An In-Depth Exploration of Legal Frameworks in the Business World
The Importance of Law in Business Operations
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The business world is directly and indirectly linked to the legal system. The laws and regulations affect the operations and functions of an organisation. In this report, the importance of law is elaborated thoroughly. There are four sections and each of them talks about a different aspect of the business world. The first section talks about the law making procedure in the UK along with different sources of law. The second section elaborates some basic laws in the context of two case studies that apply to every business in the United Kingdom. The third section explains legal solutions to different legal complications occurred in two case studies. The fourth and last section compares the ADR method of resolving issues with the litigation method.
LO1 Explain the basic nature of the legal system
P1 Explain different sources of law and laws that organisations must comply with.
- a) Discuss the meaning of this statement and the various sources of UK Laws
The unique feature of the constitution of the UK is the parliament sovereignty. The meaning of parliamentary sovereignty is that there is nothing superior to the Parliament. The laws made by the parliament cannot be challenged by any person, organisation, or judicial body. Even the Supreme Court cannot invalidate, disregard, supersede, or strike down any statute made in the Parliament. The Parliament is the sole body that is responsible to carry out law-making process. In the concept of Parliamentary sovereignty, there are certain controls that have been put on the parliament (Cotterrell, 2017). For instance, no parliament can make a statute that cannot be dismissed or amended by the future parliament. In addition to this, present parliament cannot control the law-making powers of the future parliament. Parliament can make laws that are applicable to every citizen working or living in the UK. Only parliament has the power to exempt a particular organisation or social class from coming under the influence zone of a statute.
There are different sources of laws that are effectively assisting the scholars and authorities to explore the legal system deeply (Bubb, 2014). These are two categories of sources of law i.e., primary and secondary sources that have their subclasses also.
- Legislation: In the UK, the legislations are developed by the Parliament. These laws are applicable to every citizen of the UK. Ex- Equality Act, 2010.
- International Laws: There are some international bodies that govern the law and order at the international level. The UN, WHO, IMF, etc., are certain organisations that form the laws at the international level (Callison, 2015).
- Customs: Custom laws are verified and applicable only within a particular community or social setting. These laws are also accepted by the legal system.
- Common Laws: These laws are also called case laws or judicial precedents. These are created while making the verdict of any case in the court. They may be referred by the similar or lower order court while making the decision in the similar cases.
- European Laws: The European Union Law System operates within the member countries of the EU. These laws govern political, social, environmental and economic aspects among the member states. Every member of the EU has to follow them and prioritise them above its statutory law (Fraser and Roberge, 2016)
These sources comprise articles, journals, books, case studies of previous law cases. These serve as the perfect source for the beginners to learn and explore the English legal system.
There are a few professionals who are responsible for maintaining the law and order. These include solicitor, barristers, and judges (Manthorpe and Moriarty, 2014).
- Solicitor: These professionals provide legal advice to clients, carry out negotiations, prepare legal documents, and if needed, they can represent their clients in the courtroom as well. They are often called as legal advisors of organisations.
- Barrister: These legal professionals advocate their client in the courtroom. They work from lower to a higher level of court. They are guided by the solicitors to plead in the court.
- Judge: These legal professionals usually presides in the courtroom. Their duties include hearing the arguments of both disputant parties’ lawyers. They act neutral and make decisions based on the evidence, knowledge, and personal judgment.
P2- Explain the role of government in law-making and how statutory and common law is applied in the justice courts.
The uniqueness of the UK's constitution is that it is partially drafted. Therefore, every year hundreds of laws are made in order to keep the law and order maintained in the region. The process of law-making starts from the parliament and ends after getting the royal consent. The law is proposed in the parliament in the form of a bill. The Parliament is also called the House of Commons. This body comprises the elected member chosen by the people of the UK through the assembly election. Any member of the Commons can present a bill in the Parliament. The bill is debated upon by the presented party and the opposition party. These bills and Acts are often called primary legislation.
Once a bill is accepted by the House of Commons, it is sent to the House of Lords which is the Supreme Court. This House examines the bill in accordance with both the positive and negative impacts of the presented bill. They suggest changes based on their analysis and revert back to the House of Commons. Once the suggestions are incorporated, the bill is again debated, and then it is sent for the Royal Consent. The constitution of the UK has given some powers to the Monarch of the UK- the Queen Monarch as per the provisions of the Royal Assent Act, 1967. No bill can be passed without the approval of the Queen of the UK. Once the bill gets the Queen's approval, it is sent to be gazetted and later on, the Act is passed.
Summary of the above discussion:-
- The issues in the manifesto of the elected government are addressed.
- The issues are discussed with the subject experts.
- The proposal is formulated.
- Proposals are given the shape of a bill.
- The bill is presented in the Parliament and debate starts over it.
- The first reading is followed by the second and then comes the Committee stage, report stage and finally comes the third reading.
- A bill is approved and laws are made under it.
Commons laws and Statutes
The English legal system comprises common laws and statutory law. Both laws are crucial for the well-functioning of law and order in the UK. Since the constitution of the UK is partially written, every year, hundreds of statutory laws are proposed. The Parliament is solely responsible for the enactment of the Acts under which the statutory laws are made. These laws are applicable to every citizen of the UK. On the other hand, the Common laws are usually formed in the court of justice. The judge or the jury make them. These laws fill the gap in the judicial system that is not addressed by the statutory laws. In case of any conflict between the two types of law, the statutory law is given preference.
M1- Evaluate the effectiveness of the legal system in terms of recent reforms and developments.
The Law reforms can have many meanings. The importance of law reform is to keep the law and order maintained in the UK. It is also necessary to maintain the political, social, and economic system of the country updated. In the English legal system, the Education Act 1944 that emphasised on reorganisation of the system of State education, the Data Protection Act 1998, the Equality Act 2010, the Employment Act 2006, and inclusion of environmental protection measures in the Company Act 2006 are some major changes in the law reform in the UK. In addition to this, reformations in the Factory Act developed some new provisions to protect the health and safety of the employees at work.
LO2 Illustrate the potential impact of the law on a business.
P3 Using specific examples illustrate how the company, employment, and contract law has a potential impact on business.
The business world is featured with conducts of persons, businesses, and relations. There are many legislations that govern these all characteristics of a business environment, such as Company Act 2006, Equality Law 2010, and Data Protection Act 2010. Business persons have to abide by these laws. The Company Act 2006 has imposed a wide range of duties on the directors that include existing equitable and insolvency duties, and health & safety legislation (Bubb, 2014). These duties are enlisted below:-
- Directors should act in accordance with the powers assigned to them.
- Directors should act in good faith of the company so as to promote its success.
- Directors must act independently while making decisions.
- Directors should exercise proper reasonable skill, care, and diligence.
- Directors should avoid promoting conflicting interest.
Talking about the case of JPM Publishing going public limited company. This can help the company in fund-raising from external sources. This has both positive as well as negative sides. Some of the key downsides are that the process is expensive, time-consuming, and this may lead to a loss of administrative powers from the hands of directors. Moreover, it would obligate the firm to develop effective HR and CSR policies (Brammer, et.al, 2012). Being bound by the rules of Company Act 2006, it has to follow certain obligations as defined below:-
Health & Safety Regulations: In the UK, the Parliament passed the Health & Safety Act at Workplace 1984, directs the businesses to encourage, regulate, and enforce health and safety provisions at workplace within the UK.
Equal Opportunities Regulations: The Equality Act 2010 provides the equal treatment directives. This Act of the Parliament is basically an anti-discrimination law in the UK. It aims at preventing internal and external discrimination based on race, colour, income, age, sex, social status, etc. In addition to this, it also directs the employers to make special arrangement to help the special category people in competing (Painter and Holmes, 2015).
Data Protection: The Parliament of the UK enacted a law regarding the personal data protection of its citizen. The Data Protection Act of 1998 protects the personal information stored in paper filing system and computers. JPM publishing has to abide by the guidelines provided in this legislation.
M2 Differentiate and analyse the potential impacts of regulations, legislation, and standards.
Compliance with laws, standards, guidelines, and regulations is crucial for businesses. The legislations can be international or local, whereas the regulations and standards are often national. Violating the regulations can lead to legal punishments, such as fines or withdrawal (Cuniberti, 2013). In short, inability to comply with the standards and regulations can have a large deficit to the product. Regulations and standards give consumers a confidence over a product. On the other hand, strict regulations interfere with the smooth functioning of the operations. Standards enable the organisation to comply with laws and regulations
Talking about the legislations in business, these help in resolving the conflicts. In addition to this, they serve as useful instruments in order to provide stability, certainty, and consistency to operations. They make sure that the organisation should act responsibly and predictably.
D1 Provide a coherent and critical evaluation of the legal system and law, with evidence drawn from a range of different relevant examples to support judgments.
Law reforms are essential to update the legal system of the country. This helps in maintaining the law and order condition in the country. An efficient and updated legal system helps in boosting the image of the UK globally and assist in improving the competitiveness in the EU. Reformation process brings the best and finest version of the laws that work for the betterment of the citizen and businesses. In the UK, there is the Law Commission’s Protocol created in 2010 that empowers the government to reform the law. In recent years, the most effective reform in the business world is the change in the employment law hearing structure and in May 2018, the enactment of the General Data Protection Regulation (GDPR).
LO3 Suggest appropriate legal solutions to business problems.
P4 Suggest appropriate legal solutions for a range of business problems e.g. termination of the contract, rescue from insolvency and liquidation.
Case 1: the First case is of Champion Ltd, a company that is undergoing a severe financial crisis due to which it is unable to pay its creditors their amount on time. The condition arose due to the declining customer base. The creditors are threatening to go court to seek “winding-up rights”. In case the court grants the liquidation rights to the creditors under the Insolvency Act 1986. This act has given some powers to creditors to call for the liquidation of a company when it cannot pay its outstanding debts (Siems and Deakin, 2014). Since the debt is more than 700 Euros, the majority of chances say that court would grant liquidation rights to the creditors. There are three ways to call for liquidation:-
- Creditors Voluntary Liquidation (CVL): This type of liquidation process is not carried out by the creditor, but the directors instead.
- Compulsory Liquidation: This liquidation is imposed forcefully by the creditors of the company against the will of the director. This is done when the company is under the financial crisis.
- Members Voluntary Liquidation: This liquidation process is quite unique as it is started by the members of the company when the company is solvent. This may take place due to internal disputes or merger or acquisition.
Creditors are looking for the Compulsory Liquidation permissions, but for the best interest of the company, the Company Voluntary Arrangement (CVA) mentioned in the provisions of Enterprise Act 2002. In addition to this, directors can also opt for the ADR approach to figure out some repayment plan.
Case 2: Mr Anderson signed an employment contract with Amber Ltd for the post of CFO that states both the parties have to give 12 months prior notice before ending the employment. Mr Anderson is planning to join the rival company Beta Ltd as CEO and he left his prior employer without serving the notice period. Amber Ltd is planning to go to the court to seek a prohibitory injunction. Since Mr Anderson has broken the contract, the majority of chances are that the court would provide the injunction against him. If it happens, then he cannot join Beta Ltd until he serves the notice period at Amber ltd or pays for the losses incurred to the company.
To avoid such a situation in the first place, Mr Anderson has two options. First, he too can go to the court to seek freezing orders for the injunction. Second, he should negotiate a deal with Amber Ltd and figure a way out that respects the interest of both parties. Obviously, the second option is more reasonable and effective as this would save a lot of money and time for both parties.
P5 Provide justifications for the use of appropriate legal solutions.
Nothing is going in the best interest of Champion Ltd. Its debts are increasing day by day and so creditors are pressurising the director to clear them off. If the winding uprights are granted to the creditors, then it is very devastating for both the company and the director as well. The bank accounts and other financial resources would be seized along with every operation (Gifford, 2014). The similar situation was there in the case of Lincoln-based printer Elpeeko. The company was in a financial crisis when the director of the company proposed a CVL approach. This helped the organisation to pay off its debt without losing the control over the company.
The sudden resignation of Mr Anderson was quite unprofessional and due to his action, the company faced major loss. Since this was a clear case of violation of Employment Act 2006 and Company Act 2006, the company can seek an injunction from the court. An identical case was of Elsevier Ltd v Munro  EWHC 2648 where the jury granted the injunction against Munro so as to stop him from working for the rival company. The litigation is a time-consuming process and eats up a lot of financial resources as well. Therefore, Amber and Mr Anderson should negotiate to solve their dispute.
M3 Assess the positive and negative impacts of legal solutions to business problems.
Champion ltd and the CVL method
- Directors can still take the financial decisions for the firm as the control remains with them only.
- It can shut the business quickly and easily.
- Since the financial accounts are still running, the alternative businesses can also be started.
- The liability on the directors increases.
- The brand image and director’s credibility is severely affected.
Amber ltd and Mr Anderson dispute and ADR methods
- It is cost-effective and consumes less time.
- The control of the case’s procedure lies with the disputants.
- A healthy relationship can be promoted between the parties.
- The decision of the ADR can be challenged in the court.
- Many a time the disputant questions the neutrality of the negotiating third party.
- The larger and powerful parties often get more benefit.
- Due to lack of directives, this method has many uncertainties.
LO4 Recommend appropriate legal solutions based upon alternative legal advice provided
P6 Recommend legal solutions based upon a different country’s legal system and/or a different legal framework.
There are basically two options for resolving the corporate disputes i.e., litigation and ADR. The legal system of major countries is based on these two legal solution methods. In the ADR method, the disputants are brought into an agreement with the help of a third party. Since this method is quite less formal, time-saving, and budget-friendly, it has gained a rapid momentum in the past. More than 90% of the business issues are resolved using ADR in the world. The most common types of ADR to resolve civil cases are arbitration, negotiation, and mediation (Lee, et.al, 2012). These methods are explained below in this section.
- Arbitration: In this method, the neutral party is called the “arbitrator” who is responsible to hear the arguments of both the disputants. Once this is done, the decision is given on the dispute. This can be either binding or non-binding. In the formal case, none of the disputants can challenge the decision in the court.
- Negotiation: This process is used to settle the differences with the help of a third party called the negotiator. The compromise is reached by avoiding arguments and conflicts. In this method, the principles of maintaining a relationship and benefits are the keys to success (Painter and Holmes, 2015).
- Mediation: In this method, the impartial party is referred to as a mediator who is responsible to make a certain acceptable resolution of the conflict. Mediators do not give decisions but form a communication link so as to understand each other's need. Mediation process provides the full control of the results of the dispute with the disputants.
M4 Compare and contrast the effectiveness of these recommendations.
As it is already discussed that ADR provides a diversity of streamlined mechanisms to resolve matters efficiently when the parties seek quick cost-effective and time-saving solutions. This method is very unconventional to the legal system. It is an alternative method to the formal litigation process (Hutchinson and Duncan, 2012). The latter is not a speedy way to resolve conflicts as it can drag the dispute for weeks or even decades. In addition to this, the arbitration process is based on inadequate evidence, whereas the litigation requires the evidence to be presented by both parties. The arbitration process is private and keeps the matter confidential. Litigation prices make the case go public (Lee, et.al, 2012). ADR methods provide an ease to the parties to appeal the decision of the third party in the court.
D2 Critically review and evaluate the use of appropriate legal solutions in comparison with alternative legal advice.
Even though ADR method is the most reliable and speedy method, it does not guarantee the resolution of the dispute. That makes it costly and time-consuming. But, this is a seldom case as 90% chances suggest a resolution (Stipanowich and Lamare, 2014). ADR methods help in understanding both sides. In binding arbitration, none of the party can challenge the decision in the court. On the other hand, litigation outcomes can be challenged in the higher order court. Arbitrators usually resolve disputes that involve a large amount of money in order to seek their profit. Litigators usually take decisions without considering their profit and benefits. To be precise, ADR procedures gives a freedom to the disputants to carry out the proceedings according to their schedule.
In this report, the relationship between the business world and the English legal system. Laws and regulations are directly and indirectly linked to the legal system. This report explained the importance of the law. It had four section and each of them talks about a different aspect of the business world. The first section talked about the law making procedure in the UK along with different sources of law. The second section elaborated some basic laws in the context of two case studies that apply to every business in the United Kingdom. The third section explained legal solutions to different legal complications occurred in two case studies. The fourth and last section compared the ADR method of resolving issues with the litigation method.
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