Business Law Report: UK Legal System, Business and Legislations

This report provides a comprehensive overview of business law, specifically within the context of the UK legal system. It begins with an introduction to business law, defining its scope and purpose, and then delves into the divisions and sources of law, including public and private law, and the hierarchy of courts. The report examines the law-making process in the UK and its impact on businesses, emphasizing the importance of staying updated with legal changes. It analyzes the impact of various legislations, such as employment, company, and contract law, using the case of Pimlico Plumbers v Smith to illustrate employee rights. Furthermore, the report explores different types of business organizations, including partnerships, cooperatives, and corporations, providing insights into their legal frameworks and suitability for business expansion. It also discusses the management and funding of companies, highlighting the roles of directors and the importance of financial resources. Finally, the report addresses alternative solutions for resolving disputes, offering practical guidance for businesses. The report is designed to assist Pegasus Ltd. in expanding its business operations by providing a clear understanding of the legal landscape and implications.

BUSINESS LAW

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Divisions and Sources of Law...............................................................................................1
P2 Law making process by the government and its effect on business......................................2
TASK 2............................................................................................................................................3
P3 Impact of various legislations on business.............................................................................3
TASK 3............................................................................................................................................4
P4 Analysis of how different types of business organisation and how they are legally framed.4
P5 How organisations are managed and funded.........................................................................6
TASK 4............................................................................................................................................6
P6 Alternate Solutions for resolving disputes.............................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business law, in general terms, could be termed as mercantile law and commercial law
and concerns the dealings between people and business matters. The purpose of business law is
two-fold, firstly, it deals with the regulation of businesses through various laws such as agency,
company, employment etc., and secondly, it regulates the business transactions by laws, such as
contract. (Alix Adams, 2017)
The report describes various aspects of business law along with a brief description of
legal system of the UK. The legislations affecting business such as company law, employment
law, contract law, etc. are explained in order to help Pegasus Ltd. expand its business. The report
also highlights the ways of alternate dispute resolution.
TASK 1
P1 Divisions and Sources of Law
Divisions of Law
In a society of any size, certain rules and regulations are required for governance and
organisation, and ensuring welfare of the people belonging to that society. The societies are in
need of a complex system of law to carry out the functions of governance.(Alix Adams, 2017)
Though, it is not possible to classify law in distinct divisions but broadly it could be classified
into two categories – in rem and in personam,(Alix Adams, 2017) that is public law and private
law, which are explained below:
 Public Law deals with the relationship between – individuals and government
and individual actions concerning the society directly, for instance, the criminal
law falls under the category of public law.
 Private Law is pertaining to the civil law legal system governing the relationship
between the individuals, such as law of contract, etc.
The legal system in the country are operated by the courts of law which are arranged in a
hierarchical order such as the Supreme court followed by the Court of Appeal, High Court,
County court, Crown court, and the Magistrate court which are explained as follows:(Samue,
2007)
1

 Supreme Court: Its the highest appellate court which was called as the House of
Lords up til October, 2009. Since it is the highest court its decision is binding on
all the subordinate courts.
 Court of Appeal: The Court of Appeal is a senior court and it hears the appeals
and has two divisions – civil and criminal.
 High Court: The High courts is also the senior court and hears serious and
complex matters and has three divisions – Queen's, Family and Chancery.
 Crown Court: It hears the serious criminal matters along with the matters
transferred by the Magistrates courts.
 Magistrate Court: It deals with the criminal matters which are less serious and
also certain family matters. It consists of the justices who are appointed from the
local communities.
Sources of Law
The sources are the origins of law providing an understanding of law. These could be
resorted by the Pegasus Ltd., to understand the laws prevailing in the UK. The sources could be
classified under four different heads – Legislations, Precedents, Common law and European
Union law, explained as under:
 Precedents: The legal system in the UK is administered by the courts which and
therefore the judgements pronounced by the courts of law becomes part of law
and are one of the important sources of law.
 Legislations: The legislations are the laws formulated and passed by the
legislature. In the UK the principle legislature is London which primarily
formulates law for the whole of the UK.
 Common Law: The UK's legal system is based largely on the common law,
therefore, the decisions or judgements passed by the superior appellate courts are
part of law.
 European Union Law: Since the UK is a member state of the European Union
the laws passed by the EU are prevalent over the local laws.
2

P2 Law making process by the government and its effect on business
The parliament enacts a legislation by passing a bill. A bill is of two types – public bills
which are generally laws and private bills are non-governmental bills concerning the individual,
corporate or local interests.
A bill can be initiated in either House and it has to be passed by the other in order to
become a law. The law making process involves following steps:(Mann and et. al., 2011)
 First Reading: The bill is introduced in this stage, the title is announced and then
published.
 Second Reading: This stage involves debate on the areas of the bill. The
members vote and the bill is furthered in the next stage.
 Committee Stage: In this stage the bill is thoroughly discussed and amendments
are introduced.
 Report Stage: The members of the House are presented with the amended bill
and the provisions are further debated and voted.
 Third reading: The amended bill is discussed and voted in its finality in this
stage.
 Royal Assent: In this stage the Queen gives her assent to the bill known as the
Royal Assent. This is the last step after which the bill becomes a law and is
known as the Act of Parliament.
An organisations' business is affected whenever a new legislation is passed by the
Parliament as it requires compliances and changes in business operations depending upon the
size of the organisation. Therefore, it is suggested that the businesses should have up to date
knowledge of the laws. The organisation could visit the business law websites for latest law
updates and business attorney's knowledge.
TASK 2
P3 Impact of various legislations on business
Recently, the Supreme Court has given a landmark judgement in determining the
employee rights in the case of Pimlico Plumbers v Smith, [2018] UKSC 29. In this case the
employment status of Mr. Gary Smith was under question and the issue was whether he was
3

entitled to compensation, paid leave, etc. The status of Mr. Smith as a worker or self-employed
was in question and was decided by the Tribunal.
Mr. Smith contended that he was not given the benefit of holiday pay and the company
unlawfully deducted his wages when he returned following a heart attack. The Company
contended that the status of Mr. Smith was that of self-employed so he was not entitled to the
holiday pay. The Tribunal decided that Mr. Smith was not an employee for the benefit of holiday
pay but he was a worker for the deductions made in his wages.(Pimlico Plumber v Smith, 2018)
The Supreme Court critically analysing the perplexed arrangement between Pimlico
Plumbers & Gary Smith and the decision of Employment Tribunal held that Mr. Smith was a
worker and was eligible for the minimum rights such as, paid leave, pension, etc. Similarly, the
company Pegasus Ltd., has engaged 35 driving operators and vans for delivery. The company
needs to draw out a clear arrangement while dealing with the driver so no dispute arises between
the drivers and the company.
For any company to operate three laws are of prime importance, which are, the
Employment law for ensuring employees are fairly treated, Company law for effective
management and operation of the company and Contract law. All these laws impact a business
and should be complied with as non-compliance results in penalties and other legal liabilities.
Following the Pimlico judgement it can be concluded that Pegasus Ltd., should clarify the status
of the drivers as they have to wear company's uniform holding identity cards and driving
company's branded vans. This could result in a confusing situation wherein the status as to a
worker or self employed could be questioned. Therefore, Pegasus Ltd., should comply with the
Employment law and Contract law to avoid disputes.
TASK 3
P4 Analysis of how different types of business organisation and how they are legally framed
Alex and Jay have been advised by their accountant to set up a registered company, so
that they can gain the advantage that a company has over other types of business organisation.
They have researched on different types of business organisation to expand their business and
how they are incorporated. As there are different types of business entity that can help them to
achieve their expansion goals, which are explained below:
4

 Partnership: This type of organisation is governed by Partnership Act, 1890 .
This organisation is owned and controlled by two or more than two persons and
contribute their capital in agreement with each other for its operation having
unlimited liability. A partnership deed is made specifying the rules and
regulations to be followed by the partners. In the case of Pegasus this type of
organisation is not suggested to be formed as it has some restrictions and does not
support expansion at a large scale.
 Co-operatives : Cooperative and Community Benefits Society Act, 2014 governs
this organisation. A cooperative is a business organisation owned by a group of
individuals for achieving the pre set goals. It generally has high profits and high
turnovers. The group of individuals here are called the members of the
organisation. They can be incorporated or unincorporated. This type of
organisation is basically formed to manage general utilities department of
government. As Pegasus is in initial stage of development and want to expand
their business so this type of organisation is not recommended as it will require
high investment for formation.
 Corporations : It is governed by Companies Act, 2006. This type of business
organisation is a legal person having a separate legal entity, distinct from the
owners of the business. The ownership of the owners is represented by the shares
that they have. This type of organisation is divided into – Private and Public
company.
In this the owners enjoys the limited liability up to the percentage of ownership that they
have in the company. For the formation of this type of organisation the promoters of the business
have to follow some legal steps. They have to file MOA and AOA to the registrar of the
companies so that the company gets incorporated. These documents specifies the laws, rules and
the objectives of the company. These documents should be stamped and signed by all the
directors of the company. If the registrar is satisfied then it will issue certificate of incorporation
which is the legal evidence that the company is formulated.
As it is judged in the case of Salomon v Salomon that the company acquires a separate
legal entity from those of its members, and can enter into contract in its own name. The company
still remains into existence despite the change in its owners.
5

It is recommended for Pegasus to formulate a registered company by following the legal
steps for registration and incorporation. Once registered a company enjoys a legal status and the
liability of the members is limited.
P5 How organisations are managed and funded
Management of a company
A company is generally managed by the shareholders and the board of directors of the
company. The directors are responsible for the managerial tasks of the company. The directors
are the agents of the company acting on behalf of the company.
Role of Directors
Directors are in-charge for the management of business in a company. They are
responsible for taking the companies strategic and operational decisions. The directors should
abide by the memorandum while managing a business and should work honestly, reasonably and
diligently. The directors should not work ultra vires to the powers given to them by the
memorandum.
Funding in a company
For the smooth functioning and effective management of a company funding is one of the
most important activity as money is the bloodline of a company. Generally speaking, funding is
raising financial resources or cash from one's own sources or from outside the organisation.
(Peers, 2013) The raising of capital differs according to the size of the organisation. There are
various ways in which a company can raise funds which are as follows:
 Government grants: Government grants are one of the ways of generating funds
in a company, these differ according to the size of an organisation.
 Loans: Loans could be another way of funding which are granted to the already
established organisations, that is, the companies which could give collateral
security.
 Equity: Equities are another way to raise funds from outside of an organisation.
For new companies private equity investors could be a source for generating intial
capital for the company.
 Venture Capital: Is another form of equity wherein a group of investors pool
money for a specified amount of shares and stakes in the company.
6

TASK 4
P6 Alternate Solutions for resolving disputes
Whenever a dispute arises in an organisation involving a civil matter then instead of
going to a court there are other remedies available which are often quicker and cheaper than
litigation, these alternate mechanisms are known as the Alternative Dispute Resolution (ADR).
There are four different methods involved in ADR –
 Arbitration
 Conciliation
 Mediation
 Negotiation.
In the UK there are two types of ADR which are commonly recognised, which are
arbitration and mediation. Arbitration is a process wherein an independent third party called an
'arbitrator' is involved who considers the facts and gives a decision on the dispute. Similarly,
Mediation involves an independent third party who helps the parties to mutually come to an
outcome for the dispute themselves.(Alix Adams, 2017) In the UK there are ADR schemes in the
regulated sectors such as telecom, financial services etc. as well as several businesses in
unregulated sector. And, there has been an increase in the number of businesses who are
participating in the voluntary ADR schemes.
According to the given facts Pegasus Ltd., is aware of the legal recourse of litigation to
resolve an issue. But litigations are often time consuming, expensive and slightly confusing
process for the parties. After analysing the traditional legal process Pegasus Ltd., can opt for an
alternative mechanism for dispute resolution. ADR are more cost effective and less time
consuming for the company. Also, the company could come to a fair arrangement by going
through the process of arbitration or mediation.
CONCLUSION
It can be concluded that business law plays an important role when it comes to managing
a company and its transactions. Pegasus Ltd. has to comply with the employment, contract and
company law for effectively running their business. And, the alternative dispute resolution is a
cost effective and quick way of resolving any civil dispute without involving litigation.
7

REFERENCES
Books and Journals:
Alix Adams, 2017. Law for business students Ewan MacIntyre, Business law. The Law Teacher.
51(4). pp.527-529.
Mann, R. A. and et. al., 2011. Smith and Roberson’s business law. Cengage Learning.
Peers, S., 2013. towards a new form of EU law?: the use of EU institutions outside the EU legal
framework. European Constitutional Law Review. 9(1). pp.37-72.
Samuel, A., 2007. Introduction (pp. 1-29). Springer London.
Wessel, R. A., 2011. The legal framework for the participation of the European Union in
international institutions. Journal of European Integration. 33(6). pp.621-635.
Online:
Pimlico Plumber v Smith. 2018. [Online]. Available through:
<http://thestudentlawyer.com/2018/03/19/a-closer-look-at-pimlico-plumbers-v-smith/>.
8