Introduction to Business Law of Managers
Business law can be defined as the law that applies on business entities such as corporations and partnership. It deals with the start up of new business and the problems that takes place in current businesses while deal with government, public and other companies. Business law involves variety of legal regulations, including intellectual property, bankruptcy, tax law, real estate, employment law and others (Paulo, 2011). It provides more efficient transactions and benefits the whole economy. Business law is categorized into two different areas i.e. regulations of commercial transactions by the laws of contract and other related areas and the system of commercial bodies by the laws of partnership, company, bankruptcy and agency. This report is prepared to analyze alternative dispute resolution practices of mediation and arbitration and key strategies of a successful to both domestic and cross-cultural negotiations. Here in the report legal regulations surrounding the development, sunning and dissolution of enterprise is discussed.
Alternative Dispute Resolution (ADR) practices of mediation and arbitration
ADR is a term that involves arbitration, mediation and other techniques used to resolve disputes other than by litigation. It refers to the means of settling clash outer of the courtroom. These techniques help to resolve disputes quickly, privately and cheaply than conventional litigation. In the modern era, people prefer ADR approaches as these methods are more focused as well as more creative than lawsuit (Miller, 2011). It is less time consuming, less expensive and free from technicalities in case of conducting cases in legal courts. The use of arbitration and mediation is increased due to boost in the cost of legal proceedings. The different technique that can be use by senior manager and junior employee to resolve their disputes are enumerated below:
Arbitration: This technique of ADR looks likes the traditional litigation in which unbiased third party hears the arguments of disputants and imposed a binding and a final decision that is enforceable by court (Dow, 2000). It is the process of hearing and determining of a dispute among parties by person selected by them. In this technique, disputant mutually decides who will hear their case and this method is less formal than in court of law. This technique has long been used in labor management disputes. A new form of arbitration has emerged which is known as court-annexed arbitration. The final decisions in this method may be either binding or non-binding, depends upon the terms of arbitration. The binding decisions derived from arbitration carry the same significance as a judgment of court (Abbasi, 2009). The main object behind this technique is to obtain the fair resolution of arguments by an impartial tribunal without needless expenses and delay
Under the given scenario of senior manager and a junior employee, both the parties can use arbitration to resolve their disputes. In this technique, one of the party either junior employee or senior manager can begins the process of arbitration and can appoint arbitrator. If one party does not corporate in the process than in that case other can move toward chief justice officer for selection of an arbitrator (Bhattacharyya, 2010). Both the parties will show their facts and evidence to selected arbitrator and discuss with them on their issues. This will help arbitrator to identify the reason behind their dispute and will assist them to recognize effective solution that can be apply by parties to resolve their disputes. This process will be less consuming and will be less expensive for senior manager and junior employee and will assist in development of healthy relationship (Houghton, 2012).
Mediation: It is also known as conciliation that provides a forum in which disputes of parties can be resolved with the help of third party. This technique aims to help disputants to reach a solution. Mediation is a deliberate process of dispute resolution in which all parties consent to participate to work toward a mutually agreeable resolution in a good faith. In this technique, parties are not legally bound to resolve their disputes (Birds, 2007). Mediator in this method of ADR simply facilitates the process of negotiation. The job of mediator is to keep the parties talking and to help them to move through more difficult point of contention. This technique is different from arbitration as there is no official decision maker. In the process of mediation both the parties are bought together at specific location in which parties gives short presentation to the facilitator about their issues. The purpose of behind this is that mediator has clear idea about their problem. Both the parties split into two rooms after presentation and mediator hoes back in the room and personally discuss with them (Sarkar, 2010). The facilitator collects their feedback and offer settlement that can be use parties to resolve their disputes.
In the given scenario, junior employee and senior manager can also use mediation in order to resolve their disputes. They can select a mediator who is completely aware about their issues. The facilitator will brought them together at a specific location and will discuss with them about the reason of disputes (Kennedy, 2008). Junior employee and senior manager will give their short representation which helps facilitator to have clear idea about disputes. After this, parties will move in separate rooms and the mediator will go and personally discuss with them. The facilitator will identify their responses and will offer settlement decisions. There will be no binding on parties to accept the decision of mediator. Hence use of this technique will help senior manager and junior employee to resolve their disputes and to develop healthy relationship (Ashraf, 2012).
Domestic and cross culture negotiation
The process through which people settle their differences is known as negotiation. This aims to achieve possible outcomes for their position and avoid arguments. There are different styles of negotiation that are shaped by culture, political system, geography and history of each country. The cross cultural negotiation becomes more complex in the present era and complications in it are growing exponentially (Edwards and Wolfe, 2006). Negotiation at domestic level is simple as compare to international level. It is essential to understand the culture of different nation in which company operate their business. The key strategies for successful domestic and cross cultural negotiation are enumerated below:
Don't Stereotype: This strategy can also use by parties which states that making assumption about position, needs and goals of other sides can create barriers and distrust among parties (Singh, 2009). Both the parties are required to treat each other with respect as it will help to build trust among them. They are required to understand the values, beliefs and norms of each other independently. This strategy can be use at both domestic as well as cross cultural negotiation.
Use simple and accessible language: The process of negotiation is highly interactive in which one person communicates with another. The main key factor to become successful negotiator is effective communication (Mahmood, 2012). The parties are required to use common, simple and accessible language that can be understandable by both the parties. The use of this strategy will help people to understand culture of each other and to effectively carry out business operations at both domestic and international level.
Learn the other side's culture: The contracting parties are required to learn and understand the culture of each other. This will helps to develop trust and credibility that will help parties to select right type of strategies and tactics during the course of negotiation (Wyatt, 2012). In addition to this, learning of other side culture will help to gain loyalty and will create trust among each other. The use of this strategy can be beneficial at domestic as well as cross culture negotiation. Learning of other side culture will assist in development of healthy relationship. The use of this tactic will helps to effectively carry out business operations and will eliminate chances of disputes (Fox, 2009).
Find ways to bridge the culture gap: It can also use by parties in successful negotiation and to effectively carry out business operations. In this strategy, parties can use inclusive culture in which elements of both culture will involve. This approach can be use by parties when parties will unable to find out common ground (Haapio and Siedel, 2012). It can be use at domestic as well as cross cultural negotiation in effective manner. This strategy will assist in development of healthy relationship and will helps to build trust among each other.
Maintain personal integrity, build solid relations and converse concessions: Apart from above discussed strategies, this can also use for successful negotiation. It is important that parties should maintain personal integrity as they should know about each other. This will help people to feel comfortable during the process of negotiation (Pickup, 2004). In addition to this, honestly will help to build trust and will develop healthy relationship among parties. They are also requires to develop good relationship in business as it will help to offer more value in term of revenue in long run. The use of this tactic will assist in creation of loyalty among parties and will build trust among them. In addition to this, credibility is also required for effective negotiation. This strategy can also be use for domestic and cross cultural negotiation successfully (Gale, 2007).
Business law is developed to effectively deal with creation of new business and the problems that takes place in current trade practices. This law applies to business entities such as corporations and partnership. The legal constitutes for start up of a business in context of a partnership and a company is enumerated below:
Partnership is a business organization where two or more individuals come together to manage and operate commercial activities. In such form of business are partners are equally and personally liable for debts and obligations. It can be said to an arrangement where parties mutually agreed to cooperate to advance their common interest (Schaffer, 2009). Each member provides financial or any other material contribution as their capital. They have unlimited liability towards obligation of business which can be altered with act of “Limited Liability Partnership Act, 2000.
Partnership act, 1890
As per act of partnership in UK it is an agreement which subsists between parties to carry on common business with the objective to earn profit. It is a form of business association which automatically arises when people come together for to run a business with the view of profit. According to act minimum 2 partners are required and as per updated Act there is no maximum limit for partners (Adrian, 2010). It is a legal agreement which can be oral or written. Provision of partnership act is applied unless it is intentionally excluded by partners. All members are entitled to participate in managerial activities and get and equal share of profit. Their agreement comes to end in the event of death of partners. It can be altered if there is predetermined clause prior to the death. General decisions of business are taken by majority but in special cases unanimous support is required (Shaw and Shaw, 2010).
As per partnership act, 1980 there is requirement of creation conjecture linked to indemnity of liability. Entire members under partnership agreement are jointly and severally liable for the act of other members. If any offence is done under ordinary course of business it will create obligation for whole firm. According to law all partners should behave responsibly and in utmost good faith (Paulo, 2010). Their duties are inclusion of work with honesty, not to make secret profit and they are restricted to get engages in such activities which will harm image of business. None of the partner can get expelled unless there is unanimity for this.
Advantages of partnership
Decision making: The power of decision making in partnership is shared by all partners in business and they help each other when they required. This form of business helps to get creative ideas that can be use for expansion of business operations and solve trade problems (Goel, 2006).
Shared responsibility: The responsibility in partnership is shared by all partners for management and running of business in effective manner. In this form of business, partners share in each task and take equal responsibility. In addition to this, it allows associates to make most of their business. The responsibly is shared by each partner as per their skills and abilities which helps them to achieve their goals and objectives (Bagley, 2012).
Capital: The fund is raised by all partners in this of form of business and if number of partners is higher, then more money can be generated which will assist in good start of business. It provides better flexibility and more potential for growth and profits which is shared by business partners (Zeiba, 2009).
Flexibility: There are fewer regulations in form partnership than company. It is more flexible than other form of business as partners run trade operations without any interference of shareholders (Bhattacharyya, 2010).
Disadvantages of partnership
Profit sharing: Profit is equally shared by partners in partnership which is not fair. The partner who invest large amount of fund in this form of business get similar as the another partner who invest small quantity of capital. All partners may not put equal efforts for management of business and hence equal distribution of profits may lead to inconsistency (Goel, 2006).
Disagreement: The disagreement among partners can be danger for business in partnership. All people have different ideas which can lead to disagreement or disputes among partners which can impact on business operations.
Taxation: On the basis of self assessment on each year, partners are obligatory to pay tax equal to sole trader. It is one of the biggest disadvantages of partnership. Partners are required to pay more tax as compared to company and therefore client can register business as company on the ground of taxation as it will be more profitable for them (Bagley, 2012).
Hence from the above discussion it can be stated that client can consider advantages and disadvantages of partnership business as well as the legal constituents of this form of business while he create a new business with his formal colleague.
Companies Act 2006
The Companies Act 2006 provides a complete code of company law for the UK and it is the primary source of law. The act contains various provisions which affect the creation of company. It codifies certain present common law principles and those are related with duties of directors. The formation procedure of company is modernized that helps integration over internet. The constitutional document of formation of company involves Article of Association (AOA) and Memorandum of Association (MOA). There two are the main document in company formation (Haapio and Siedel, 2012). The new model of articles developed under the act for private companies and it can also be adopted by existing companies as it better reflects the way they operate their business.
The act states the capacity of parties will be unlimited and this removes the requirement of extreme long clause in MOA. In order to execute documents by directors on behalf of the whole company, the formalities regarding deed is modified in the Companies Act 2006. The deed can be executed by simple signature (Edwards and Wolfe, 2006). The need for an authorized share capital for formation of company will be eradicated. Further companies are able to change their share capital without order to court. The uncertainty in law in relation to non-cash asset by a company to their shareholders also address by the act. This also enables shareholders meetings to be held more quickly. The act also enables companies to communicate electronically and it permits auditors to limit their liabilities for claim in negligence as well as breach of trust (Kennedy, 2008).
Advantages of company
- Taxation and tax advantages: The limited companies pay tax only on their profits. A person is recommended to pay at minimum wage level if he runs a limited company.
- Ownership and control: Directors are termed as shareholders of company in case of limited company. The ownership as well as control remains in the hands of directors which help them too take quick decisions (Ashraf, 2012).
- Limited liability: Financial security that comes with business is also an advantage of a limited company. The shareholders of company will only be liable to pay debts as per the level of their investment in the company which provides satisfied feel of security.
- Employee shareholders: The employees can also become shareholder of company in some circumstances. The position of shareholder can be provided to employees as a reward which will provide higher level of satisfaction and motivate them for higher level of performance (Houghton, 2012).
Disadvantages of company
- Restricted capital rising: The dispute among directors and shareholders can also take place regarding ideas as what is good for business of company.
- Dilution powers: There is restriction for private limited company regarding issues of capital through sales of shares (Schaffer, 2009).
- Complex accounts: There are complex and restrictive rules and regulations regarding accounts and booking of company. The business can be time consuming and costly in case of limited company.
From the above report it can be concluded that business law provides more efficient transactions and benefits the whole economy. It deals with formation of new business and involves different areas such as property, employment law, sales, agency bailment etc. There are Alternative Dispute Resolution techniques such as arbitration and mediation that can be use by disputants in order to resolve their clash. In addition to this, there are different key strategies that can be use for domestic and cross cultural negotiations. Further parties are required to consider legal constituents as well as advantages and disadvantages of company and partnership while they start up a new business. This will help them to successfully create a business and to attain their objectives.
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