Business Law Report: UK Legal System and its Impact on Businesses

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BUSINESS LAW
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Table of Contents
Introduction................................................................................................................................3
SCENARIO 1.............................................................................................................................4
Sources of law........................................................................................................................4
Reforms and development......................................................................................................5
The impact of law on a business............................................................................................6
The application of business laws on organisations................................................................6
How effective is the United Kingdom reforms and development..........................................7
Difference between legislation, regulation and standard.......................................................8
SCENARIO 2...........................................................................................................................10
Examination of the different business organisation and how they are created....................10
How the organisation is managed and funded by the users and the owners........................11
What are the advantages and disadvantages for the formation of different types of the
business organisation?..........................................................................................................11
Different method of resolving the dispute outside the court system of the country............12
Conclusion................................................................................................................................14
References................................................................................................................................15
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Introduction
The constitution in the United Kingdom is unwritten one and there prevails the parliamentary
form of government. In the absence of a written constitution the judiciary relies on the
common law that is previous landmark judicial decisions and legislations framed by the
legislative body. The legal system of the United Kingdom is different as per the jurisdiction.
United Kingdom is also a member state of the European Union and hence the laws and
obligations of the EU is automatically applicable on UK. The presented report shall serve as a
guidance for the newly established companies regarding the laws and legal systems to which
their business shall be subjected to. It shall provide for the various sources of UK law and the
recent reforms which have been implemented in the UK legal system. The report specifically
highlights the application of employment law, company law and contract law on the daily
operations of the business. The business corporations whether registered or unregistered are
also at a mandatory obligation to abide by the legislations passed for their governance along
with the standard of care they are required to take. These standards are generally codified
rules for specific issues like safety of workers, promoting eco-friendly business and so on. At
last the report contains recommendations to companies for resolving their business disputes
through alternate dispute resolution.
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SCENARIO 1
The report is presented on behalf of the legal practitioner of Hardy and Morrisons Solicitors
and is drafted with the view of educating the new companies regarding the legal systems to
which they are subjected and the laws which the companies are required to abide by in order
to avoid penalties.
The drafted report is a guidance regarding the employment law, company law and contract
law which shall be applied on the organizations. Hence the first discussion in the report is
regarding the various sources and principles of law of the UK legal system.
Sources of law
The constitution of the United Kingdom is unwritten and hence the judiciary is completely
relied on two major sources of law. These are:
 The legislations of the government that is Acts of Parliament
 Judicial decisions that is the common law
1. Since in the United Kingdom there prevails parliamentary form of government, there
are a number of legislations passed by the government which is introduced in the
initial stag as a bill and then becomes a law after getting the royal assent. The
legislations are considered as the major sources of law. These legislations are required
to be passed by both the houses of parliament and at last signed by the queen.
2. But sometimes there arises a situation where there is absence of legislative provisions
and codified laws. At such times the judicial officers and judges rely on the previous
judgments given on cases having similar circumstances (Dixon, 2013). Such
judgments serve as judicial precedents which becomes binding on other courts in
cases of similar circumstance. Hence the common law also serves as a source of law
in the United Kingdom.
3. Along with the legislative provisions and common law, the European Union law is a
source of law in UK as UK is a member state of the EU and thus UK is bound by the
laws of EU. The treaties signed by the European Union is binding on the member
states and hence the provisions of the treaty are binding on UK while practicing
international law.
4. Another source of UK law is the European Convention on Human Rights. UK is a
signatory to the ECHR and hence the provisions of the ECHR for the protection of
human rights shall be applied on UK legal system.
Hence the nature of the UK legal system can be identified by looking at the sources of the
UK law (Dixon, 2013). The UK legal system has the Parliament as the supreme body of land
which governs the law making and implementing process.
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Reforms and development
Law reforms means a number of things which are changed or brought to change in the legal
structure of any nation. It is the task of the Law Commission to review the law and
recommend amendments and changes as per the changing needs. The changes in the law is to
bring about a change in the economic, political and social life which is embedded in the
statutes and codified laws as behaviors to be followed or omitted. But the concept of
reforming law is a wide one which covers a broader aspect within its definition.
The UK legal system has proved to be an effective system as it has succeeded in
implementing law reforms efficiently. There are various examples of reforms in legal
framework in United Kingdom. For example, the Education Act 1944 can be considered as a
law reform as it has reorganized the system of state education provisions. Similar reforms
were also implemented to nationalized the coal mines are also considered within the
definition of law reform.
The Law Commission initiated a 13th Program of Law Reform which has targeted 14 new
areas where reforms and changes is required. These 14 areas include:
 Review of the administration
 Automation of the vehicle
 Signature with using electronic devices
 Collections of the museums
 Immigration rules to be simplified
 Removal of unfair terms in leasing residential property
 The forming of smart contracts
 Modernising the trust laws
 Formation of a structure for hearing employment law
 A modern framework to be used for the disposal of the dead (Lawcom, 2017).
These initiated reforms reflect the effectiveness of the UK legal system as the reforms are
drafted and planned after conducting a research in the public and listing the areas which is in
maximum need of reforms in view of the public. The legal system functions as per the needs
and demands of the society and this aspect make it an effective system. Thus, the UK legal
system is approaching to achieve the fulfilment in meeting the demands of the public and
assuring them safety and security.
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The impact of law on a business
The business operating in UK shall be subjected to laws enforced in UK which includes
employment law, contract law and company law as most common. The corporate disputes
whenever arising in any organization shall be dealt by the court by interpreting the
legislations provided for the same. Hence the application of statutory laws as well as common
law can be seen in the courts while deciding corporate disputes.
As an example of the statutory law, the Companies Act 2006 shall be made applicable in the
court while dealing with disputes arising in corporations. An example of the case
Northampton Regional Livestock Centre Co Ltd v. Cowling [2014] EWHC 30 (QB), can be
taken where the provision of the company law in respect to the duties of the directors was in
question and the court held that where the director is under a duty to act in his official
capacity and he breaches his duty, the court has the power to grant relief to the director under
Section 1157 of the Companies Act 2006 from his liability in respect of negligence or
breach of duty or breach of trust. But this exemption from liability shall be given under
reasonable circumstances where the director has to prove that he was acting in good faith
(Craig and Campbell, 2012).
Hence the court in arising of dispute has considered the statutory law as a priority while
giving its judgments. Statutory laws provide for the provisions and the court is to apply these
laws while giving judgments. In case there is statutory laws missing the court shall apply the
common law that is judicial precedents.
The court relying on judicial opinion is one of an attractive feature of the UK legal system. In
the absence of the legislative provisions, the court rely on previous judgments given in cases
under similar circumstances. Justice Brandeis in the case of Burnet v. Coronado Oil & Gas
Co., 285 U.S. 393, 406 (1932) held that the ability to predict makes the judges come more
closer to law and it shall be effective if the principle is settled than the principle being settled
right (Talbot, 2015).
The application of business laws on organisations
The organisations operating in the UK are subjected to various business laws which cover a
wide subject within its scope. As a legal practitioner and advisor, the following report is
presented to make the client get acquainted with the fields which is covered under the
business law of United Kingdom.
The business law in UK covers the employment law, company and competition law and
English contract law.
Employment law
In the United Kingdom, the Employment law is governed by a number of laws which
includes the Employment Rights Act 1996 and the National Minimum Wage Act 1998
(Barnard, 2012). The Employment Rights Act governs and protects the rights of the
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employers as well as employees. It provides protection from unfair dismissal under Section
94 of the Act.
Company law
The United Kingdom company law is governed by the provisions of the statute Companies
Act 2006 which covers detailed provisions regarding the formation of company till the
winding of the companies. It also includes the rights and duties of the directors and the
employees and also prescribe the registration process (Lipton, et. al., 2014). It covers the
governance of various forms of organization which includes the limited company by
guarantee and shares, unlimited company and public and private company.
Competition law
The United Kingdom competition law is being influenced and affected by the elements of
both the British law and the European Union. The two major statutes which governs the
competition law of UK are the Competition Act 1998 and the Enterprise Act 2002. It is also
provided in Section 60 of the Competition Act 1998 that the rules of UK competition laws
shall be made applicable consistent with the rules laid down by the European Union
(Countouris, 2016). The UK competition law is enforced with three main purpose:
 It promotes the formation of agreements which is in furtherance of free trade
practices.
 It restricts the behavior of companies in such a way that the company tries to secure a
dominant position in the market.
 It further has the purpose of supervising the merging procedures and joint ventures
including acquisitions.
English contract law
The contract law of United Kingdom is governed by the basic principles of contract law
which provides that the agreement, consideration and intention to form a contract is the
essential elements to form a contract which can be enforced in the court. Further the sale and
purchase of goods under a contract is governed by the Sale and Supply of Goods Act 1994
(Poole, 2016). This Act is enforced to provide the protection of rights of the sellers as well as
buyers. The selling and the buying process give rise to the formation of a contract hence the
contract is required to be enforced as per the provisions prescribed.
How effective is the United Kingdom reforms and development
The reforms and development of the UK law is initiated by the Law Commission which is a
statutory body which recommends reform when and where needed. The aim of the
commission is to ensure that the proposed reform is fair, simple, modern and cost effective.
The effectiveness of functions of the parliament and the law commission in proposing and
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implementing reforms is seen in the steps taken by the legislative body in implementing the
law reform.
While preparing new and amended laws, the legislative body supervises the government
consultations and helps in ensuring effectiveness in pre-legislative actions (Bolton, 2017).
The legislations also evaluate the effectiveness of current implementation policy and audits
the efficiency in delivering the policies as needed.
All the initiatives taken by the government depicts that the law reform is effectively enforced
and implemented in the United Kingdom. The quality of legislation is judged by the
effectiveness test in UK. There are various steps involved in testing the quality of legislation
and law reform. These are:
 Examining the purpose of legislation
 Examining the relation between the content and objective
 Examining the results of legislation through available information
 Relation between he provisions and current legal order (Libguides, 2015)
Difference between legislation, regulation and standard
Being a legal practitioner, the following is the presented discussion regarding the legislations,
regulations and the standards which shall be made applicable to newly formed companies in
UK. In the UK legal system there is a difference between the legislation, regulation and
standard. The following is the description for the same:
1. Legislation:
 The legislations are the codified statute which is drafted by the legislative body
and is enforced for the governance of the corporations working in UK.
 Some of the legislations which are enforced in UK for the governance of
organizations are:
o Companies Act 2006
o Employment Rights Act 1996
o National Minimum Wage Act 1998
o Sale and Supply of Goods Act 1994
 Legislations provides for the behavior which the people and organizations are
bound to do or omitted to do. They also provide for the penalties and punishment
in case of violation and breach.
 The Parliament of UK is the sole body empowered for the formation of legislation
and also for bringing a legislation to an end (Dixon, 2013).
2. Regulation:
 The regulations are also codified steps for the implementation and enforcement of
legislative provision.
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 The regulations provide for the actions to be taken for the effective application of
the legislation.
 Some of the examples of the UK regulations are:
o Distance selling regulation
o Anti-competitive agreements
o Regulation for tax assessment
o National minimum wage
 The regulations are also drafted and amended by the legislative body as per the
changing needs for example, the minimum wage is increased every year by
passing a new regulation.
3. Standard:
 Standards are the prescribed rules which the companies are at a mandatory
position to follow.
 These rules are prescribed in the internal articles of the company.
 These standards define the acting and running of the company.
 These standards also provide for the guaranteed care to be taken while performing
the activities of the companies.
 The examples of these standards are:
o Safety rules for the employees
o Health rules for the workers and staff members
o Rules for the protection of environment
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SCENARIO 2
It is seen that this task is related to the different types of organisation in the country which are
managed and funded through the different managers and the options that are available for
funding the organisation. Being a line manager of the company, the report is based on the
brief description of the different organisations that can be framed in the country and specifies
the advantages and the disadvantages that are related to creation of the various type of the
organisation (DiMatteo, 2016). Also, how these are operated in the country and various
advantages and the disadvantages that are related to the organisation are the discussed here in
the report.
Examination of the different business organisation and how they are created
The company’s act 2001 is one of the main acts that is related to the formation of the
company and also sets the boundary for the companies so as to operate their functions
according to the law that is prevalent in the society. Hence it is seen that there are various
provisions that are created by the companies act which led to increase in the performance of
the company and to function there operations according to the provisions that are set by the
company as a whole.
This is seen that the Sole trader is one of the forms of the business that is prevailing in the
country. It is seen that the owner of the business is considered to be the single man who
contributes capital of the firm and associates the performance of the firm as a whole. He is
considered as the responsible person for the reimbursement of the liabilities and for the assets
of the firm as a whole (Forrer and Seyle, 2016).
The limited company is considered to be one of the other forms of business organisation that
is prevalent in the country. It is seen that the shareholders have the limited liability for the
amount of share that is purchased by them. Also, there are two types of limited company
which includes the private company and the public company. These are the companies that
the manager or the owner of the company can create, while this is seen that for the formation
of the company it is required to have at least two director which are considered to be the
owners of the company.
Other form of business organisation includes the partnership which is considered to be the
one of the important forms of business organisation which helps in achieving the objective of
the doing the business by two or more people jointly. This is seen that the mutual consent is
given for the contribution of the capital by the partners and are considered to take decision as
per the requirement of the business operations.
The public limited company, it is considered as the company where the registration is done
by the company under the company’s act of the country. It is considered as the organisation
where the company can raise funds through the process of the bank loans and other forms
which includes the shareholders capital contribution. It is considered that liquidity with the
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organisation is very high as they have various resources through which they can raise the
money. The shares of the company can be easily traded in the market (Lee, 2017).
Other form of business organisation includes the incorporated company and the
unincorporated company, this is seen that this type of organisation is the organisation
where the incorporation is done according to the legal framework and the registration is done
in the registration house of the country. On the other hand, the unincorporated company
includes the company where the business is not registered with the government.
How the organisation is managed and funded by the users and the owners
The management of the business organisation and its funding are considered to be the one of
the main elements and the function of the owners of the company which help them to raise
the fund for the organisation. This is seen that the role of the managers, directors and the
owners of the business organisation are considered to be the main thing which helped in
increasing the performance and the management of the organisations as a whole. It is seen
that the companies are funded through the various medians which includes the bank loans,
shareholders, debentures and various other forms of raising the fund (Picciotto and Mayne,
2016). While the partnership is funded through the process of the partners’ capital and the
other form of outside loan. While on the other hand the sole proprietorship is considered to be
funded through the process of owner’s own capital.
What are the advantages and disadvantages for the formation of different types of the
business organisation?
The advantages and the disadvantages are considered to be the main thing that helps in
finding the structure which is best for the owner to decide for the formation of the business.
Hence some of the advantages and disadvantages are specified below:
Types of business Advantages Disadvantages
Partnership These are considered to be
the form of the business
where the raising of the
finance for the business is
considered to be very easy.
It is seen that during the
formation of the partnership
business the formalities are
considered to be less than
ever and are considered to
be less than other form of
business organisation
(Merry, Davis and
This is the seen that the main
disadvantage that is related
to the form of business
includes that the whole
partnership is considered to
be related to the acts that are
done by the single partner
and hence the partner
themselves are liable for the
act that is done by the single
partner of the company.
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Kingsbury 2015). This is
seen that the affairs among
the partners are considered
to be confidential among
them.
Limited Liability
Partnership
It is considered to be the
partnership where the
partners are having the
limited liability for the
capital contribution towards
the liability of the firm as a
whole.
It is considered that these
types of organisation are not
able to offer the shares to the
public for raising fund and
hence has the disadvantage
of raising the fund for the
operations.
Private Limited Company
(PLC)
It is the company where the
private ownership is
considered to be the main
advantage which helps in
achieving the objective of
the profit maximisation.
Here the listing of shares is
not compulsory for the
company.
The main disadvantage that
the company has is that they
are not having the right to
publish the share to the
public for the purpose of
raising the capital.
Public Limited Company It is considered to be the
company that has the
advantages to raise the
money from the public and
the can have the expansion
more easily than any other
form of business
organisation.
The disadvantage that is
related to the company
includes that it has to go
through the different process
of formation and due to
which they are not able to
easily formulate.
Different method of resolving the dispute outside the court system of the country.
Methods of ADR Definitions
Arbitration This is considered as the approach where
the parties to the dispute can come in front
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