Knowledge about business laws can help the businessmen and managers in sound decision-making. There are innumerable laws that apply to the business world. These laws help in defining the ethical deeds, providing stability and discarding some uncertainties. In addition to this, they can serve in resolving the disputes. This report basically targets four key aspects of business laws. In the first section, it talks about the nature of the English legal system and legislation that influence the organisation in the UK. It elaborates the process of law-making in the UK and differentiates between the common law and statutory laws. Second section explains various important business laws in context of given business scenario. Moreover, the potential effects of the law on an organisation are also assessed. In the last section, certain legal solutions and advices are given in context of the provided case studies.
The sentence “UK’s Parliament is sovereign” means that the parliament is the supreme legal authority in the UK. The parliament sovereignty is the key principle of the UK constitution that provides the Parliament the power to form or end any law. Even the judicial bodies like the Supreme Court cannot overrule the decisions of the Parliament. Moreover, no Parliament has the right to form laws that future parliament cannot amend. Parliament sovereignty is the most significant element of the UK constitution. The constitution of the UK is partially written and completely un-codified. Therefore, the Parliament enjoys limitless powers. There are certain laws passed by the Parliament itself that limits the implementation of parliamentary sovereignty (Bubb, 2014). These laws are mentioned below:
Various Sources of Law
There are two prime sources of laws, namely primary sources and secondary sources that can be further divided into sub-sources.
Primary sources: These are the first hand and original source of information. These are explained below:-
Secondary Sources: These consists of magazines, books, journals, and newspapers that usually consist of some articles specifically based on laws, Acts, regulations, and legislations. These are the best references to start any research. They provide the basic terminology that are often used in law suits (Barkan, et.al, 2015). In addition to this, professionals may refer to related issues and they are easy to understand and read than most of the primary sources. They usually synthesise the relevant information found in the primary sources.
The constitution of the UK is partially written. Therefore, several legislation are created by the Parliament of the UK. The law-making process depends on the two crucial bodies: 1) The House of Commons and 2) The House of Lords. The government is elected by people of the UK after every five years and the chosen candidates represent the House of Commons. The government tries to maintain the law and order in the region (Barkan, et.al, 2015). Therefore, it attempts to attend to different issues and challenges that the country is facing. The issues may arise from the campaigning by nationals, special interest group, minorities, etc. To resolve the issue, the selected government proposes a bill in the Parliament. The debate takes place between the government and the opposition parties. Once the bill is approved in the Parliament, it is sent to the House of Lords.
The House of Lords is the Supreme Court. The court re-evaluates the bill and if needed, it may suggest some changes in the bill. Once the evaluation is done, the bill is sent back to the House of Commons again to make the suggested changes.
Once the amendments are done, the bill is sent back to the monarch i.e., the Queen. In the constitution of the UK, some powers are given to the Queen that includes the power to approve the bill. Every bill has to be approved by the Queen (Royal Consent). Once the bill is approved by the Queen, it will be gazetted and the Act is passed (Cotterrell, 2017).
A brief of the law-making is explained below:-
Applying the statutory and common laws in the court
Most of a time, it has been noticed that while making verdicts, the judicial body refers to either common laws or statutory laws. The former are also called precedents and applied to new cases. These laws are recorded in the yearbooks and are referred to make decisions in the new cases. On the other hand, statutory laws are established by the parliament and are codified. These are applicable to every citizen (Cuniberti, 2013). These laws being superior to common laws can overrule them in case of any conflict between the two.
Law reform program are needed for the sustainability of the legal system of the UK. The legal system is pivoted on the Rule of Law and consists of administrative institutions, judicial and regulatory bodies, and comprehensive legal framework that are responsible for implementation and enforcement of the laws and policies. Region like the UK is continuously changing and therefore, it needs some important reformations in its legal system. Apart from this, government also ensures that businesses that are operating in the UK are least affected by the reform processes (Siem and Deakin, 2014). Inclusion of environmental liability under the Company Act 2006, protection of the citizens’ personal data as suggested in the General Data Protection Regulation 2018, avoid discrimination in Equality Act 2010, and many more are certain reforms that were brought in the existing legislations of the UK. These laws define the course of action for both employees and employers, and ensure that standards are being followed.
LO2 Illustrate the potential impact of the law on a business.
P3 Using specific examples illustrate how company, employment and contract law has a potential impact upon business.
Laws and legislation direct the businesses to prevent themselves against any deceitful event. These can have both positive and negative impacts on the business. Laws obligate the director and organisation to follow some pre-defined standards and implement them in their working premises. The Company Act 2006 has defined certain duties of the directors of the organisation:-
The directors must act in accordance with the organisation’s constitution and use only those powers that are assigned to them.
They are responsible to promote the success of the firm for the benefits of its workers.
They are liable to exercise reasonable skill, café, and diligence.
Now coming on the case study where JPM Publishing is planning to float as Public Limited Company in order to raise the funds from the external parties for expansion. There are many challenges that company might face while doing so. First, it may lead to equity dilution and the owners may lose the governing rights. Going public not always beneficial as the process is time-consuming, expensive, and add a burden of paperwork on the company. Moreover, some additional responsibilities, such as formulation of efficient HR and CSR policies come on the organisation’s shoulders. In addition, a few obligations that are discussed below also come on the firm.
No doubt that regulations, legislation, and standards are important from the perspective of both employee and employer. They help the organisation in dealing with the market uncertainties and fluctuations. They reduce the legal implications arise during operating the business functions. Standards help in enhancing the process management and improving the public welfare. They also ensure the health, safety, and environmental protection. On the other hand, regulations define the product and processes characteristics which organisations have to comply with. The basic difference between the two is in the compliance. Conformity with the standards may be voluntary but this is not the case with regulation. Regulations may affect the trade, whereas not following the standards may affect the market share of the business. Talking about the effect of legislation on the organisation, imposing a large number of legislation on an organisation may lead to lower efficiency. This can also constraint the businesses to operate at its potential.
Comparing the impacts of standards, legislation, and standards is irrelevant and vague. This is because their consequences usually driven by the market scenarios.
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 judgements.
In the democracy like that of UK, having an effective legal system is mere necessity. Talking about the English legal system, it ensures that justice should be accessible to both poor and rich people. For this purpose, the Exceptional Case Funding (ECF) scheme was launched by the government in order to financially assist the needy people. The legal system is always open to reformation and had gone through some major reforms in the past. In context of a business world, legislations, such as Contract Law, Company Act 2006, Data Protection Act, and Equality Act 2010 are some basic components of the partially written constitution of the UK. These legislations have to be followed by each and every organisation operating in the UK. These legislation promotes a healthy employee relation, business-customer relationship, and help in building the brand image.
Law reforms are important to run the business world parallel to that of rapidly changing environment. Sometimes they are opposed by the business communities. For instance, the Consumer Rights Act 2015, was criticized and opposed by the business enterprises in the UK, but the reform was essential in order to protect the customer from illicit practices followed by the businesses.
In the first case of Champion Ltd., the company is facing financial problems after moving away from its location as a result of which the company faces decline in the customers. The creditors have threatened the company for winding up petition under the Insolvency Act 1986. This act empowers the creditors to liquidate the company’s assets. In case the court grants the winding up order, the company will be liquidated. The liquidation can be done in different forms as described below:-
In this case, instead of compulsory liquidation, company can take up other measures like Company Voluntary Arrangement (CVA) as defined under Enterprise Act 2002. Company can also carry out certain negotiations with the creditors in order to develop a repayment plan.
In the second case, Mr. Anderson had an employment contract with Amber Ltd., that he broke in order to join Beta ltd. Amber Ltd can send a prohibitory injunction notice under section 25 of Civil Jurisdiction and Judgement Act 1982. This injunction would stop Mr. Anderson from joining as CEO at Beta Ltd. The company seems to be in an advantageous position. If the case is taken to the court, there are more chances for Amber Ltd., to win the case. The court may direct Mr. Anderson to pay off for the losses the company had incurred due to his sudden resignation. To stop the proceedings, Mr. Anderson can also revert back by filing for freezing the prohibitory injunction order. The best possible suggestion for both the parties is to resolve the issue through negotiation in order to save each other’s time and money.
In the case of Champion Ltd., compulsory liquidation i.e., winding up is the last instrument left with the creditors to get their money back. This would lead to losing the control of the company from director’s hand. This has large negative impacts as the information of the liquidation of the company can go public after seven days of filing a petition. This can result in freezing of the bank accounts without any prior notice. This also increases the liability on directors as they would be made responsible for paying off the debts. Therefore, resolving the issue of outstanding debts, company should choose other measures like Company Voluntary Arrangement (CVA) as defined under Enterprise Act 2002. In this case, various methods of Alternative Dispute Resolution (ADR), namely negotiation, arbitration, mediation can also be brought in use (Amato, 2015).
In case of Amber Ltd., the company got affected in terms of time, resources, management, and much more. Therefore, sending prohibitory injunction notice under section 25 of Civil Jurisdiction and Judgement Act 1982 can help it from stopping Mr. Anderson to join Beta Ltd. The court can ask him to work at Amber Ltd. till his contract with the organisation expires or pay organisation for the losses incurred.
Case 1: Champion Ltd and the winding up petition
Since the company may go liquidation, Company Voluntary Arrangement (CVA) is suggested in this case.
Positive Impact: The director would remain in power and have the full control over the organisation. In addition, it is cost-effective and time-saving method. The information about the company’s financial condition would not get disclosed in public.
Negative Impact: CVA may affect the organisational credit worthiness and rating. This may affect future investments. This also affect the stakeholders trust and confidence in the company.
Case 2: Mr. Anderson and Amber Ltd.
To freeze the prohibitory injunction orders, negotiation method (ADR) is suggested to resolve the issue.
Positive Impacts: It cut the cost of resolving the issue and save a lot of time of both parties. It is quite a flexible method where parties enjoy more flexibility in choosing the rule of the procedure. The best thing is that the outcomes can be made confidential.
Negative Impacts: This method may not provide the surety to resolve the issue. This means that money and time is at a stake in this method. In addition to this, there can be a possibility of bias decision-making.
In context of the given case study, the most suitable method of resolving the corporate disputes is Alternative Dispute Resolution (ADR). Every organisation would like to settle the dispute at the earliest so to save time and money. For Amber Ltd, taking the case in the court cannot be beneficial because it is costly and time-consuming as it may take decades to resolve the issue. On the other hand, ADR saves both time and money of parties. In addition to this, it gives control in the hand of the disputants and provide them an opportunity to discuss their issues. For Mr. Anderson the latter option is not beneficial as it may ruin the relationship between the two parties. ADR method contains mediation, arbitration, and negotiation (Lee, et.al, 2016).
Mediation: In this method, a neutral third party is hired by the disputants to reach settlement. The third party act as a mediator and carries out communication between them. Mediator do not act as arbitrator or judge.
Arbitration: In this method, the decision-making lies in the hand of the third party called ‘arbitrator’. He makes decision after hearing to both parties and take the best decision that respects the interest of both disputants.
Negotiation: In this method, two disputants reach a settlement that favours the interest of both of them. This can be made through a dialogue between the two without involving the third party.
Choosing ADR method can provide more innovative solution to the parties. Only limitation to this method is that it does not guarantee the resolution of the disputes.
In case of Mr. Anderson and Amber Ltd, nothing could work as good and effective as ADR. The key to success of ADR lies in the way it is brought into use. It takes the system approach that takes into account every dispute-resolving option, where filing for prohibitory injunction does not consider other options. Also, the latter can ruin the relationship between the two. ADR increases the chances of compliance with the agreed decisions (Lee, et.al, 2016). In some rare cases, it has been found that ADR also takes time to resolve the issues that increased the cost for the disputants. Going to the court may not leads to mutually beneficial solutions, but ADR can do it easily.
Litigation method has only one major advantage over the ADR method that it provides surety of the final decision. ADR can be utilise in negotiating any kind of settlement between two opposing parties and offers numerous advantage over court proceedings. It does not involves a large paperwork or consumes a lot of time. Litigation on the other hand can drain the resources of both disputants. ADR offers the disputants a freedom to choose their mediators or arbitrator. The decision-making in this method takes care of the active participation of both parties. ADR keeps the dispute under the cover by making it confidential, whereas in the litigation method things get registered in public record (Siem and Deakin, 2014). ADR provides the freedom to the parties to schedule the sessions as per the convenience of the participants. In addition to this, disputants can also take the case into the court if they feel unsatisfied with the agreement.
In the course of writing this report, it was seen that how business laws can be used to resolve the disputes that affect the business organisation. Being aware of the basic business laws, owners can make decisions that might benefit the business in a long run. This report basically targets four key aspects of business laws. In the first section, it talks about the nature of the English legal system and legislation that influence the organisation in the UK. It elaborates the process of law-making in the UK and differentiates between the common law and statutory laws. Second section explains various important business laws in context of given business scenario. Moreover, the potential effects of the law on an organisation are also assessed. In the last section, certain legal solutions and advices are given in context of the provided case studies.
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