Unit 7: Business Law
In the UK, it is said that nothing is above the law and everyone has to abide by the law. The rule of law must be followed by governments, humans, and businesses. It is all about being fair to all and ensuring that everyone is complying with the legal system. In this report, the English Legal System is discussed, wherein different sources of laws are enlisted and the procedure of forming laws in the UK. In addition to this, statutory and common laws are discussed in the context of the UK. The recent reforms in English legal systems are explained. Various laws that are quintessential for the business to govern in the UK are also elucidated. Moreover, it talks about the potential impacts of standards, legislation, and regulations. A part of this report covers the process of forming a legal business entity. In addition to this, it discusses how the business is funded and managed. In addition to this, the types of business organisations are critically analysed.
P1 Explain different sources of law.
The English legal system is quite flexible and is ever changing. There is recognised bodies and authorities responsible for making laws and legislation. The constitution of the UK is partially written that allows regular changes in the legal system. The constitution of The UK is consisting of primary and secondary sources of laws. In the primary sources, the following sources are present:-
Legislation:These are the laws that are formed by the parliament of the UK and are applicable to every business entity and a human being living in the UK. Since the Parliament is the sole responsible body to form Acts under which legislations are made. These are necessary to maintain the law and order in the UK.
Common Law:In the UK, the courts have the right to make laws while providing a verdict on a particular case. These laws can be followed and can be usedwhile making verdicts in identical cases by same and lower order courts in near future. These laws are not preferred over legislation.
Customs Law:There are many communities in the UK that have established their own set of rules and legislation. Each and every community member is required to follow them. Anyone who breaks them is liable to punished by the community.
European Union Law:European Union has its own legislation that is mandatory for every member of the Union to follow. In addition to this, the associated members are required to put the EU laws over their statutory laws.
International Laws:There are many international agencies working in the UK, such as WHO, World Bank, WTO, etc. They have their own laws and guidelines that are required to be followed by the UK and prioritise them in the first place.
Apart from these, there are some secondary sources of laws as well. These comprise books, review journals, articles, research paper, etc.
P2 Explain the role of government in law-making and how statutory and common law are applied in justice court.
As it is mentioned in the previous part the constitution fo the UK is unwritten and partially composted. Due to this, the government enjoys the liberty for making the laws and legislation as per its convenience and to maintain the law and order in the region. Therefore, the role of the government is quite significant in making laws and acts for the country. Talking about the legislative process, the parliament is the main body in the UK which is responsible for the making of legislation (Bernstein, 2013). The members of the parliament determine and worked out some issues and place bills in the parliament. There are two types of bills that can be placed in the parliament. The first is public bills that are more inclined towards the public at large, The Cabinet gives approval on the public bills. The other bill is a private members' bill. These are concerned about corporate, individual, or local interest.
A bill usually initiates in the House of Commons (comprising members of the parliament chosen by the public itself in the general election). The bill is debated upon in the parliament and can be approved once it wins majority votes but this has a rigorous procedure (Chaklader, 2015):-
First Reading:This is the very general process as the title of the bill is presented and published.
Second Reading:This stage is all about having a thorough discussion and debate in the Parliament where the government supports the bills and the opposition criticises it.
Committee and Report Stage: These two stages are all about examining the bill and finding loopholes. The changes can be done in the bill at this stage. If amendments are done in the bill, they are put into a report. The speakers can even pinpoint the amendment to have a discussion.
Third Reading:Once the reporting is done, the bill is again read and the changes are reviewed. This is the final stage of voting the bill up in the parliament by the MPs.
Proceedings in the House of Lords:In this stage, the final voted bill is sent to the House of Lords which is the Supreme Court of the UK. If the lords find any discrepancies in the bill, they highlight it and send it back to the House of Commons for changes.
Royal Assent:It is important in the UK to have the consent of the Queen before final enactment of the bill. Once the Queen gives her approval, the Act is formed and the legislation and rules are formed under it.
Applying Common and Statutory Laws in the Court of Justice
There are two types of laws in the UK, namely Common and Statutory. These have been explained below in the context of their applicability:-
Common Law:These laws are usually formulated by the legal bodies of the UK, especially the Supreme Court. Tribunals can also form them and make use of them in the cases of similar type. The jury makes a decision in the earlier case and in later years, it is used as a law in another case as law. The lawmaking can only be done by the apex courts and the lower courts have to follow them. Common laws are important for the English legal system as it can be used to understand statute laws in a better way.
Statutory Law:Talking about the statutory laws, they are the fundamentals of the English legal systems and have more significance than the common laws. The Parliament makes them after a thorough discussion and analysis. They are the basis of the law and order in the region. For the efficient functioning of the English legal system, statutes are crucial as they govern the behaviour of the individuals and the businesses.
M1- Evaluate the effectiveness of the legal system in terms of recent reforms and developments.
Being a flexible and stable legal system, the English legal systems govern innumerable principles, institutions, governance, etc. The UK is the rapidly changing nation and therefore, it requires the timely up-gradation in the present legal system. In addition to this, new laws need to be made in order to cover up the newly developed scenarios that are not covered in the existing legislation (King, 2016). The recent laws regarding data protection by forming GDPR 2018, Factory Act, Contract Law, and Employment Law, etc. The changes in the Education Act of 1944 has reorganised the complete education sector of the UK. The GDPR 2018 has reformed the way business organisations were handling the information of the clients and customers.
P3 Using specific examples illustrate how the company, employment, and contract law has a potential impact on business.
Each and every business organisation operating in the UK has to follow some basics laws and legislations formed by the government of the UK. A few of them are elaborated below:-
Company Act:This act was formed in the year 2006 by the parliament and has 1300 sections and is called the longest Act. The Act obligates the organisation in many areas, such as employees, shareholders, creditors, directors’ rights and duties. It sets the accountability of the directors in the company and their job role. It also talks about corporate finance, etc. It safeguards the employees from getting exploited by the firms and vice versa. The directors of the company can safeguard the interest of the stakeholders.
Health and Safety at the Workplace:In 1974, the UK government passed the Health and Safety at the Workplace Act in order to protect the safety and health of the employees while they are at work. The act has obligated the businesses to take care of the basic safety measures at their premises and carry out a regular risk assessment in the working area. This puts the extra burden on the companies as they have to install new equipment, carry out training of the employees, and carry out a risk assessment and mock drills. In addition to this, there are many consequences for not following the guidelines. In the serious case, one can be fined and the owner can be put behind the bars (Balland Ball‐King, 2013). The most recent case is the Health and Safety Executive v Polyflor Ltd (2014).
Employment Law:The Employment Act is a result of many acts that existed in the UK in earlier times. This law is important from an employer and employee perspective. This regulates the relationship between employees and their employers. The act set the minimum wages and working time and rules for leaves and holidays (Wessing, 2016). In addition to this, it safeguards the rights of the employees by obligating the employer to form contracts. This way both employers and employees can save their interests and fulfil each other’s requirements. It safeguards the employees from getting exploited by the firms and vice versa
Equality Law:The UK has legislation for equal opportunities in the organisation. The Equality Act 2010 is the umbrella for many laws that were there earlier for controlling partiality and illegitimate behaviour at the workplace. It prohibits the employer from indulging in any kind of discrimination on the basis of gender, religion, ethnicity, pregnancy, disability, race, sexual orientation, etc. In fact, the act has a special mention for the disables that empowers them to compete with normal employees by obligating the employer to provide special measures in the workplace. In case of any kind of dereliction, the victim can ask for compensation from the employers. But, it is important for the victim to bring the case within six years of the occurrence of the event.
Data Protection Law:It is one of the significant laws and the newly formed legislation. This law obligates the business organisation to take care of the privacy and the personal data of the organisation and the clients and customers. In short, GDPR is all about safeguarding the citizens of the UK from a data breach. In addition to this, it provides guidance to the companies operating in the UK regarding securing, storing, and using the personal data of the stakeholders. Being the EU parliamentary law, it has to be followed across Europe. It provides information to the businesses to understand and install the processes that provide safety to the business world. Heavy penalty and imprisonment can take place
M2 Differentiate and analyse the potential impacts of regulations, legislation, and standards.
Before differentiating regulations, legislation, and standards, it is important to understand the meaning of the three terms. A standard is the statements or approved steps of doing a task, characteristics of a good or service, guidelines for processes given by some standardisation body. Talking about a regulation, these are formed by the regulatory body regarding the characteristics of process, goods, and services. These are the administrative provisions that are mandatory to follow or comply with. Legislations are the laws that are formed and should be followed by everyone in the country. They talk about the legal and illegal aspects of the business. There is a very intricate relationship between the three terms. Regulations are important for the business entities as they help in discarding the failure and uncertainties from the business and its modus operandi. On the other hand, regulations increase the operating cost for the businesses by obligating business to carry out some crucial activities. Standards can improve the quality in the product and services of an organisation and following them can help in achieving consistency. However, getting a certification of the standardisation and purchasing the standardisation might affect the operating cost of the company. Talking about the legislation, they can help in improving the employee-employer relationship. They can obligate employees and employers in many areas.
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.
The UK’s legal system is the most efficient and effective legal system around the world. It covers the large portion of the population of Europe and to maintain law and order is a challenging issue and requires a robust and powerful legal system. Many countries have based their legal system on English Legal System like India. The English Legal System is adversarial and it is based on the common legal system, wherein the rich and the poor shares equal rights (Elliott and Quinn, 2015). With fundamental laws such as Health and Safety at the Workplace Act, it safeguards the rights to safety of the workers while working. This happened in the case of Burgess V Plymouth Cc, CA (CIV DIV). In addition to this, other laws such as the Employment Act, data protection, contract law, etc., are making the English Legal System better than other legal systems in the world. The only drawback in the legal system is that it is applying on the partially coded constitution that requires amendments on regular basis (Marsonand Ferris, 2015).
P4 Explore how different types of business organisations are legally formed.
For the growth and development of business organisations in the UK, there are several types of business organisation that taken into consideration. These are mentioned below:
Sole proprietorship- This is the business which is controlled and managed by the single owner and the owner is personally liable for the payment of the debts (XueTing, et. al., 2018). The business owner is responsible for the payment of all the debts, losses and liabilities arise in the business operations. The owner has sole control over the whole business.
Partnership- Partnership is the business where two or more partners are come together for sharing the profits and losses as per their contribution to the share capital. The business is regulating as per the terms and condition that are mentioned in the deed of partnership. In this business, the partner's liability is unlimited as they are personally liable for the contribution to the payment of the business liability and debts. The provisions of this act are governed by the Partnership Act 1890.
Limited partnership- In this business of partnership there is a general partner who is responsible for managing the business operations and the liability of the partner are unlimited for the business obligation and debts. A partner with limited liability is not liable for participation in the management of the company.
Company- In the UK, the company is the separate legal entity from its members which can be suing and can be sued in its own name. The shareholders are the actual and real owners of the company and their ownership depends upon their shareholder's value (Legislation.gov.uk, 2019). For managing and controlling the operations of the business the Board of Directors is appointed. The company is bound with the provision of theCompanies Act, 2006.
Limited Liability Company- Limited Liability Companies are those businesses where the liability of the company towards its business debts is limited for each of the value of the shareholder. It provides protection to the personal assets of the shareholders in case of financial problems.
P5 Explain how business organisations are managed and funded.
Management of business organisations
To achieve the organisational growth and business objectives it is essential that both the managers and the employees perform their best. It is important that the organization work as per the rules and regulations that are necessary for business operations. Both the managers and the employees work with loyalty while accomplishing the business task.
Funding for business organisations
To run the business successfully, the funds are very essential for financing business operations. There are various sources of funds are mentioned below:
Self-funding- Self-funding is the way of funding which assists in the performance partnership operations. These funds are gathering through family or relatives.
Long, medium and short term funds- In this type of businesses, it includes several sources of funds in which the long term sources satisfy the requirement of the capital in the businesses and taken for more than five years (Lopes and Costa, 2017). On the other hand, the medium term sources are generally for three to five years that satisfy the expenditures of revenue nature. In the end, the short term funds are the funds that satisfy the short term requirement of the business which includes expenses for managing the day to day operations.
Equity or preference shares- These are the source of finance which assists the business organization to raise the funds by issuing the shares to the internal or the external shareholders. These can be arranged internally via the right issue which can be raised through outsiders by issuing preference or equity shares.
Loans or Borrowed funds- Loan and borrowed funds are the loans that are raised by the company by issuing debentures and provide interest to its holder. In case of another form of business, the business can raise the capital by taking the loan from the banks or the financial institutions on which the interest is a charge.
M3 Assess the advantages and disadvantages of the formation of different types of business organisations.
In the case of the formation of a business, there are several advantages and disadvantages of the business organizations are discussed below:
Types of business organisations
The liability of the debts of the business is limited.
A partner with limited liability only responsible for the amount they invested (Pisani-Ferry, et. al., 2016).
Limited partners, not much involved in regular business operations.
All business risk is assumed by the general partner.
This type of businesses has tax advantages in comparison to other businesses
This type of business is easier to set up (Barak, 2016)
In this, the owner is personally liable for the business debts and obligations
This type of business has liability and functional disadvantages as compared to other business organizations
The partnership business need not have to pay the income tax
In this the business not taxed separately
In this the liability of the partners is unlimited and partners are jointly or severally liable for the debts of the business
In this the ownership easily transfers and the company enjoys several taxable benefits
The legal formalities are more as compared to other businesses
Limited Liability Company
In this the liability of the members is limited
There are less taxable benefits
D2 Critically review and evaluate types of business organisations.
To evaluate and critically analyse the types of business organisations are mentioned underneath:
Sole proprietorship- This is the business which is managed and controlled by the single owner. In this, the whole business debts are borne by one single person.
Partnership- Partnership business is the business which is formed for sharing profits and losses by two or more partners. In this the liability of the partners is unlimited (Johnstone, 2016).
Limited partnership- In this form of business, the limited partner with limited liability is not liable for the contribution in the business management.
Company- This type of business is formed under the Companies Act, 2006 where the shareholders are the actual owners and business operations are managed by the board of directors.
Limited Liability Company- In this business, the liability of the partners is limited and liable to share up to the value of the shareholders. This type of business enjoys less taxable benefits.
P6 Recommend legal solutions for resolving a range of disputes using examples to demonstrate how a party might obtain legal advice and support.
Business disputes are very common and might affect business growth and brand image. The process of establishing a business can be winding and long and might have many disputes. Hence, tackling them while maintaining the relationship for a long-term is good for business sustainability. There are two primary ways of resolving the disputes, namely court litigation and Alternative Dispute Resolution (ADR). The latter is characterised by involving neutral third-party who gives the solution to a problem between parties or disputants. In this section, various ADR approaches that can be used for the business dispute resolution have been talked about.
Mediation:In this process of ADR, the main goal of the third party who is a mediator is to resolve the dispute and help the disputants to agree on an alternative on their own. The solution is not imposed on the parties but the mediator tries to figure out the solution that is voluntary, sustainable, and non-binding.
Arbitration:In the method of arbitration, the natural party is kind of a judge who is solely responsible for giving the decision as a solution after hearing both sides. The decision made by the arbitrator is binding on both the parties and both of them have to follow it. The decision made by the arbitrator is confidential and there is no way any party can appeal it. The process is a bit less expensive than litigation.
Negotiation:In negotiation, the two disputant parties are brought into direct or indirect contact through a negotiator. Negotiations are used to lay the groundwork for healthy relations between the disputant. No party is brought into the process of negotiation forcefully. In fact, the decision is mutual. The parties are free to reject or accept the final decision made by the negotiator and can oppose it. Confidentiality is maintained throughout the process. In addition to this, both parties enjoy flexibility as they can carry out the process of negotiation as per their convenience.
Conciliation:It is the process of dispute resolution which is confidential, flexible, and voluntary. The parties try to solve the problem with the help of a conciliator. In this process, conciliator is asked by the disputant to suggest some non-binding proposal. The process is free to follow and allow the parties to choose the appropriate time, structure, content, and date as per their own convenience. In other words, the process makes sure that the autonomy of the parties is maintained. The overall process is cost and time-effective and both parties can ensure their confidentiality of the matter.
Talking about the recommendation, the aptest method for dispute resolution among the aforementioned ADR methods is arbitration. This is because the method is based on some pre-defined principles and rules. In addition to this, both parties are bind by the final decisions.
Legal Advice’s Sources
Trade Unions:The role played by the trade unions is very crucial as they can help the workers in defending their pay related issues, working conditions and health and safety, job security, and working standards-related issues. They are formed with a vision of being a legal adviser to the labour and workers.
Legal Help Centres:Majority of them are run by the NGOs and social activists and they aim at providing legal help and financial help to fight litigation in the court to the needy ones. They are run by the charity.
Solicitors: These are the professionals who provide legal assistance to individuals and businesses. They charge their fee according to the need of the person. They operate in different legal fields.
M4 Compare and contrast different sources of legal advice and support for dispute resolution.
It is already discussed that there are two methods of dispute resolution i.e., litigation method and ADR. Both of them have their own set of advantages and disadvantages. If somebody is looking for a speedy solution for any dispute, then the latter method is the best option. ADR is a cost-effective and time-saving method and it guarantees speedy resolving process. Going in the court might take decades to get justice and till then, the cost would be borne by the parties (Marmot, et.al, 2013). However, ADR does not guarantee a proper solution. In addition to this, there are high chances of biases in the process of dispute resolution. The neutral party might not be fully neutral. Litigation process, in this case, is at the more advantageous process as it guarantees the dispute resolution and that too a bit fairer. However, ADR is always a win-win alternative for the disputant parties.
D3 Evaluate the effectiveness of legal solutions, legal advice, and support for dispute resolution.
In the case of the business world, the voluntary methods of dispute resolutions are always best. This is because parties can carry out the process as per their time availability and convenience. In addition to this, both parties can maintain their confidentiality and their reputation in the market is safe (Hart and Green, 2012). Litigation lacks all such parameters and hence, it is the least preferred solution to the problem. ADR keeps the process to continue with the consent of the parties involved. One should go for litigation if the solution given by the ADR is not right for any party and that can cause serious loss to it. The litigation method is best in those situations where there are large implications and the ADR is not providing any legitimate solution (Painterand Holmes, 2015).
In the following report, the importance of business law had been seen. It was highlighted that business organisation must abide by the laws. There were four different sections in this document. The first section talked about the English legal system, sources of laws, the role of government of the UK in formulating laws and legislation. In addition to this, the whole process of the lawmaking was elaborated. The next section of the report talked about basic business laws, such as employment law, equality law, etc. In addition to this, it talked about the basic difference and significance of regulation, standards, and legislation. In addition to this, the third part elaborated the types of business, the process of forming a business, and rules and legislation required to be considered while forming a business entity. The last part focused more on resolving the business disputes by making of ADR method.
- Adams, A. 2016 Business Law for Students. 9th ed. London: Pearson
- Ball, D.J. and Ball‐King, L., 2013. Safety management and public spaces: restoring balance. Risk analysis, 33(5), pp.763-771.
- Barak, M.E.M., 2016. Managing diversity: Toward a globally inclusive workplace. Sage Publications.
- Bernstein, D.S., 2013. The International Insolvency Review: UK Insolvency Law. Slaughter and May.Oxford Journal of Legal Studies, 36(4), pp.697-723.
- Chaklader, A., 2015. History of Workers’ Compensation in BC. A report to the Royal Commission on Workers' Compensation in BC.
- Elliott, C, and Quinn, F. 2015. The English Legal System. 16th Ed. London: Pearson
- Hart H.L.A., And Green, L., 2012.The Concept of Law. Oxford University Press
- Honeyball, S. 2016. Honeyball and Bowers Text to Employment Law. 14th ed Oxford: Oxford University Press.
- HSL, H., 2014. RR262-Health and Safety of Homeworkers: Good Practice Case Studies.
- Johns, C., 2017. Advantages and Disadvantages of Creditors Voluntary Liquidation. [Online]. The Insolvency Experts. Available at: https://www.theinsolvencyexperts.co.uk/advantages-and-disadvantages-of-creditors- Voluntary-liquidation/ [Accessed on Feb 19, 2019].
- Johnstone, S., 2016. Labour and management co-operation: workplace partnership in UK financial services. Routledge.
- King, M., 2016. Does the Health and Safety at Work Act 2015 Apply to Roads? Victoria U. Wellington L. Rev., 47, p.617.
- Lee, C.K., Yiu, T.W. and Cheung, S.O., 2016. Selection and use of alternative dispute resolution (ADR) in construction projects—Past and future research. International Journal of Project Management, 34(3), pp.494-507.
- gov.uk, 2019. Companies Act, 2006. Available at: https://www.legislation.gov.uk/ukpga/2006/46/contents. [Accessed on: 19.02.2019].
- Lopes, A. and Costa, C.C., 2017. MARF: Alternative sources of funding for SMEs in the Portuguese market. Aestimatio: The IEB International Journal of Finance, (15), pp.138-161.
- Manthorpe, J. and Moriarty, J., 2014. Examining day centre provision for older people in the UK using the Equality Act 2010: findings of a scoping review. Health & social care in the community, 22(4), pp.352-360.
- Marmot, M., Allen, J., Bell, R., Bloomer, E. and Goldblatt, P., 2012. WHO European review of social determinants of health and the health divide. The Lancet, 380(9846), pp.1011-1029.
- Marson, J, and Ferris, M. 2015. Business Law. 4th Ed. Oxford. Oxford University Press.
- Painter, R. and Holmes, A., 2015. Cases and materials on employment law. Oxford University Press, USA.
- Paterson, S., 2015. Rethinking corporate bankruptcy theory in the twenty-first
- Pisani-Ferry, J., Röttgen, N., Sapir, A., Tucker, P. and Wolff, G.B., 2016. Europe after Brexit: A proposal for a continental partnership(Vol. 25). Brussels: Bruegel.
- Robson, C. and McCartan, K., 2016. Real world research. John Wiley & Sons.
- Wessing, T., 2016. Employment Law Update. Law at Work: Taylor Wessing articles
- XueTing, L., Yuan, Y. and Rui, Z., 2018. Research on the Tax Planning of Small and Micro Enterprises Income Tax from the Perspective of Financial Management.