The assignment related to Country Pine organization which is seeking advice from Business Future Ltd, a business consultation, regarding the expansion of operations.
- What is the nature and role of the English legal system?
- Determine the probable effect of legislation on Country Pine.
- Develop suitable legal solutions to the business problems of Country Pine.
- Provide appropriate legal resolutions by using ADR methods.
Business laws are essential to form of statutes that regulate the functioning of companies in the market. It is binding upon all for fair trade and commerce. The Law of Contracts, Consumer Laws, Employment Laws, Sale of Goods, etc. are some of the statutory obligation over the business entities. Moreover, there are certain Civil liabilities that need to be comply in order to perform the functioning of an organisation. In the given case study Business Future is consultancy organisation which provides their advice to start ups and also to such organisation who wants to expand their business. Country Pine is one their client. They assemble pine furniture and working as a sole trader. Country pine wants to expand their business, so they are looking up to the Business Future for legal and market advice. Also they had a dispute with a supplier of timber from Poland and they want to settle it harmoniously. This report is about various sources of laws that constitutes to form a business statutes. Also, business advice has been provided to the client regarding their expansion of business.
P1 Sources of laws
A well-developed society is defined by various factors and one of them is the application of laws. Laws came into existence from an ancient period earlier it was tribal laws, then comes the Civilisation, so they mend it according to the circumstances. Conclusively, laws are not definite it usually depend on the circumstance in which a civilisation has been established. Similarly laws related to business and trade variate from time to time. For now, in United Kingdom, the sources of laws are from three factors, the European Law, Parliament and the Courts. Generally, there are two sources of laws, Primary and Secondary. Legislature and European Laws are the primary sources of law in UK while the Courts are secondary, that is their judgements and precedents.
The European laws are originated in 1973 and spread all over the Europe. These laws are the essence of Roman Empire. Treaties and directives are the significant source of European Laws. Moreover regulations and decisions are also a significant part of forming the laws. Since, treaties are legal obligation on two different states, these are mostly use to regulate the functioning of business between them. European Union, established under the European Communities Act 1972, is the most significant part of primary source as it is responsible for implementation of laws. EU is comprise of councils of ministers, European Parliament, Commission and Court of Justice. (Alix and Adams)
Business laws are originated from these sources. For starting up an organisation it is essential to abide by the business laws. Moreover, it is most important to know in which sector a company is going to perform. There are only two types of sector, Public and Private. Public sector is control by the state whereas the private one is controlled by the private lobby. Apart from the sector there are certain forms of partnership, Limited, Unlimited and Limited Liability Partnerships.
Limited Partnership and Limited Liability Partnership, are such which deals with the limited liability of partners. According to it the responsibility of paying debts and incurring losses are limited. Where as, in Unlimited Partnership it is totally depend on the owner of the company, that is only an individual is responsible for debts and loss. But, the profits are earned and invested in an individual in Unlimited Partnership, unlike Limited one. Sole Trader is on of its kind, here the debts and profits are incurred by only the owner of the company.
In order to form an organisation it is necessary to follow some procedures that are mentioned in Companies Act 2006. There are certain principle that needed to be comply with, such as Memorandum of Association, which provides the complete detail of the amount of capital invested in a company and shareholders. Moreover, for the functioning of the organisation there exists an Article of Association, which is comprised of the constitution of the company, appointment of directors and function of it. It also includes the liabilities of the directors and it members. (Bodie, Z., Kane, A. and Marcus, A.J., 2014)
Country Pine wants to expand their business and is willing to convert into a limited partnership, so they have to abide by the rules and regulations of the Company laws and certain other statutes.
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P2 Role of Government in Lawmaking
It is conspicuous that the laws are not made by their own. There are certain procedure in order to form a law. Generally, the governing body includes the legislature, executive and the judiciary. In UK there is nothing above the Queen. The state is governed by the Queen, legislature and the court. Forming a law is a futile process, it involves passing of the Bill by these governing bodies in order to make it an Act of Parliament.
There are three types of Bills, Private, Public and Hybrid. A private bill is such which influence the interest that are vested in an individual unlike a public bill, which affects the interest of public as whole. A hybrid bill is a mixture of both, it is a public bill which affects the interest of the an individual.
A bill is proposed in the parliament in its First Reading. A discussion or debate on the facts of the bill takes place in its Second Reading. After that the bill is passed for its scrutinisation to a committee in its Report Stage. Then it represented again the house of commons for the final discussion and amendment, if there is any. After passing from the legislature is presented before the Queen in order to obtain Royal Assent. A bill becomes 'an Act of Parliament” after getting such assent. This is how laws are formed in United Kingdom and then implemented by European Commission.
P3 Impact of Employment and Contract Laws on business
Business is regulated by two major laws, that is Law of Contract and Employment Laws. In UK, contract laws are the essence of English Law of Contract, according to it there are certain principle which makes a contract a valid one. These elements are offer, acceptance, consideration and intention to form a contract. In order to form a contract there must be an offer and to that offer there lies an acceptance which should be made without any inducement. Also there must exist an intention for forming a contract without such a contract is invalid. Moreover, the objective of a contract should not prohibit the law, that is it should not conspire with any provisions of the law. (Fisher v Bell) a contract is invalid without any consideration, it must be legal one. Considerations are generally the amount paid for the promise between the parties.
An agreement which is enforceable by law is known as contract. For establishing a relation between an employee and employer there exist a contract of employment. There are two types of contract, 'contract for service' and 'contract of service'. Both are different, an employee is under signed by a contract of service. It is mandatory for an employee to abide by the instruction given to him by his employer but not such instruction that are illegal (Morrish v Henlys Ltd, 1973). Apart from the legal obligation there are certain rights which has been provided to an employee under Employment Rights Act 1996. These rights are given against the discrimination, dismal and redundancy.
In the given case country pine is expanding there business which would result in increase of work force. In order to compete with these challenges they have to appoint new workers. But they are confused whether the newly appointed workers are self-employed or an employee to the company. As per section 230 sub-clause 3 of the Employment Rights Acts 1996,a worker is between self-employed and an employee, also it has entered into a contract of service with the organisation. In the Uber taxi case, Aslam v Uber BV, it was held that the workers are employees to the company and they are entitled for minimum wages and sick leave under the Act of 1996. it is clear that the newly employed workers by CP shall have a profile of an employee, so they are eligible for a minimum wages and all the rights and liabilities under the Employment Rights Act 1996. (Eren, S.S and et. al., 2012)
P4 Solution to the business problem
Business is all about competition and standing in the market with optimum strategy. Competition in market is kept on increasing and it is a headache for newly formed organisation to make their stand in the market also it is tough for the existing companies to expand their business for earning more profits. Everyday a new organisation is is originating the business market with new and innovative ideas, which makes the already existing one insecure, so they have to come up with new ideas and expansion to keep their position intact in the market. (Foss, N.J and Knudsen, C. eds., 2013)
The challenges that all the organisations, whether a new one or an already existing one face are the appointment of right talent, competency, uncertainty of future of the organisation, rules and regulations, costumer service, technologies, etc. In order to come up with these challenges they have to think out of the box and be the leader in their sector.
In the said case, CP is going to expand their business that is they are converting from sole trader to a limited company. So there are certain challenges and problems that they will face in such shifting. First of all they have to get registered under the Companies Act 2006 to become a limited company. After such incorporation they have to appoint new employees with the right talent and also they have to abide by the rules and regulations related to company laws and business laws.
Being a sole trader provides certain advantages such as there is less paperwork and the profits are earned by an individual but becoming a limited one increases the paperwork, especially for the Directors of the company. It is their fiduciary duty to file an annual tax report. Similarly there are certain legal obligations that needed to be comply by becoming a limited company. The share of the company shall be distributed in a limited company between the partners. They are liable for the amount of debt they invested as a capital in the company. (Grundfest, J.A., 2010)
If CP is going to convert from sole trader to limited company then they have to face such problems but it is beneficial for converting in a limited one as it will increase their profits. Moreover, appointing the new employees will increase their efficiency to face the work force also it will provide them with new and innovative ideas. Also they have to comply with latest technology in the market which will increase the working limit of the company. Converting into a limited company is the best option for Country Pine for making their stand in the furniture market.
P5 Justification for legal suggestion
The legal advice provided to Country Pine for shifting from sole trader to a limited a company is a genuine one as they want to expand their business for earning more profits. Being a sole trader has its own advantages such as the profits are gained by an individual and there is not much paperwork. But unlike a limited company a sole trader has to bear the losses and debts on their own that is the liabilities are unlimited and only an individual is liable for sub responsibilities. A limited company is a separate organisation, the investors and shareholders are liable for the amount they have signed as capital. Also it provides an authenticity to the organisation and that helps in attracting more investors and consumers.
A sole trader cannot grow it business to the other level as they are confined to the limits of their local market but a limited company can expand their business worldwide. It is obvious that being a limited one not only attracts the investors but also the costumers as it will create a bond of trust between them and their consumers. A limited company can grow more swiftly than a sole trader, moreover the product they are going to sell shall not be entitled for bargain like a sole trader.