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LO2 Illustrate the potential impact of the law on a business
In the following section, a discussion on the significance of company, contract, and employment is done. In addition to this, the significance and their impacts on the business organisation are also discussed. A small discussion on the difference between legislation, standards, and regulation is provided.
P3 Using specific examples illustrate how the company, employment, and contract law has a potential impact on business.
The Company Act 2006 was passed by the Parliament of the United Kingdom as the primary source of law. It is the longest Act formulated by the UK in its history with over 1300 sections conglomerated in 700 pages. The Act has superseded by the new Corporation Tax Act of 2009. The significance of the Act is that it aims at modernising and simplifying company law, codifying the duties of the directors of the company, granting enhanced rights to stakeholders, and simplifying the administrative burden carried by the organisation operating in the UK. The significance of the act is that it sets the director's duties as described in section 171 to section 177 (Collison, et.al, 2014). However, the directors do not give a focus on responsibilities that results in a great negative impact on the economy and the rate of the growth of the company. The first and foremost duty is that directors need to act within powers. The director is required to carry out the tasks that are required to be completed by them. This is stated in Section 171 of the Company Act 2006. The next duty is exercising independent judgement. The director is required to carry out fiduciary duty by making use of their powers without getting influenced by other people. An example of such duty is Fulham Football Club Ltd. v Cabra Estates plc, where the directors did not make use of their powers.
Talking about the Employment Law, it is quintessential to safeguard the rights of the employers and employees. In addition to this, it provides responsibilities to the employers towards their employees. It is an Act that makes provisions for statutory rights to adoption or paternity pay and leaves, maternity leave and pays (Painterand Holmes, 2015). In addition to this, it also acts as an instrument to make changes in Employment Tribunals Act of 1996 and make use of statutory procedures in the context of employment disputes. Furthermore, the act makes provision to make a compromise agreement. It also assists in making changes in the Employment Rights Act of 1996 and makes changes in provisions about fixed wages and working hours. It obligates the employer to
The significance of contract law is that it mandates the employer to formulate a legal binding contract at the time of offering jobs to the employees. The contract must include those terms and conditions that are important and beneficial for both employers and employees (McKendrick, 2014). This condition might be related to the working hours, duties, employment tenure, appraisal guidelines, working hours, and responsibilities, grounds and condition to expel. It also comprises the penalties in case of breach of contract.
M2 Differentiate between legislation, regulations, and standards to analyse potential impacts upon a business.
It is a well-known fact that businesses in today’s time operate in a very intricate environment which is often intensive and full of regulatory constraints. There are some regulations, international and national standards, and legislation. For every organisation, it is important to understand the difference between the three terms, namely regulation, standards, and legislation. The first and foremost is regulations that are enforced by some regulators. These are basically the rules that are followed by the company. Regulations might be very challenging for the company as they obligate the firms to keep control over its procedures and workforce skills sets (Painterand Holmes, 2015). Legislations are usually formed by the government after a parliamentary session. Legislations formation is the part of law-making. Legislations influence the structure of the firm and its functioning. It obligates employers to conduct a process of risk assessment to ensure a safe and healthy working environment. In addition to this, it enhances and strengthens the firm against any discrepancy that might affect the organisation in the future. In simple words, legislation discards any uncertainties and fill-factor that might affect the working environment of the company.
Talking about the basic difference between the three terms, the regulations and standards are very beneficial for the majority of the companies, especially those that are of small scale. They may result in an increase in the operating cost for a short duration. However, in the long run, these might be beneficial for the company. According to Painter and Holmes (2015), it has been seen that regulations act as a double-edged sword. These might have positive sides as well as negative sides for the company. It depends on the type and scale of the company and they help in minimising the legal consequences that might occur in the future.
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.
Among all the legal system, the English Legal System is the most efficient one that ensures that justice should be given to all the strata of the society irrespective of their race and religion. The UK's government has taken many steps to provide justice to all. For that purpose, it launched an Exceptional Case Fund Scheme. It provides funds to poor people have no or little money to fight a court case. Another feature of the legal system of the UK is that it is quite flexible and powerful at the same time. The legal system of the UK is open to making changes as per the requirement of the law and order. It governs the human as well the corporate entity and their functioning. It comprises some Acts and legislation that serve the basis of the functioning of the companies. These are the Company Act of 2006, GDPR of 2018, Equality Act of 2010, and Employment Act of 2002.
The English Legal system is full of laws and legislation that are efficient in resolving the disputes affecting the business operation. For a better understanding of the English legal system, O'Brien v Bolton St Catherine's Academy  IRLR 547 CA. In this case, Ms. O'Brien was fired illegally from the company as she was ill for a very long time. The case was related to discrimination and unfair dismissal. The court found the company guilty in this case based on the terms given in her contract.
In this section, an understanding of laws and legislation has been explained in the context of some examples. The contract law and employment had been elaborated and the importance of the English Legal System was also elaborated. At last, the difference between regulations, standards, and legislation had been explained.
LO3: Examine the formation of different types of business organisations
In this section, a discussion on the types of business organisations and how they are formed is done. In addition to this, a critical analysis of each business type is done, wherein advantages and disadvantages of each business are enlisted.
P4 Explore how different types of business organisations are legally formed.
There are two types of business structure, namely incorporated and unincorporated that are distinguished by their ownership title. The former is an individual business entity while the other is a part of the business similar to a sole proprietorship or partnership (Mazzucato, 2015). Mr. Jones can enter in the UK by forming a business in the following ways:-
Company: This type of business is usually established under the Companies Act of 2006, where the company’s board of directors handles the majority of the operations. Due to this act, the powers and duties of the board of directors are well-defined and they are required to operate within those powers. There are two categories in this, namely the private and public company. The shareholders have real control of the organisation.
Private Limited Company:In this type of business, there is a limit to the liability of a shareholder. In addition to this, the general public can purchase the organisation's share. This business has a plethora of opportunities and the business can start with an easy process. In this business, the shareholders have very limited freedom to transfer the shares.
Sole Proprietorship:In this type of business, the company is responsible for its operations and do not share its profits and losses along with all liabilities. There is only one owner that runs all the businesses.
Partnership:It is the business type, wherein two different business entities share the profit after entering in the contractual obligation. In addition to this, the organisation shares its resources and losses too (Mazzucato, 2015).
Recommendation: As a client, Mr. Jones is advised to enter in the UK by forming a private limited company as it is easy to form and enter the market.
P5: Explain how business organisation are managed and funded
The business organisations are well-managed and operated by different stakeholders, such as managers, leaders, employees, the board of directors, etc. Each one of them has well-defined roles and responsibilities that are required to be performed in an ethical manner and as per the norms and regulations set by the government (Posner, 2014). In addition to this, every business entity requires funds and that are provided by shareholders, investors, and sponsors. In order to determine the net effect of the business, funds play a great role in this. A business can arrange its funds from numerous sources, such as business entities, government, loans from banks, shareholders, etc. In addition to this, some small firms merge with large firms in order to get huge resources and funding (Masonand Harrison, 2015). This is the practices that are widely followed when an international company wants to invest in overseas markets. The organisation can arrange their funds by taking loans from banks on short, medium, and long-term basis. Many a time, the funds are raised by issuing a debenture.
M3 Assess the advantages and disadvantages of the formation of different types of business organisations
In the previous parts, the different typology of business entity and their formation had been discussed. It is important to note here is that each of them has their positive and negative sides. These have been discussed here:-
- Advantages: The shareholders enjoy limited liability and the business entity can have any number of shareholders.
- Disadvantages: The business might take a lot of efforts to operate, especially in the international market (Singh, 2012).
- Advantages: It is best suited for the short as well as a long-term basis due to its flexibility.
- Disadvantages:The major downside is that transferring the shares is not a cakewalk.
- Advantages:The complete profit comes in the hand of the business owners and there is no share in the authority. Disputes are very less (Singh, 2012).
- Disadvantages:In the case of business failure, the loss has to be borne by the owner only and he might leave under huge debts.
D2 Critically review and evaluate types of business organisations.
There are various forms of business organisation as discussed in the previous question. Each has its upsides and downsides. Talking about the company, it has limited liabilities and obligations on the shareholders. The transferring of the shares is a bit easier than other forms of business. In addition to this, the shareholders can be employed within the same organisation and such organisation is free to trade anywhere in the same country. On the other hand, there is less secrecy in such business types as the accounts are public and profits are required to be shared among shareholders. Talking about sole proprietary, there is no need to share the profits and the control is in the hand of the owners. On the other hand, liability and obligations are high in such business forms. The risks are high but the ROI is high as well. The owner is the ultimate boss of the business. In case of business failure, the loss has to be borne by the owner only and he might leave under huge debts.
In this section, a thorough discussion of the types of business forms had been done and their advantages and disadvantages were also outlined. Each business form was critically analysed in-depth.
Collison, D., Cross, S., Ferguson, J., Power, D. and Stevenson, L., 2014. Financialization and company law: A study of the UK Company Law Review. Critical Perspectives on Accounting, 25(1), pp.5-16.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Painter, R. and Holmes, A., 2015. Cases and materials on employment law. Oxford University Press, USA.
Ang, J.S., Cole, R.A. and Lin, J.W., 2012. Agency costs and ownership structure. the Journal of Finance, 55(1), pp.81-106.
Painter, R. and Holmes, A., 2015. Cases and materials on employment law. Oxford University Press, USA.
Singh, P.K., 2012. Management of Business Processes Can Help an Organization Achieve Competitive Advantage. International Management Review, 8(2).
Posner, R.A., 2014. Economic analysis of law. Wolters Kluwer Law & Business.
Mason, C.M. and Harrison, R.T., 2015. Business angel investment activity in the financial crisis: UK evidence and policy implications. Environment and Planning C: Government and Policy, 33(1), pp.43-60.
Mazzucato, M., 2015. The entrepreneurial state: Debunking public vs. private sector myths (Vol. 1). Anthem Press.