Business Law Unit 7: A Comprehensive Guide for New UK Companies

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Unit 7- Business Law
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Table of Contents
Introduction................................................................................................................................3
Scenario 1 (LO1 and LO2)......................................................................................................4
Sources of law........................................................................................................................4
Law making process in United Kingdom...................................................................................6
Effectiveness of UK legal system by an analysis of law reforms in subject of business law....7
Statutory and common law applied in UK courts......................................................................8
Statutory law application........................................................................................................8
Common law application.......................................................................................................8
The impact of employment, contract and company law..........................................................10
Recent reforms and development.............................................................................................11
Difference between legislation, regulation and standards........................................................12
Scenario 2 (LO3 and LO4)....................................................................................................13
Types of business organisations in UK and its management and funding...............................13
Pros and cons of business organisations..................................................................................17
ADR modes as recommended solutions..................................................................................18
Different legal advices: Compared...........................................................................................19
Conclusion................................................................................................................................20
References................................................................................................................................21
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Introduction
Business law is a subject which provides for the studies of various laws that are made
applicable on business organisations. In United Kingdom the law relating to business is in
form of statutory laws, codified and implemented through the Acts passed by the Parliament.
As a legal advisor on behalf of Hardy and Morrison Solicitors, the counsel presents the
following report to make the new companies of UK aware of the various business laws
enforced in the region. The report starts with the description on the nature of the UK legal
system followed by the impact of business law (employment, company and contract laws) on
various organisations. It also evaluates the effectiveness of the reforms and developments
taking place in UK in past few years.
In the subsequent part of the presented report, the counsel argues the options available with
the companies to get its name registered and get incorporated in UK. It also provides for the
various organisations and its legal formation along with the pros and cons of these
organisations. In the final part of the report the counsel provides for the recommendations to
the organisations to resolve its internal as well as external disputes by means of alternate
modes for dispute resolution popularly called the ‘ADR’ modes.
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Scenario 1 (LO1 and LO2)
The former part of the report provides for the nature of the UK legal system with an
explanation of different sources of law. The UK legal system has a distinct feature which
makes it separate from other which is the unwritten constitution. Further there is no single
legal system in UK and the classification of this system is as per jurisdiction (Adams, 2016).
For example, the legal system of Scotland was derived from the Roman law and is different
from law of England, Wales and North Ireland.
Sources of law
The English law is based on the common law tradition. That is the judicial precedents prevail
in UK and the higher courts have more authority than the lower courts which makes the lower
courts bound by the decisions of higher courts. In addition to this it is also a feature of UK
legal system that the law in this region is codified in the form of statutes and is systematically
collected and consolidated to draft a consistent set of rules (Partington, 2013).
The judiciary of UK has a significant role in setting the meaning of the Acts and provisions
passed by the Parliament. Further the procedure of the court is not investigatory rather it
follows the adversarial system of justice. This means that the judges and the courts do not
investigate the case themselves rather they depend on the evidence presented before them for
rendering judgment.
Hence from the above discussion the following main sources of law in UK can be provided:
1. Statutory laws that is codified laws in the form of Acts
2. Common law which provides for the previous judgments of the superior and higher
courts particularly the Supreme Court.
Along with the above-mentioned sources the legal system of UK also relies on certain
secondary sources of law which includes the law reviews, articles and writings of judicial
scholars, commentaries from experts, etc. (Open, 2018).
The below figure provides for the main sources including primary and secondary sources in
English legal system:
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Fig. 1 sources of law in English legal system
(Source: Open, 2018)
Law making process in United Kingdom
United Kingdom is governed under the parliamentary form of government where the
constitution is unwritten and the parliament is considered as the supreme body for the passing
and withholding laws. For the purpose of passing the laws in UK the parliament follows a
prescribed procedure and the initial introduction is in the form of ‘bill’ which needs approval
from both the houses of parliament.
The law-making procedure of UK comprises of the following steps:
1. First reading
2. Second reading
3. Committee stage
4. Third reading
5. Queen’s consent (Parliament, 2015).
The law-making procedure of UK can be understood through the following figure:
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Fig. 2 Law-making process in UK
(Source: Parliament, 2015)
Effectiveness of UK legal system by an analysis of law reforms in subject of business law
The extent of effectiveness of the proposed changes in law of United Kingdom (law reform)
can be measured by looking into the various fields in which changes have been introduced in
the past few years. one of the basic features characterised for the UK legal system is the high
centralization of power where the Parliament has been made the national legislature which
hold its meeting in London.
Law reforms are demanded when the society needs change in the existing legal system. This
change may be demanded for two reasons:
1. When the existing legal system fails to cope with the needs of the society.
2. When the existing legal system is incomplete and needs insertion of new clauses.
Hence the UK legal system has also introduced certain changes in its legal system in order o
cope up with the advanced needs and demands of the public at large.
One example of the reforms in UK which can be taken into consideration is the enactment of
the Companies Act 2006 in place of Company Law Review. The main aim of the Act of
2006 was:
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 To make easy the forming and running of companies in UK
 To implement better regulation and promote ‘Think Small First’ approach
 To improve the engagement of shareholders
 Promote future flexibility (Dignam and Lowry, 2012).
Hence the effectiveness of the legal system of UK in terms of regulation of corporation can
be seen in the effective enforcement of the Companies Act 2006. The effectiveness of this
law reform can be measured by analysing that whether the Act has made the running of
companies easier or not.
Hence the following conclusion can be drawn on the basis of reforms in Company law:
1. The removal of the provision for the directors to disclose their home address has
proved to be good measure but it may prove trivial at times.
2. The provision of drafting a separate and better adapted internal article have proved to
be good but this process is time consuming.
3. The provision of enabling a single person to form a public company has also proved
to be good but this process is also time consuming (French, et. al., 2012).
4. The provision of reducing share capital without prior approval of court has also
proved to be a good measure but this process may lead to undesired consequences.
5. The provisions which streamlined the filing of accounts and reports has further proved
to be a good measure but may lead to counteracting effects.
Hence the reforms in field of business law are implemented in furtherance of company’s
demands but there are still certain reforms required in order to remove the minor flaws and
make the companies work with efficiency.
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Statutory and common law applied in UK courts
The business law in UK shall be made applicable on all the companies operating in the region
and so as a legal advisor the counsel submits the report to make the companies well aware of
how their business shall be subjected to common and statutory laws and how these laws are
made applicable in the court.
Statutory law application
The application of statutory law is seen in courts in almost every case in United Kingdom.
Statutory laws are the written legislations drafted by the UK parliament and the court
considers these laws as primary source of law. The written and codified rules are interpreted
by the court in order to make it applicable on the facts of the case.
The following rule regarding statutory interpretation is applied by the United States judicial
bodies:
1. The literal rule:
 Under this rule it is the task of the judges to give the word its actual and literal
meaning without considering that the meaning makes sense or not in the given
context.
 The famous judgment given by Lord Diplock in case of Duport Steel v. Sirs
[1980] 1 WLR 142, [1980] 1 All ER 529, [1980] ICR 161, [1980] IRLR 116,
it was held that the court in certain circumstances apply this rule in spite of
being absurd which may be an outcome of this application (Translegal, 2019).
2. The golden rule:
 The other name for this rule is the British rule and it is an exception to the
literal rule.
 This rule is made applicable when due to literal rule the intention of
parliament is at stake rather than being applied.
3. The mischief rule:
 This is the final rule of interpretation in which the intention of the judge is to
determine the intention of the legislature.
 The court also determines any defect which is seen in the language of the
statute and points out its remedy and also points out the process of
implementation of such remedy (Translegal, 2019).
Hence the application of statutory law in courts reflects the meaning of how the judiciary
implements and interprets laws framed by the legislature.
Common law application
The term common law is used to refer the decisions of the court. It is also called case laws or
judicial precedents which provides contextual background in many cases. The ruling given by
the judge is taken as a reference in deciding future cases of alike circumstance. The principle
of ‘Stare Decisis’ is applied in cases where the application of common law is seen in court as
this principle means ‘let the decision stand’ (Carpenter, 2019).
In cases where the statutory laws are in question or where the facts of the case are such that
the judges need to give the judgment on the basis of equity, justice and good conscience, the
judges render new rules and principles which stand as precedents for future cases. Hence the
application of the common law is seen in judicial decision in cases where statutory law faces
difficulty in finding place.
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Example of the case Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842), it was held by the court that
“In cases of trial causes, the judges manifest that there is no question of calling for the
application of any principle other than existing principle (common law) and the rule of law
that exist shall be made applicable in every transaction that takes place defining the rights
and duties of the parties.”
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The impact of employment, contract and company law
The companies of the United Kingdom are required to abide by a number of UK business law
in order to continue its existence and smooth functioning. Hence there are certain laws
framed for the protection of rights of the employers as well as employees and also provision
made for the formation till winding up of the companies.
As a legal advisor the counsel provides below for the various laws to which the companies
shall be subjected to in UK:
1. Company law:
 All the organisation which are incorporated in the United Kingdom are
subjected to the provisions of Companies Act 2006.
 The Act provides for the registering and incorporation procedure to be
followed by the companies under Section 9 which provides for the registration
of documents.
 Further the Act also covers the effect of registration under Section 14 to 16 in
which the companies shall get a certificate of incorporation for the registrar
once its process of incorporation is completed.
 Along with the company law, the organisations are also subjected to
competition laws under the Competition Act 1998.
 The purpose of the Act 1998 is to prevent the companies from getting into
fraudulent business activities and exploit the rights of other organisations in
the global market.
2. Employment law:
 The employment laws are enacted in United Kingdom for the purpose of
protecting the rights of the employees and also the employers (Honeyball,
2012).
 The major employment laws which are in force in UK are the Employment
Rights Act 1996 and National Minimum Wage Act 1998.
 It covers almost every right of the employees including protection against
unfair dismissal, provisions for paid leaves, health and safety, etc.
 The Act of 1998 provides for the payment of the minimum wage to all
workers by the company which is currently £7.84.
3. The principles of contract laws:
 The English law of contract is governed in UK under the basic principles of
contract which provides that for the formation of a valid and enforceable
contract there must be an agreement between the parties along with a valid
consideration and intention form the side of parties (Andrews, 2011).
 The contract must be done to pursue a legal object and for any illegal purpose.
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Recent reforms and development
Law reforms are called when the existing laws become outdated and fail to cope with the
advance needs of social demands. In United Kingdom it is the Law Commission which is an
independent body empowered to bring changes and reforms in law. These changes target the
change in the political, economic and social life which is prescribed in the codified laws as
behaviours to be complied and omitted by the general public.
As a legal advisor it is settled on the basis of review that the UK legal system has proved to
be an effective system as it has succeeded in implementing law reforms efficiently and that
all the necessary amendments and proposals are applied appropriately (Martin, 2014).
The Law Commission started a program for law reform which was named as the 13th Program
of Law Reform which made 14 core areas as a target to bring changes as per the needs and
demands of the public. These 14 areas were as follows:
 Disposing of dead using a modern structure
 Simplification of leasing terms and removal of unnecessary complicated terms
 Protect the collections of the museums
 The simplification of immigration rules
 The use of electronic devices for signatures
 The administrative review relating to efficiency
 Mechanisation of the vehicles
 The emergence of smart contracts
 Simplifying and modernising trust laws
 Forming a framework for implement employment laws
These above-mentioned reforms were planned after the Law Commission conducted a
research among the general public and listed the areas which are in an urgent need for reform
and changes. Hence it can be seen that the UK legal system is an effective system as it has
achieved the goal of initiating changes and developments consistent with the society’s needs
(Martin, 2014).
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Difference between legislation, regulation and standards
Legislations, regulations and standards are the three forms of codified laws which are
enforced in United Kingdom. These laws are made applicable to all business organisations
irrespective of its type and formation. But it is important for the new companies to have
knowledge about the difference between the three laws. Hence as a legal advisor the
following handbook is submitted to provide a tool for study regarding the difference between
the three.
1. Legislation:
Legislations are the statutory laws which are passed by the Parliament of UK and
needs to be approved by both the houses (House of Lords and House of
Commons).
These laws provide for the definition of the act which are required to be done or
restricted from doing and also provides for the punishment and procedure of trial.
The legislations which shall have impact on the companies doing business in UK
includes the company law which is enacted as the Companies Act 2006.
It also includes the employment laws which is enacted as Employment Rights Act
1996 and National Minimum Wages Act 1998 (Barnard, 2012). Apart form these
Acts there are also legislations like:
o Sale and Supply of Goods Act 1994
o Competition Act 1998
o Partnership Act 1890.
2. Regulations:
Regulations are also written rules and laws which are notified by the government
as the implementing and application procedure for the legislations.
These are a subsequent part of legislations which contains provisions as to how
an enacted legislation shall be applied.
The regulations having impact on the business of UK includes:
o Regulations for intellectual property rights
o Regulations for selling goods and providing services through online
means
o Regulations for the approval of liquor licence
These regulations and its application are as per jurisdiction that is these
regulations may be local or at state level or national level.
3. Standards:
Standards are ethical and moral laws which are approved by the internal
management of the company and is included in the company’s articles.
These standards are according to the needs of the employees and workers or
according to the needs of the organisation.
The standards also include the provisions for the protection of environment and
contains the extent up to which the industries and companies may make use of the
environment and natural resources.
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