Impact of UK Business Laws on Companies: A Case Study Approach

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Unit 7- Business Law
Name:
College ID number:
Name of Lecturer:

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Table of Contents
Introduction................................................................................................................. 3
Section 1 Nature of English legal system and implication of business laws................4
TASK 1 (LO1 and LO2)...............................................................................................4
Parliament is Sovereign...........................................................................................4
Sources of law in UK............................................................................................... 4
Parliament in law-making process...........................................................................5
Application of common and statutory laws in justice courts.....................................6
Potential impact of company law, employment law and law of contract on
companies in UK..................................................................................................... 7
TASK 2 (LO3)............................................................................................................10
Management and funding of various business organisations................................12
Advantages and disadvantages of firms and companies......................................12
Section 2- Legal solutions covering LO4...................................................................14
Case 1.......................................................................................................................14
Case 2.......................................................................................................................15
Conclusion................................................................................................................ 17
References................................................................................................................18

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Introduction
In United Kingdom, every organisation whether registered or unregistered functions
abiding the rules and regulations passed by the government. These rules are
sometimes in form of statutory laws and in absence of statutory laws, the reliance is
on case laws. Hence, the following submission is presented as an aid for the new
companies in order to get aware regarding the existing legal structure in UK which
governs the business and its functioning. This governance is through various
provisions of company law, employment law and also English law of contract.
The following submission is in two sections where the first section deals with various
sources of law and the sovereignty of Parliament. It also provides for the application
of Companies Act 2006 and other employment related laws on business
organisations. The learning outcome 3 and 4 of the scenario are problem based
which is described in the subsequent part of the report. The report also provides for
legal solutions to the problems mentioned in the scenario and how companies could
avoid winding up and rescue insolvency.

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Section 1 Nature of English legal system and implication of business laws
TASK 1 (LO1 and LO2)
The first part of the report provides for the description of the statement “Parliament is
Sovereign” and the various sources of laws in United Kingdom. It further discusses
the law-making process in UK along with the potential impact of business laws like
company law and employment law on business.
Parliament is Sovereign
Every year in October and November the government of UK initiates its law-making
programme through the speech of the Queen. In UK there is parliamentary form of
government which depicts that the parliament is considered as the supreme body in
UK which is solely empowered to make and end laws. The sovereignty of parliament
is suggested through three different sources which are as follows:
The Acts of Parliament which can only be amended and ended by the
Parliament itself.
The court’s interpretation on the statutory laws passed by the Parliament.
The relationship between all the parts of the government including the two
houses of the Parliament (Hannigan, 2018).
Sources of law in UK
United Kingdom runs on parliamentary form of government where the parliament has
the sole power on making and ending laws. Hence it is seen that the statutory
provisions and Acts passed by the Parliament are considered as the primary sources
of law. The UK sources of law can be classified in two groups namely:
Primary sources
Secondary sources
The primary sources of law include the following sources:
1. Acts passed by the parliament:
 The Acts passed by the Parliament are considered at first priority by
the courts of law in UK.

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 These Acts are inscribed legislations which covers all the provisions
relating to the formation, running and governance of the companies in
UK (Dixon, 2013).
 Examples of legislations governing corporations and organisations in
UK is the Companies Act 2006.
2. Common law called the case laws:
 The common laws are also the secondary sources of law as these laws
are taken into consideration when the language of the legislation is not
clear or does not covers the nature of act to be judged.
 These laws are rulings of the superior courts which are to be treated as
landmark judgments and are binding on the lower courts.
 The case laws serving as judicial precedent or ruling is to be followed
by the lower courts in cases of similar and like facts in future.
3. Along with the Acts and common law there are other primary sources of law
as well which are the laws passes by the European Union. As UK is a
member state of EU, UK is automatically bound by the laws of EU.
4. The ECHR that is European Convention on Human Rights is also
considered as a primary source of law as after the passing of the Human
Rights Act 1998, UK courts are bound to considered the human rights of both
the parties while delivering judgments (Kaczorowska-Ireland, 2012).
5. Secondary sources: The courts in United Kingdom has also relied on
secondary sources of law in case there is question on the primary sources.
But these secondary sources are reliable only if they are extracted from the
primary sources with proper citations. These secondary sources include:
 Commentaries and writings of experts
 Law journals
 Law reviews
 Reports of commissions
 Report of other government agencies and bodies (Dixon, 2013).
Parliament in law-making process
The law-making is the function of the Parliament and it is the supreme body of land
for making and rejecting laws. this process is done in various stages and is

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conducted in both the houses of Parliament that is the House of Lords and the
House of Commons.
The following stages are involved in the law-making process in UK:
1. First reading
2. Second reading
3. Committee stage
4. Third reading
5. Report stage
6. Queen’s consent (Gov.uk, 2019).
The above-mentioned procedure is carried in the same way in both the houses of the
parliament and the law is initiated by a proposal and introduction of the ‘Bill’.
The following image describes the above-mentioned stages in law-making:
Fig. 1 Law making process in both Houses of UK Parliament
(Source: GOV.UK, 2019)

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Application of common and statutory laws in justice courts
In the courts of United Kingdom, there is application of both statutory laws and
common laws. The statutory laws are applied at first instance as they are written
codified laws and are considered on first priority. In case there is question of law in
the statutory laws, the curt relies on the common laws that is judicial precedents for
its judgments.
At first instance- statutory laws
The court at first considers the statutory laws while giving its judgments in any
corporate issue that has come before it. In case the companies face disputes
whether at internal or external level and the dispute is brought before the court, it first
considers the statutory laws applicable on the corporation which are parties to the
suite.
The statutory laws which shall be made applicable by the courts of justice and which
are relating to business law are:
Companies Act 2006
Employment Rights Act 1996 in case of dispute between the company and
employees
National Minimum Wage Act 1998 in case the dispute is regarding the
payment of wages to the workers and employees
But the application of statutory laws is done on the basis of certain rules regarding
interpretation. These rules are as follows:
Giving the literal meaning to the terms used that is the literal rule
The exception to the literal rule that is the golden rule
Identifying the intention of legislature that is the mischief rule
In absence of statutory laws- Common laws
In case there is absence of statutory laws relating to particular case facts, or in case
where the statutory laws carry a question of law, the court rely on common law that
is previous judgments serving as rulings. The Latin maxim ‘Stare Decisis’ is made

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applicable by the court while applying judicial precedents. The meaning of this
maxim is ‘let the decision stand’.
As an example, the writing of Professor Hammond can be considered who has
opined that:
“While considering the historical aspects of the systems, the courts have
played a role in actually making new laws”.
Also, an example of the writing of Professor Beale can be considered who ahs
expressed his views for the application of common laws as:
“Among various sources for bringing changes in laws, it is an accepted fact
that the decisions of the court are one and the most important in many ways”
(Kershaw, 2012).
Potential impact of company law, employment law and law of contract on
companies in UK
The companies established and working in UK are not at absolute freedom in
conducting its business. They are subjected to certain liabilities and legal
requirements which are formed by the legislation of the country. These subjections
are the laws governing the business which includes the provisions of Companies Act
2006, Employment Rights Act 1996 and the general principles of UK contract law.
The impact of company law
Companies Act 2006 is the regulatory statute which is formed in UK and
which governs the establishment and functioning of the businesses in UK.
Section 7 of the Act deals with the description of the requirements for the
companies to get its name registered in the registrar’s office.
Further, section 14 of the Act provides for the effect of registration that is if the
registrar is satisfied that the essential requirements of the registration process
is fulfilled, he shall issue a certificate of registration to the company in its
proposed name.
The impact of employment law
In UK the employment laws are enacted for the benefits of the employees as
well as the employers (Barnard, 2012).

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There are various Acts which governs the provisions relating to employment
in UK.
Some of the examples of employment related Acts are:
 Employment Rights Act 1996
 National Minimum Wage Act 1998
 Pensions Act 2008
 Equality Act 2010
Among the above-mentioned legislations, the most important ones are
Employment Rights Act 1996 and National Minimum Wage Act 1998.
The Employment Rights Act 1996 provides for the rights of the employees as
to get protection from unfair dismissal, to get paid leaves, to get proper health
and safety at workplace, etc.
The National Minimum Wage Act 1998 provides the rights of the workers to
get the prescribed minimum wage for working which is £7.84 (Countouris,
2016).
The impact of contract law
The general principles of English contract laws shall also be made applicable
on the companies in UK as these companies shall enter into commercial
transactions based on the principles of contract.
The companies while entering in contract need to fulfil the essentials of a valid
contract under the English law which includes an agreement, consideration
and intention of parties (Poole, 2016).
For an elaborative understanding the below table provides for the difference
between legislations, regulations and standards in UK:
Legislation Regulation Standard
Codified laws
providing for
behaviours to be done
and omitted
Codified laws for the
implementation of
legislation
Codified accredited
and approved ethics
for the internal
management of
company
Drafted by legislature Drafted by legislature Drafted by legislature
and also by internal

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management authority
Primary source of law Source of applying
legislation
Not a source of law
but approved by the
government
Examples:
o Companies Act
2006
o Employment
Rights Act 1996
o National
Minimum Wage
Act 1998
o Consumer
Rights Act 2015
Examples:
o Working Time
Regulations
1998
o Management of
Health and
Safety at Work
Regulations,
1999
Examples:
o Health and
safety
standards for
workers
specially
women
employees
o Standards for
the protection
of environment
Publication in statute
book of UK legislation
Publication in statute
book of UK legislation
Publication in the
internal articles of the
company

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TASK 2 (LO3)
As provided in the scenario, the JPM Publishing is established as a partnership firm
by three graduates who are also friends named Jane, Penny and Marie. After
running the business successfully for some years, they are advised by their
accountant to get their business expanded and registered as limited company.
Hence for providing them with relevant provisions to which their business after
expansion shall be subjected to, the following description is submitted evaluating the
difference business types and its pros and cons.
The following image provides for the types of business organisations in UK:
Fig. 2 Business structures in UK
(Source: Lightworkbusiness, 2019)

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Under UK business laws, there are two types of business which are incorporated
business and unincorporated business. Under the category of incorporated business
comes:
Companies limited and unlimited
Companies public and private
Companies for the interest of the community (Lightworkbusiness, 2019).
And under the category of unincorporated business comes:
Sole proprietorship that is sole trading company
Partnership firm (Craig and Campbell, 2012).
For the better understanding of the three partners Jane, Penny and Marie, the
discussion is elaborated by stating the difference between incorporated and
unincorporated company. The following table provides for the same:
Basis of comparison Incorporated company Unincorporated
company
Forms The following businesses
are the forms of
incorporated company:
Companies limited
and unlimited
Companies public
and private
Companies for the
interest of
community
The following business
are under the category of
unincorporated company:
Sole proprietorship
company
Partnership firms
as formed by Jane,
Penny and Marie in
name of JPM
Publishing
Liabilities and
obligations covered
The members are
exempted to pay the
debts as the company is a
separate legal entity.
The liabilities to the pay
the debts is completely of
the owner and partners.
Tax levied This business structure is
subjected to corporate
taxes (Talbot, 2015).
This business structure
has a liability to pay tax
as per individual rates.