent legal system is the common law. This ancient system is also followed
ion the English system. The system is segregated into two broad categories, that is, criminal and
civil law and both the systems must be followed in order to bring peace and harmony in the
society. In the present section analysis is done on the nature and sources of the legal system and
the role of the government in the formation of laws and the impact of the law on various business
scenarios. It is thus first important to understand the nature and character of the English system
of law.
English Legal system
Hierarchy of legal system
The legal system of every country demonstrates the kind of society that exists in the said
country. The legal system that is present in United Kingdom is very strong and so is its society
which runs on such an effective legal system. It is thus very important to understand the ladder in
which the legal system of the United Kingdom is built.
The foremost and the court which is at the highest step of the ladder is the Supreme Court of the
country. The Supreme Court has the power to deal with all the kinds of conflicts at its original
and appellant jurisdiction both.
At the second step of the legal system of the United Kingdom come the Senior Courts of
England and Wales. It is not a single court in nature and it is the assembling of various kinds of
courts in its jurisdiction which includes Court of Appeal (the court has the power to resolve the
conflicts at original jurisdiction (both civil and criminal) and also deals with the tribunal appeal);
High Court (the court has the power to resolve the conflicts at original jurisdiction (both civil and
criminal); Crown courts (first instance civil matters) and subordinate courts. (Oakland 2010)
All the courts which are discussed above together formulate the hierarchy of courts of the United
Kingdom. The courts have to apply the laws from all the sources in order to achieve the valid
outcome. So, it is now time to evaluate the sources of law prevalent in the country.
Sources of Law
Every country maintains peace and order when there is a stable and just law. The law that is
followed by the court is derived not from any single source; rather, there are various modes from
which laws can be derived and the laws are then applied to bring justice to the people of the
country and maintain peace and harmony. Thus, all the main sources of law are discussed herein
under. (Denoncourt 2009)
Constitution
The Constitution is the bible with the help of which every country runs. It is the guiding force for
all the laws of the country. Any law that is established in any country and which is not in
consistent with the constitution is held to be unlawful. The constitution is the major source of
law and is followed by all the legal agencies of the country.
Common law
The age old laws that are followed by all the countries in the world is also followed by the
United Kingdom and is called common law.
Parliamentary authority or Legislation
The parliament of the English system of law is one of the governing bodies which are involved
in the process of making law in the country and thus it is one of the source or mode from which
law emerges and which must be followed by the people in order to bring just society. The
parliament makes law by evaluating the crimes that exists in the country. The parliament has the

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power to frame laws in every arena in which it believes just in order to curb the menace and to
bring peace and harmony. It is one of the fundamental sources of law that exist in the English
legal system.
Case laws
Another source which is very prevalent in the United Kingdom legal system is the presence of
case laws. The decision that is put forth by the higher courts are compulsorily applicable on the
lower courts and the lower courts must apply the same to the same factual situation and issues. It
is called law of precedent and is one of the main sources of law of the legal system.
European Union Laws
The laws that are framed by the European Union with which the United Kingdom is the party is
also applicable on the country and the courts are bound to apply the laws of the said treaty and
thus it is also one of the sources of law. It is the laws of the European Union which supersede the
other laws in cases of conflicts.
Law making – the position of the Government
Every country must acquaint with all the sources of law and the same must be applied by the
legal system of the country in order to deal with the conflicts in hand and to maintain peace and
harmony in the country. Now, when any country uses laws, then, apart from the rest of the
sources, one of the sources of law is the legislation. The legislation is the law which is framed by
the parliamentary structure or the government of the country. Thus, the government of the
country plays a very significant role in the process of law making. The laws that are made by the
government of the country is framed by complying with the set procedure and which has several
stages. (Robert and Walters 2015)
Thus, steps that are followed by the legislative authority while framing the laws in the country
comprises of:
Every law making process is started with the presentation of the bill in the Houses of the
parliament. It is the House of Lords in which either of the bills that is, private or public can be
placed. This is the initial stage of the process of law making.
When the bill is introduced in the House, then, there is a stage of debate. The bill is then debated
by the members of House and it is simply gesture which must be carried out. This is called the
First Reading of the bill.
After the completion of the first reading, there is a detailed discussion on the bill as to why the
bill is actually put forth before the House. The reasons are found out for the presentation of the
bill. If the members are of the opinion that there must be some changes that must be brought in,
then, the same are done at this very stage. This is called the Second Reading of the bill.
After the completion of the second stage, there is a thorough analysis of the bill and is called
committee stage. The bill is then again analyzed in the report stage and the amendments are
implemented. When there is completion of the debate and there is no alterations that can be
made, then, there is third reading. After the third reading the bill is granted with Royal assent
which transforms the bill into an Act.
The entire process is the method of converting a bill into an Act by the government of the
country.
The significant laws or Acts required to be evaluated considering the business needs
It is stated that there is no one manner in which the society adapt laws, rather, laws can be
sourced from various made such as common law, precedents, and parliament. Etc. One of the
sources was to create an enactment by following the process law. Now, when the government
makes laws by following the process of laws, then, the enactments that are made have an

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important impact on the business industry. It is thus now important to understand as to how these
laws affect the business industry of the English system.
There is no one single legislation in the English system which is present but there are few laws
which have the significant influence on the business industry and the same are analyzed herein
under: (Huxley-Binns, et, al 2017)
i. The law of negligence is one of the significant common tort laws and every business
must get itself acquainted with the same in order to avoid any kind of hardships. In
Donoghue v Stevenson (1932), the law was settled that any business while dealing
with its activities must deal in such a manner so that no hardship is caused to its
customers with whom it is sharing the relationship of proximity and the customers
which are reasonably foreseeable.
ii. The Companies Act 2006 is one of the significant provisions which affect the
business of the country. The laws which are framed under the enactment must be
followed by every business in order to avoid the penalties that are made of the Act.
(Marson and Ferris 2015)
iii. Every business must take into consideration the Road Traffic Act 1968 in order to
avoid penalties.
iv. To bring justice and equity in the business it is necessary that The Equity Act 2011
must be comply with.
The potential implication of law on a business, general data, protection regulation, contract law,
employment law
In any business, there are several contracts which are framed. Thus, the provisions of the contract
law must be complying with so that the contract that is established must be enforced by the
business. The non compliance of the law results in breach which may result in several
compensatory and liquidated damages.
The business must also follow the employment Laws so that the employer is aware of his
obligations and responsibilities towards the employees. By maintaining the provisions of the law
a safe and healthy environment and word place can be offered to the employees.
The general data and protection regulations should be comply with so that the secrecy of the
business must be established.
Task 2
A Partnership or company
A business is wished to be started by Tony and Bola. Tony wish to invest 60,000 and Bola wish
to invest 40,000 in the business. But, before they invest in the business, they must be aware as to
which is the right choice of business, that is, either the partnership form of business or the
company form of business.
It is first important to understand the company form of Business. When a company is created
then it is artificial in nature which has its own legal personality but carried on its acts with the
help of officers. Since a company in a person in the law’s eyes, thus, a company has the power
that it can take or initiate legal proceedings on its own level. Thus, the company has the power to
bring legal proceedings and the company also has the power to take defence if any legal
proceedings are initiated against the company.
If Bola and Tony wish to create a company then there company is artificial creation and they can
become the officers of the company and carryout its management and control the affairs. They
will be the company directors and imposed with several duties to carry out their obligations. The
main pros are that since the acts are in the name of the company thus they cannot be held

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personally liable for the same. Both Tony and Bola can only be held personally liable when the
veil amid them and the company is shattered. One of the significant feature of operating the
business by sway of the company is that the liability of Tony and Bola will be equivalent to the
value of their share and thus their liability will be limited in nature. The company also never dies
as it has perpetual succession.
However, if a company is made by them then there are few obligations that they must comply
with that is, to act with diligence and care; they have to use their position and the information for
the benefit of the company alone; they have to act with honesty; the officers must always
supersede the interest of the company when there is conflict with their own interest; they must
avoid any kind of insolvent trading.
But, if a partnership is established then their liability will be unlimited and there is also no
perpetual succession. it is thus advisable that they must formulate a company.
Now, to form a company it is advice that they must follow the due process of law.
They first have to select a name for the company. The shareholders, directors and secretary of the
company must be decided. The controllers of the company are to be decided. The documents are
then must be prepared and must lodge for registration. The business is then registered and a
company is thus created.
b)
Issue
Whether the travelling expenses that are incurred by Patrick can be recovered by him from the
company while acting as the director of the company?
Relevant Law
No company can manage its own functions and activities as a company is an artificial person and
it requires officers to carry out the functions of the company and to manage the affairs of the
company. The directors are the main guiding force of the company and they are imposed with
several obligations that they must cater.
While carrying out the directorial duties, there are instances when the director might incur some
expenses. As per the Companies Act 2006, the expenses that are sustained by the director when
he is serving his official duties then such expense must be given back by the company to the
director. However, it is necessary that the expenses so incurred must be such which are raised by
the director only within the scope of his directorial position and not in any other capacity. If the
expenses so raised are personal then the same cannot be acquired back. (Taxcafe 2019)
Application of Law
A company is running in the name of Planet Mars Limited and the director of the company is
Patrick. There is no presence of constitution to run and manage the affairs of the company.
Patrick being the director has the obligation that he has to travel from one place to another with
respect to the affairs of the company.
At this stage it is clarified that Patrick is moving from one place to another not by choice but
because he being the director of the company has an obligation to do so. When Patrick carry on
this duty and obligation then while catering the duty he incur few expenses which are in the
nature of travelling and other expenses. These expenses are not in any manner is his own or self
expenses but are incurred in order to comply with his directorial duties. Patrick is not having any
separate contract of employment with the company.
So, the right of Patrick exists and he has all the power to bring an action against the company and
he can recover the travelling expense that is spent by him while catering the obligations of the
company.

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Conclusion
It is thus concluded that Patrick has spent the money as travelling and other expenses and the
same are spent when he is comply with his duty as a director and not when he is acting as an
independent person. Thus, the company must reimburse the expense that is spent by Patrick.
C)
Relevant Issues
I. Can Planet Mars Limited restrict Patrick from taking any employment in its
competitor?
II. If the Alternate dispute resolution is used, then, how the dispute will be resolved?
Relevant law
When the business is registered as per the company law of the country, then, such a business is
called incorporated business organization or a company form of business. As per the leading case
of Saloman v Saloman (1897), it was submitted by the House of Lords that a company is an
artificial being which has the capability to carry on all the activities and tasks which can be
conducted by a normal person. But, a company has no mind to apply and so to carry on the
affairs of the company there is a need of a normal person who are the officers of the company
and who are responsible to conduct the affairs of the company in the name of the company.
The officers must comply their conduct as per the employment contract. Restraint of trade clause
is one of the clauses that is normally found in the employment contracts. As per the clause any
employee is restrain to conduct the similar trade during his tenure of services or after tenure for
particular period of time or restrain to conduct the similar affairs at a particular geographical
regions.
The restrain terms are found to be valid when the restrain is not for an infinite term but the time
limit is limited (Thomas v Farr plc and another [2007]. When the company is trying to maintain
its genuine interest, then, the clauses are found to be valid and legal (Nordenfelt v Maxim
Nordenfelt Guns and Ammunition Co Ltd [1894]. Also, at times to keep the secrecy of the
company or the business, the clause is needed (Austin Knight (UK) Ltd v Hinds [1994]. Also, at
times in the name of public inertest the clause is held to be valid (Hinton & Higgs(UK) Ltd v
Murphy and Valentine [1989].
Generally, when the parties in the dispute wants to resolve the conflicts maid them then they take
the recourse of the court of law and get themselves bound by the decision lay down by the court.
But, the recourse from courts are found to be very cost and a time consuming affair and thus
another method by which the problems amid the parties can be resolved is by availing the
recourse of alternative dispute resolution technique. The ADR techniques work when a
neutral/common person is placed who has the capacity or the power to deal with the problem at
hand and the decision is found to be applied on the parties without any dispute.
One of the ADR techniques is the process of arbitration wherein the arbitrator is the deciding
person who is appointed by the parties and the decision of the arbitrator is undisputed by the
parties. The arbitrator acts as judicial officers by looking into the facts of the case, apply law
with the help of the evidences. The process is very helpful as it keeps the secrecy of the parties
and makes the decision binding.
Another ADR technique is mediation where the decision is not binding though the decision is
given by a mediator which is a neural person.
Application of Law
Patrick was working in Planet mars Limited and he is not in the good terms with the company.
He was offered a very profitable job offer from the competitor of Planet mars Limited. Patrick

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left the work of Planet mars Limited and joined the rival company. Patrick was imposed with a
restrain clause when he joined Planet mars Limited. As per the clause, Patrick (senior manage) is
not permitted to seek any position with the competitor of Planet mars Limited for a term of five
years if they leave Planet mars Limited. Now, Patrick can be held to be in violation of the
restrain clause because:
a. Patrick was the senior manager of Planet mars Limited and thus the clause is
applicable upon him. The clause is held to be valid as the restrain is not for unlimited
time period but is only for five year term and which is valid as the term is definite in
number.
b. If the goodwill and confidentiality of Planet mars Limited was to be maintained then
the clause is valid.
ii. If any other method of dispute resolution is to be used then it is advice that Planet
mars Limited must use arbitration technique so that secrecy is maintained and
decision is binding.
Conclusion
So, Patrick is not allowed to seek the position in the competitor of Planet mars Limited as the
clause is valid in nature.

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Conclusion
After analyzing the English legal system and understanding the law of the company and the role
of the directors it is submitted that all the legal aspect are very important and thus the same must
be applied in order to attain the just society.

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Bibliography
Books/Articles/Journals
Rebecca Huxley-Binns, Jacqueline Martin and Tom Frost. 2017. Unlocking the English Legal
System. Taylor & Francis.
Janice Denoncourt . 2009. Q&A Business Law 2009-2010. Routledge.
James Marson and Katy Ferris. 2015. Business Law. Oxford University Press
John Oakland. 2010. British Civilization: An Introduction. Routledge.
Robert Rogers and Rhodri Walters. 2015. How Parliament Works. Routledge. 7th Edition.
Case Laws
Austin Knight (UK) Ltd v Hinds [1994] FSR 52
Donoghue v Stevenson (1932).
Hinton & Higgs(UK) Ltd v Murphy and Valentine [1989] IRLR 519 (CS)
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535
Thomas v Farr plc and another [2007] EWCA Civ 118 CA.
Online material
Taxcafe (2019) < https://www.taxcafe.co.uk/resources/directorsexpenses.html>.