How the Law of England and Wales Is Made - Essay Example

Business laws in England and Wales Introduction Businesses cannot be run without interactions and therefore conflicts and dispute are common occurrence in the business world. The availability of conflicts and dispute in businesses implies that the sector requires a system of procedures and regulation to govern its operations or resolve resulting disputes. Business law is therefore a body of laws or procedures that governs the operations of businesses and their transactions. Although the law under which a business operates has close connection with the legal system of a country, they are unique and of business interest. Businesses in Wales and England have different form of ownerships that depends on the required level of control and the availability of funds. The variation in the form of ownership determines the rules suitable for a particular business according to the legal system of the countries. This paper will therefore give clear details concerning how England and Wales’s laws are made. The papers will also examine the incorporation of companies in England and Wales and its importance. Making of laws in England and Wales The UK parliament is responsible for the creation of laws that governs Wales and England. The parliament is made up of the House of Commons, House of Lords, and the Monarch. The process or creating laws starts with the creation of a bill that has to pass or to be approved by the parliament. Either the bills can be public (presented by government ministers) or private (presented the backbench MPs). English laws can also be created from government policies that have to go through similar approval from the legislature. The bills have to go through first and second readings in the house before being handed to the committee for further debate. From the committee stage, the bill is presented to the house as a report before it goes through the third reading. After passing through the third readings successful bills proceed to the House of Lords for approval. Finally, the bill has to go through the Royal Assent for it to be adopted as a law. The laws made by the legislature are general laws that govern the countries however; there are specific laws that are important to the corporate and business world and this fall into the category of business and corporate laws. Creating of business laws is a complex process that requires combined efforts from the business sector and the government’s instruction through the judicial system (Bade, 2001). The main reason of involving the two sectors is to ensure that the resultant laws are appropriate for effective operation of the business sector. The business laws are also of interest to the authority and therefore the laws should represent the interest of the government in business. Business ownership is an important factor in the process of running and planning of a business and therefore the system of a business ownership forms the basis of most business laws (Bond, 1995). Wales and England businesses have several forms of ownership that include sole proprietorship, partnerships, and companies. Partnership and companies can also be classified as limited or limited liability according to the degree to which the owners can take risk from the business. The three forms of business ownership require that the countries have all-inclusive laws that govern the running of each form of business. According to Kalb, sharing of loses, profits and risks is the main issue behind the ownership of a business (1993). This statement implies that appropriate business laws should specify the method or procedure through which these factors should be divided among the legal owners of the business. The Wales and England business laws are therefore designed to incorporate these important issues. Secondly, the business laws are constructed in such a way that they define the legal status of business owners in their business. This implies that the laws give the boundaries within which a business owner is protected under the laws of the country. The government also has interest on how businesses are operated and therefore the laws should represent the government’s interest. The government always has an interest on how businesses are protected from risks through insurance schemes, taxed and how businesses are affected by financial forecasts and predictions (Schwartz, 1998). Wales and England business laws therefore define the government’s position on these important factors. Thirdly, businesses have social responsibilities that are defined in their corporate laws. The business laws these countries therefore defines the responsibilities of business on matters concerning their social responsibilities (Ogus, 1994). The other reason for government involvement in business in to protect consumers against unfair trading practices business. The common law of contract unites England and Wales’ lower courts and it has sections that protect consumers. The Carlill vs. Carbolic Smoke Ball Company is a good example of how contract law work in Wales and England (Trevino, & Nelson, 2004). In this case, the defendant was the manufacturer of Carbolic Smoke ball an influenza medication had pledged a reward of £ 100 for anyone who contracted the illness after using the product. The company however failed to honor its pledge when the first case was reported. Similarly Reuter Ltd. v. Mulhens, (1953) 70 RFC 235 is the second example of a landmark case held in UK courts that demonstrate the application of common law of Wales and England (Hicks, 2008). Salomon v Salomon & Co Ltd (1897) AC 22 is another case that is of significance in Wales and England business laws. The case being a House of Lords case involved a former director of the company and the company’s liquidator. The case involved the need to protect unsecured creditors (suppliers) from risks arising from the company’s liquidations (Statute, 2011). Macaura Vs Northern Assurance Ltd is also an interesting case held by House of Lords involving Mr. Macaura and the Northern Insurance Company. The complainant sought compensation for losses suffered by his company following a fire tragedy on his timber farm. The company however declined to pay compensation claiming that he had he had no insurable interest instead the company should have taken the cover as a separate legal entity (Rooks, & Dunn, 2009). Collen v Wright (1857) 120 ER 241 is another important case in England and Wales judicial history. The case involved consequences suffered by a third party following a bleach of contract (Richard, 2005). These cases demonstrate the importance of laws in businesses and business activities. Incorporation Incorporation of companies is the process of creating new companies that are reorganized by the law as separate legal entities. Incorporation is a legal process that has legal benefits to both the shareholders and the company. The most important legal benefit resulting from the incorporation process is the protection of private properties against any claim that might arise from creditors. This factor protects the personal property of the shareholders against any claim from the creditors in situations when the company is declared bankrupt. Secondly, the law defines appropriate procedures that should be applied during transfer of ownership in the company. Incorporation also allows company to raise the needed funds through the sale of its share to the public and other investors. The process also ensures the durability of the company; this implies that a company cannot be terminated following the death of its directors, shareholders, or incorporation officers. Finally, the incorporation process enables a company to have its own credit rating that is different from that of its owners and this is an important factor especially when applying for corporate credit (Prentice, 1998). As a process, the incorporation of companies has four major steps that should be followed in order for a successful incorporation process. The process begins with the establishment of the reasons for the incorporation or the aims and objectives that inspired the formation of the company. The deed of formation is contained in the article of association and it includes all the important information concerning the formation of the company. This process seeks to establish the company as a separate legal entity that has separate aims and objectives from its founders. The second important step in the incorporation process is the obtaining a legal approval from the ministry indicating that the new company has been approved and that the owners can proceed with the other processes. The third stage is the registration of the new company under the ministry or department of trade in the county. The final stage in the incorporation process involves the publication of the company’s formation deed in the state Gazette indicating that the new company has legal recognition in the country. The process however has several requirements that are attached to the four main steps and they include the definition of the liability of the owners of the company and the availability of founder or the company’s shareholders. During the incorporation process, the law requires that the company should have a minimum of two persons who are founders or the shareholders of the company. The founders can be either individuals or a legal entity such as registered corporate. If the new company only has on shareholder and it does not produce the other owners within a period of six months the sole shareholder will be liable for its losses. The important requirement that dictates that a company should be formed by a minimum of two people is founded on contractual theory, since a corporate result from a contract then there should be at least two parties to form the agreement. Although the incorporation process is a lengthy and a complicated process, it is important to both the company and the shareholders. In England and Wales, the incorporation process is referred as company formation (French, EA. 1977). The UK has the fastest incorporation process that has fully automated process and fast clearance from the registrar of companies (Company house). The incorporation process aims to create corporate that have legal recognition and that operate according to corporate laws. The process also ensures legal protection of the citizen who constitutes the company’s shareholders and directors from risks resulting from claim. Conclusion The process through which England and Wales laws are made is an inclusive process that involves all the concerned parties. Business laws provide guidelines and procedures that are required in resolving conflicts that are of business interest. Businesses in Wales and England have different forms of ownership; this implies that they require different laws to govern their operations. The business laws are important since they define the form of ownership in a business entity and the liabilities of the owner. The laws also define the government involvement in the business through legal requirements. The business laws also define the social responsibility of the business. Incorporation is the process of creating companies that are reorganized by law of the state as separate legal entities from the founders. The incorporation process has numerous benefits to both the shareholder and the company. The process protects the shareholder from bankruptcy of the company while ensuring survival of the company following the death of its founding members. References Bade, R. P. 2001. Foundations of Microeconomics. New York: Addison Wesley Bond, P. 1995. Business Law. Blackstone Press. French, EA. 1977. “The Evolution of the Dividend Law of England,” in Baxter, W.T. and Davidson, Sidney, Studies in Accounting. London: ICAEW Hart, O. 1995. Firms, Contracts, and Financial Structure. Oxford: Clarendon Press Hicks, A. 2008. Cases and materials on company Law. London: oxford University Press. Kalb, I. 1993. Structuring your business for success. New York: K & A press. Ogus, A. 1994. Regulation: Legal Form and Economic Theory. Oxford: Clarendon Press Prentice, D. 1998. Corporate Personality in the 20th Century. Oxford: Hart Publishing Richard, S., 2005. Contract Law Q&A 2005-2006 6/E. 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