Law Handbook for New Start-Up Companies: Understanding the Basics of Business Law

The aim of this unit is to enhance students’ understanding of how business law is applied to the running of a company. Students will gain knowledge of business law and examine the impact of the law on business operations and decision-making.

Throughout the unit students will identify legal solutions available to business owners and assess their suitability. Their experiences in this unit will help them better understand the areas of law in which they will want to specialise. They will be able to illustrate the impact of the law on normal business operations and when registering a company and inviting shareholders to invest in it. They will gain an understanding of the law in relation to market abuse and director responsibilities. Students will be able to recognise the application of employment law between employers and employees.

By the end of this unit a student will be able to:

1. Explain the basic nature of the legal system.
2. Illustrate the potential impact of the law on a business.
3. Examine the formation of different types of business organisations.
4. Recommend appropriate legal solutions to resolve areas of dispute

LO 1: Explain the nature of the legal system

• What constitutes a legal system?
• The purpose of law, the evolution of law and different sources of law e.g. legislation, directives, case law and treaties relevant to country.
• Divisions and key terminology of the legal system e.g. court structures.
• The differences between civil and criminal law.

• The role of government in law-making and the justice system.
• Organisation of the judiciary.

LO2: Illustrate the potential impact of the law on a business

The impact of Law:

• Contract law e.g. the formation of contracts, the elements and terms of contract
• Competition Law
• Data protection
• The tort of negligence, consumer protection, health and safety and product liability
• Duties of employer and employee e.g. the employment contract, employer obligations and employee rights in the work place.
• Managing cases of dismissal, redundancy, discrimination, health and safety.

LO3: Examine the formation of different types of business organisations

• Unincorporated V’s incorporated legal structures
• Different types of business organisations and legal structures e.g. Sole trader, partnership and registered company.
• Classification of companies e.g. public and private companies, limited and unlimited
• Starting up a business organisation and registration requirements.
• The management of a company e.g. appointment of directors, company secretary, auditor. The role of the shareholders.
• The application of company law in forming different types of business organisations and companies, raising capital and liquidation.

LO4: Recommend appropriate legal solutions to resolve areas of dispute  

Legal solutions for different types of dispute resolution:  

• Areas of employment e.g. health and safety, equality of pay claims, compromise and severance agreements, wrongful or unfair dismissal claims.
• Corporate and commercial disputes e.g. breach of contract, contesting a damages claim, dispute between directors.
• Commercial property e.g. commercial lease transactions, real estate and investment properties.

• The role of Alternative Dispute Resolution (ADR) Civil litigation procedures and funding
• Tribunals
• The role of unions
• Citizens Advice.

In order to pass this unit, the assignment that you present for assessment needs to demonstrate that you can meet all the learning outcomes listed below.

You have recently joined a law firm as legal Assistant and your manager asked you to prepare a “Law Handbook” which will help the new start-up companies to help on the legal system and about the key legislations that they are required to know for effectively running their businesses. This handbook must contain all salient legislation which a businessman must know and their impact due to non-fulfilment.  

1. Your handbook will start with an explanation of the legal system, different sources of law, the role of government in law-making and how statutory and common law is applied to businesses.
2. A critical reflection of the legal system using examples to demonstrate strengths and weaknesses.
3. An explanation of the key legislation, regulations and standards that a new business needs to be aware of.
4. Different law which businesses have to follow and analyse their potential implications on businesses. You need to cover contract law, Law of torts, copyright law, employment law, etc.
5. The businesses can have different legal formats; you have to give a detailed account on different types and classification of business organisations in the public and private sectors, providing specific examples to illustrate different legal structures with their advantages and disadvantages.
6. A critical evaluation of how different organisations are managed and funded in both public and private sectors e.g. limited companies, social enterprises, corporations, co-operatives. Provide a specific example of each of them.

You have to cover various legal problems affecting local businesses and suggest solutions for them.  The areas of law to be considered contain company Law (including insolvency and liquidation); contract Law (including termination of contract) and employment Law. The three cases which you need to cover in your legal handbook are given below. For each case, you need to apply and justify a legal solution to the problem.

Gordon works as a salesman in the Orange Computers Ltd store.  His contract of employment provides for an annual salary of £10,000 and commission payments (at 9%) on any computers and peripherals he sells.  In the last three years, the commission payments have amounted to an average of £11,000 per annum.

Learning Outcomes

In 2015, due to cut throat competition in the local market, the business is adversely affected.  The manager, Fred, informs Gordon that the business is in severe financial trouble and that he must reduce the firm’s outgoings.  In response, Fred asks Gordon if he will forgo his salary for 2015, 2016 and 2017, and simply accept payments of commission.  Fred explained to Gordon that this was required of him (and all other staff) or the business would probably not survive and it would have to be wound up owing substantial debts to creditors.  As such, Gordon accepted the variation of the contract.

In 2016, the economy began to grow, and in small part due to governmental incentives for investment in information technology, the store has managed to trade its way through the difficult times and is making a healthy profit.  As such, Gordon feels that he should be able to receive his wages for 2017 and not simply have to rely on his commission as agreed in 2015.  He also wishes to know if he can claim for his wages from 2015 and 2016 as Orange Computers Ltd has sufficient profits to repay this money.

Advise Gordon whether he can obtain his wages for 2017, and also whether he would have any claim for the wages he agreed not to accept in the year 2015 and 2016.  Discuss in context of contract law & employment Law.

After doing some research on the internet, Janet decided to call Virgin Media to arrange the purchase and installation of the internet package costing £35.00 per month, including the phone lines (monthly line rental of £11.00). The engineer came on the arranged date at 9am and installed the internet. However, he could not find the telephone point on the switchboard and suggested that he will call his supervisor and come back. Janet waited until 5pm that day for the engineer but he never returned back to complete the task. She called the Virgin Media and complained about the engineer and that she still hasn’t got the phone line yet. Finally, after several calls and e-mails they sent another engineer to fix the phone line after 3 weeks.

When the invoice from the Virgin Media arrived Janet was charged for the whole package from the day the internet was installed including the monthly phone line rental. Janet is extremely upset since she believed that her phone line should be charged after 3 weeks only.

Part 1: Understanding the Legal System and Key Legislations

Analyse the legal position of the service provider (Virgin Media) and the consumer (Janet) on the basis of your understanding on the various elements of contract law.

Blackhorse Limited is a security company providing security guards to other businesses, which is one of your client. The company has 50 employees. The company has minimal overheads, apart from the "wage cost" of the employees.

The company had four main customers, the largest of which failed leaving Blackhorse limited with a bad debt of £100,000. Since that bad debt was incurred three months ago the company has recovered its previous level of turnover, but that turnover is now spread over ten customers.

The cash flow reduction of £100,000 caused by the bad debt resulted in Blackhorse limited "stretching the due dates" of the payments needed to be made to the company's creditors. One of those creditors issued a winding up petition two weeks ago and the court is to consider whether or not to make a winding up order at a hearing set to take place in three weeks’ time. Discuss the different options available to your client to avoid compulsory winding up.

In part 2 of your legal handbook, you now need to cover the following aspects of the above cases for the guidance of new start-up companies: 

1. Brief overview of Contract law, employment law, Company law, etc.
2. Salient legal points of each case;
3. Suggest an appropriate legal solution to each of the problems; 
4. Provide justification for the advice and solution given;
5. Compare & contrast the effectiveness of these recommendations given in your presentation;

Your work should be in a Report Format to your manager and should include all the above points divided into two sections, Part 1 & Part 2. The report should be referenced using the Harvard referencing system. Please also provide a bibliography using the Harvard referencing system. The recommended word limit is 3,000(+ /- 10%) words, although you will not be penalised for exceeding the total word limit.

Grading Criteria

This table outlines requirements for each grade (i.e. Pass, Merit or Distinction).

Before you get started please read the following information very carefully.

Produce an informal report/paper that addresses all the tasks in the assignment brief. You are encouraged to use diagrams or tables to illustrate and reinforce your findings, using single space and font size 12.  Any references to academic theory should be correctly cited and referenced in a bibliography at the end of the report. (Please do not copy and paste information).

• Fully completed assignment cover page
• Title page
• Table of contents
• Introduction
• Main body of the report clearly identifying the separate outcomes and assessment criteria
• Conclusion and recommendations ( if relevant)
• References and bibliography
• Appendices only if relevant and necessary

The assignment brief includes headings relevant to the unit outcomes, read and follow the tasks listed under each heading and this will make certain that you cover all the outcomes and assessment criteria to achieve the unit.

Part 2: Resolving Legal Issues and Disputes

Assessment and Grading

Read the assessment grading criteria before attempting the assignment tasks, as it contains important information about how you should approach your assignment and how grading is applied in order for you to achieve a pass, merit or distinction.

All assignments must be submitted by the agreed date, via MOODLE.  Assignments submitted late, but with permission, will be marked as a pass only.  Assignments submitted late, without permission, will not be marked until the end of the year, or the next time the unit is scheduled.

Please ensure that your assignment is attached to the assignment submission receipt and that you read and sign the statement confirming authenticity. Check that all relevant fields are completed fully before submission.

Once the assessor has marked your assignment, you will receive written feedback, either confirming that you have met the required standard and grade awarded, or that you have not yet met the standard and what you need to do to make the necessary improvements.  Please note that achieved and confirmation of grades is provisional until signed off by the Internal Verifier.

This is an assignment guide to help support you while completing your BTEC Assignments.

It includes:

• Assignment writing guidance   
• Referencing guidance

Bibliography / References

Please list down “works cited” within the framework of enumerative bibliography – a list of references to key articles and texts. Verify each reference carefully; the references must correspond to the citations in the text. The list of references should start on a new page and be listed alphabetically by the name of the author(s) and then by year, chronologically. Only the first author’s name is inverted. The name of each author and the title of the citation should be exactly as it appears in the original work. More Information can be found in the College MOODLE in the General Information about the Harvard Referencing.  

Learners must consult College and local national library facilities. In addition, learners need to read the broadsheet press and weekly business magazines regularly. You should also use relevant internet sites regularly and identify key influences and recent and relevant research with regard to your subject area.  You should read topical case studies and read about national campaigns and government initiatives in your area of interest. Following is the list of indicative resource materials

Textbooks:

Check the list of recommended books for your further reading

• ADAMS, A. (2016) Business Law for Students. 9th ed. London: Pearson.
• ANDREWS, N. (2011) Contract Law. Cambridge: Cambridge University Press.
• ELLIOTT, C and QUINN, F. (2015). The English Legal System. 16th Ed. London: Pearson
• HONEYBALL, S. (2016) Honeyball and Bowers Text to Employment Law. 14th ed. Oxford: Oxford University Press.
• MARSON, J and FERRIS, M. (2015) Business Law. 4th ed. Oxford: Oxford University Press.

Check the list of recommended links for your further reading

This unit links to the following related units:

Unit 1: Business and the Business Environment

Unit 19: Resource and Talent Planning

Unit 20: Employee Relations

Unit 29: Managing and Running a Small Business

Unit 48: Law of Contract and Tort

Unit 49: Company Law and Corporate Governance

Unit 50: Sales and Consumer Law

Plagiarism is a form of cheating. Plagiarism must be avoided at all costs and students who break the rules, however innocently, may be penalised.  It is your responsibility to ensure that you understand correct referencing practices.  As a university level student, you are expected to use appropriate references throughout and keep carefully detailed notes of all your sources of materials for material you have used in your work, including any material downloaded from the Internet. Please consult the relevant unit lecturer or your course tutor if you need any further advice.