UK Legal Procedures for Starting a New Business

3786 words (15 pages) Essay in Business Law

30/07/19 Business Law Reference this

Last modified: 30/07/19 Author: Law student

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1.   Introduction

This assignment will explain what legal procedures need to be followed in the UK to start up a new business.

To be able to understand the ‘law’ many things have to be understood which includes where and how law is created.

2.   Sources of Law

In the UK the main sources of law are as follows:

Legislation is the main source of law in the UK and it is the UK Parliament that have the power of law making in the country. Legislation is made after a long series of discussions by the representatives of the people. We can say the creation of law is one of the most important elements of government for organising and protecting society and citizens.

A proposed piece of new legislation will begin life as a draft bill. It will then face many stages before it becomes law. These stages are

  1. First Reading: Bill’s title is read out and available to all members in the Parliament.
  2. Second Reading: MPs discuss the principles of the bill and end of that stage MPs vote on it, if the bill is controversial.
  3. Committee Stage: At this stage every bill will be considered line by line by MPs, any amendments, if necessary, will be made here to vote on.
  4. Report Stage: After amendments the bill will be reported to the house for reviewing the amendment bill.
  5. Third Reading: At this stage of the bill MPs debate on the bill in its final form. After approving by house of commons, the bill is sent to house of lords for review. Both commons and lords must have to agree on the final shape of the bill.
  6. Royal Assent: Once the bill is approved by commons and lords, it will receive a formal approval by the monarch, which is known as Royal Assent.

Once it has been passed as law it will then be passed to the courts to ‘apply the law’ and administer it in the form of hearing cases brought before the courts.

This form of primary legislation is however not unique as the UK signed up to become a member of the European Union and as part of its joining agreement also agreed to have EU law followed in the UK. This law is indeed superior to the UK and if a clash exists between the two it is the EU law that has to be followed.

In terms of how EU law is passed we have to understand what EU institutions there are and how they operate.

EU Law is actually drafted by the European Commissioners who will do all of the work in writing the proposed bill and that it is ‘good law’. Once it is ready they will pass it to the Council of Ministers and if they agree and it passes the voting system of the EU then it will become law.

All regulations from European parliament must have to be followed by all member countries.  Regulations becomes part of national law of every member country once they are passed.

It would be useful to note two further EU institutions:

  • European parliament has established in 1952. Its main role is to debate the proposed EU regulations and directives although it has not direct law making capacity of its own and cannot actually make any changes to the regulations themselves. It is in many ways a toothless tiger.
  • Interpreting the law is their one of the main functions. ECJ ensures that national court of each member countries follow the EU Law properly. They also can enforce a national government to comply with EU law, if the country fails to do so.

CJEU is divided into two parts:

  1. Court of Justice: They deal with certain actions for appeal, requests for preliminary rulings from national courts.
  2. General Court: Deals with competition law, state aid, agriculture, trademarks, etc.

In the UK primary legislation and EU are not only law maker, also delegated legislation can make the law. Delegated legislation is where Parliament allows individuals and other organisations to make law on its behalf. It helps to save parliament’s time and lack of technical expertise. Delegated legislation also encourages local people to get involved to make new law and prioritise their opinions. Examples of bodies that can make law include local authorities and specialists such as the Civil Aviation Authority.

3. UK Court system:

Magistrate courts: In England and Wales the lower court to hold trials for offences is known as Magistrate court. Sometime civil matters are also dealt here.

Magistrate court is divided in 2 sections.

  • Criminal court
  • Civil Court

In magistrate court, magistrates are always assisted by a professional clerk, magistrates can impose penalty maximum amount of £5000 or six months or prison.

County courts: County court deals with indictable offences. The broad range of offences could be armed robbery, drug dealing, sexual offences, fraud offences, driving offenses etc. They will not deal with serious crime like murder and related offenses.

Some more responsibility of county court has been listed below:

  • District Judges sit here and deal with civil matter
  • They will deal with the claim if it doesn’t exceed £100000

Small Claim court: Small claim court is part of county court and normally deals with low value claims. They have very limited resources, such as limited number of judges, courtroom staffs etc.

Here are few more characteristics of small claim court:

  • They are part of county court system
  • They deal with the claims of £10,000 or less
  • District Judge deals the cases
  • Claimant and opponent represent themselves, so only cost involved is initial court fee.

High Court: The High Court of Justice is divided into three divisions:

  • Chancery division: this division deals with trusts, wills, bankruptcies, patents etc.
  • Family division: this division deals with matrimonial and children matters.
  • Queen’s Bench Division: this division deals with torts and contract. They have a commercial court for insurance and a technology and construction court.

Court of Appeal:  Court of Appeal of England and Wales was established in 1875. It is divided into two division, they are:

  • The Civil Division: Civil division hears family cases and civil appeals
  • The Criminal Division: This division hears appeals against criminal convictions and sentences.

A case can be taken to the court of appeal for the following reasons:

  • If someone gets the right for the appeal from county court or high court
  • If there is any errors of law or fact
  • If there is any error by judge

Supreme Court:  It is the highest court in the UK and not bound by it’s own decisions but is usually Supreme court is usually has five law lords who hear an appeal. Being an appeal court, Supreme court cannot consider a case if a relevant order has  not been sent from a lower court. It is the final court of appeal for all civil and criminal cases in the UK.

Supreme Court hears appeal from following courts:        

 In England and Wales:

  • The court of appeal, Civil division
  • The Court of appeal, Criminal division

In Scotland:

  • The court of session

 In Northern Ireland:

  • The court of Appeal in Northern Ireland.

It would be incorrect to describe the UK court system without Common law which is combined by:

  • Equity
  • Fairness

Common law is also known as case law or precedent, which normally developed by judges. It is one of the unwritten constitutions and is the third branch of law.

In understanding the application of statue law, the following laws must have to be implemented in the business organisation:

4. Employment Law:

Employment law regulates the relationship between employers and employees as well as employees’ rights at work. It also regulates what employees can get from employers and what employers can ask employees to do.

Employment Law includes the following areas:

4.1 Recruitment:  Key points of law affecting recruitment includes discrimination, rights to work in the UK, criminal record checks, data protection, etc.

Pre-Employment check: It can be done by employers to minimise the risk of hiring a wrong person before appointing someone. Employers need to conduct the preemployment check in a legal manner, such as asking for a permission during or before interview to contact previous employee.

Comply with Immigration Law: Immigration law is changing every year, company need to comply with immigration law when they are hiring someone who has an immigration status.

4.2 Terms and Conditions: Like any contract Employment Contracts are made up of  Terms and Conditions will define the employment relationship between employee and employer. Terms and conditions must include the type of employment contract, job descriptions, notice periods, salary/ wages, clear view of zero -hour contract, etc.

Zero-hour Contract: Many employers use zero-hour contract to cover situation where work load fluctuates, and many workers find it more suitable to arrange working hours. However, a zero-hour contract do not offer a guarantee of work. Employers need to ensure that written contracts contain the right and obligations of their zero-hour employees.

4.3 Data Protection: Although not directly a part of employment law every organisation will be aware of a further piece of legislation referred to as GDPR or data protection and that this must be a part of its relationship with its employees. It is very important that a company has a solid idea how to maintain employee’s personal information, recordkeeping, monitoring records. It is company’s duty to understand how to handle and keep employee’s data up-to-date responsibly with legal requirements.

4.4 Working time and holiday entitlement: In the UK, working hours are governed by working time regulation 1998, which limit 48 working hours in a week, and 8 hours average working hours a day. Company also need to entitle employers a paid holiday, which is 28 days for full time employees. Part time employees are also entitled for 28days holiday on pro-rota basis.

4.5 Discriminations: Sex discrimination is to treat unfairly for the reason relating to their sex. Everyone needs to get the equal opportunity to work in good place and go for training in work place, a person’s sex must not affect whether he/she will get a job or not. Equality Act 2010 pays rights to both men and women to be get paid equally in the work place. A person’s religion beliefs must not affect someone’s right to work. The same act also stops employers to discriminate employees on their disabilities, race, age. We can see therefore that the Equality Act has a direct impact and influence on employment as the organisation must ensure all the principles of equality are incorporated into its relationship with employees.

4.6 Impact of breach of employment law:

A company can be affected in many ways if they breach employment law:

  • Financial: If a company is taken to court, they might get penalty of big amount of money, which will affect their profit end of the year.
  • Reputation: A company who is taken to court for breaching the employment law might not get skilled worker in future. There will be direct effect on their reputation, which will lead them to lost customers
  • Moral: Breaching employment law by a company will drag down productivity, activeness, happiness of their existing employees.

By way of a recent example of the potential impact of poor use of employment law is the recent case study of Sports Direct who’s payment of things such as the living wage has been questioned. This has led to a fall of 50% in the share price attributed to the damage to the reputation of the firm through its poor record on employment law.

5. Contract Law:

A contract is a legally valid agreement between two or more persons. Contract law is the part of common law. It could be a written document to help a business with a legal document, stating how to face the negative situations.

A contract must have to have three parts:

  1. Formation of Contract:
  2. Contents of Contract
  3. End of the contract.

A contract can be between Venture partners, that negotiate about partners responsibilities. It could be between employee and employer, stating hiring condition, salary benefits, probation period during which the employee might be dismissed,

The main basis of any contract will be the responsibilities of each party which will be set out in the terms and conditions. These may include what may happen in the event of a dispute and when the contract itself is expected to come to an end.

A contract dispute may arise when one party in a contract disagree with any contract term. In the contract law, a contract dispute is known as breach of contract, that means one party failed to carry out responsibilities that they initially agreed on.

Breaches of contract can lead a company towards financial as well as reputation losses.

Minor breach is known as partial breach of a contract. For example, if A agreed to do a specific work for B, but its not up to B’s standards; then B can sue A for monetary damages as well as demand it to be corrected. Anticipatory breach allows one party to terminate the contract because of another party’s inabilities to execute the contract on time. For example, if A has agreed to finish a work by 30th September for B, but didn’t started the work on 29th September, then B can terminate the contract and can claim potential financial damages. Fundamental breach is a violation of a contract that stops wrong party to stop working on it and sues for monetary damages. This kind of breaches normally end up in the court. Material breaches are considered as one of the most serious breaches of contracts. For example, A has done a work for B according to a contract, then B refuses to pay A for the work.

5.1 Impact of breaching Contract Law:

Most of the time impact of breaching contract law lead a company towards financial losses. If the matter goes to court, then loosing party/ business ends paying court fees and other expenses for wining party too. It has a very big impact on company’s reputation too. If a business goes to court for violating terms and condition of the contract, it is very unlikely for that business to get more contracts. In the other word that business will lost the trust in the market. Sometime court forces a business to carry on the contract or rectify their work, which is also time consuming and company faces financial damages.

6. Company Law:

Company Law is a proper guide to set out a company, according to Companies Act 2006. It clearly explains to set up a business, that need to be registered with Companies house, which is known as ‘incorporation’. It also explains the business need a name, an address, at least one director, at least one shareholder, memorandum of articles of association to register with company house. Once the business is registered with company house, it need to be registered for corporation tax within 3 months of starting of the business. A business may get a penalty if they register late.

All business must have to file their annual accounts to company house. If a company fails to do so, the registration might be cancelled.

From the above discussion we can conclude that employment law, company law, contract law all has equal impact on any organisation depending on situation.

In last 15 years, a good number of changes in the UK legal system took place in two phases. In the first phase, major institutional changes were made and in the second phase institutional changes continued.

Created the Ministry of Justice in 2007, which replaced the department of constitutional affairs.

Created legal service commission in 2000, to provide legal aid to disadvantaged or poor people. But later the scope of legal aid scheme was completely restricted.

Supreme Court replaced judicial function of the House of Lords in 2009

Tribunal service and courts service merged together in 2011

County court was reformed in 2013

Family court was introduced in 2014

A new court was created in 2015 for hearing major international commercial disputes

To reform the UK law reformation proposals need to be considered, prepare draft bill for a approval by minister and also need to seek information about other legal system, which might help to reform a new law. Judges play a vital role in reforming new laws by adapting a decision from a new situation. For example we can look at  Donoghue v Stevenson case, which said that you must not injure your neighbour, has been used to impose liability in a wide range of situations.

Parliament can investigate and reform new law. For example, a committee of house of lords reviewed the law relating to murder and its sentence. They found sentence for murder can be from a fixed life imprisonment to a maximum of life imprisonment, which means high court can sentence a lesser term. In 1995 committee introduced a report on mandatory life sentence and that sentence must stay. In the UK, the law commission, media pressure, universities etc. also play a big role to reform the UK law.

However, UK legal and court system is not perfect always, it is very strong at some point and at the same time carry some drawbacks too.

It is unfair that sometime a victim do not get proper justice only for the judges power imitations. For example a sex offender or child abuser get 2 years of sentence while someone who is brought to court for fraud gets 5 years of prison sentence. It is the limitation of the UK law that judges powers are limited, they are not allowed to give longer sentences as the law is designed in that way. In the other hand, in India or Saudi Arabia a sex offender gets life time sentence depending on the case merit and situation. Recently in Pakistan a 23 years old man was executed for sexually abusing many minor girls.

UK law protects everybody who is living in the UK by taking dangerous and harmful people in the prison. These people are regularly monitored even if they are set off free after spending a long period, which make them conscious to do any further crime in future. In India, Bangladesh, Pakistan once a prisoner is free the court system never allow them to be monitored by police and most of the time they get involved in the same crime again and again.

Lack of legal aid is a very big drawback for UK legal system at this moment. It made feel disadvantaged people week as they cannot afford highly paid solicitor. Human right has become unaffordable for some people with lower income as they cannot seek for legal advice. A social worker May Bulman (2018) said with an interview with independent ‘’Drastic cuts in legal aid provision are tipping the scales of justice and putting lives at risk. The government must act now to ensure the legal aid system is fit for purpose.’’ In Japan legal aid was reformed in 2004 and according to UNODC report 28% of people got legal aid assistance but it is almost impossible at this moment to get legal aid in the UK.

In the UK legal system an accused person is given right to be silent as long as he does not get a lawyer to help him and during this procedure he remains innocent.  This system allows both sides to present enough evidences to support their claim independently. The objective here is to present all facts so that judge can use that in deciding who is really responsible. If we talk about some other countries like india, Saudi arabia, accused person face physically torture in the police custody and by the time he is presented in the court, he declare himself as guilty even if he is innocent.

The Jury and judge are always expected to be impartial as they are chosen using a design that made to get rid off biased people. Normally those people who do not have any interest in the outcome and can evaluate facts, are chosen to be a part of jury. However it is complicated sometime, as lawyers from both side can use legal strategies to influence opinion that can affect on outcome.

7. References:

  1. Uniindia (2018) Available from: http://www.uniindia.com/pakistan-executes-murderer-and-repeat-child-sex-offender/world/news/1381103.html (Accessed 12 October 2018).
  2. Independent (2018) Available from: https://www.independent.co.uk/news/uk/home-news/legal-aid-cuts-human-rights-unaffordable-committee-refugee-action-asylum-seekers-a8452661.html (Accessed on 17 October 2018).
  3. The UK Parliament Available from: www.parliament.uk (Accessed on 15 October 2018)
  4. Courts and Tribunals Judiciary Available from : https://www.judiciary.uk/you-and-the-judiciary/going-to-court/court-of-appeal-home/ (Accessed on 15 October 2018)
  5. Company’s Act 2006 Available from: http://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf (Accessed on 16 October 2018)
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