Legal Aspects Of Business

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Question :



By referring to relevant legislation and case law critically discuss the main feature these forms of business organisation:

1. sole trader

2. unlimited partership

3. limited libability partnership


By referring to relevant legislation and case law critically discuss the fiduciary duties of directors of private limited companies in the UK. These shall include:

1. duty to act within powers

2. duty to promote the success of the company

3. Duty to exercise independent judgment

4. Duty to avoid conflicts of interest

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Answer :


The business laws or legal aspects related with business are procedures or legal formalities in terms of which the activities of business interconnected with training are formulated or legalised. Each and every kind of business activity and sub-activities does fall under the doctrine of laws related to taxation and other principles of businesses. Not only the laws of business accrue to this company based activities but also they are executed in terms of superiority of performance appraisal. The main features of business according to the modules and modalities of companies are efficiently jurisdiction or justified in terms of the specific laws associated with each kind of business activity or procedure. The owner has thorough and never -ending liability  in terms of ownership of businesses and each kind of debt or credit related transactions which are held in the relevant business of the concerned company or companies of united Kingdom are under his notice and supervision (Carroll and Buchholtz, 2014, p.11).

Task 1: Different case laws and legislation based procedures 

1.1 Sole trader 

A sole trader is a company or institution strictly run by an independent individual or entity of business and the entire profits appropriated in terms of net amount after payment of taxes comes under the ownership of sole trader of business. In addition to this, the losses incurred after execution of business activities in terms of sale and trading is also faced or encountered by the sole traders according to certain norms of business and based on the following legislations (Chmielewski and Hoff, 2015, p.99). Regulatory Impact Assessment (RIA) and Rationality direct sole trader that comes under the purview of the specific variety of case law and legal procedures according to the perspectives of business based scenarios and relevant phenomenon.

Trade descriptions Act of 1972: The trade descriptions act are those acts in terms of which, protection is given the sanctity of trade-based business dealings in terms of making punishable. Every crime related offence of violating rules of trade based binding contracts of business based dealings, false claims, or misleading claims made any form of business agreement of both verbal and written origin. It protects the chief essential feature of the sole trader in lieu of protecting the sole authority over the error free trade activity (Cruz et al. 2014, p.19). 

Consumer protection act of 1987: This act protects the interests and-and freedoms of the customers being supplied with fake products or products which are illegal in terms of danger and damage involved in the same and risky as it may cause harm to the customers of the consumers. The supplier is strictly punished in terms of the mentioned situation if he or she cannot furnish enough proof of his alibi w.r.t the fact the cause of danger was unknown to the supplier at or before its supplied faulty product. This act also correlates with the essential feature of the sole trader in terms of maintaining absolute ownership of its market base of customers purchasing its products measured in terms of trust and reliability.

Case study

Salomon vs. Salomon and Company limited (1897): In 1897 a case arises in terms of sole trading business put forwarded by Salomon in the heartland of united Kingdom when he sold his boot manufacturing business to a company in terms of earning 3900 pounds from the company as a whole from banks as repaid mature loan and share capital. But in the period of recessionary crisis which hurt the company under the ownership of salmon, and when the profits of the company were liquidated, salmon was sued for not paying the compensation money to some creditors and Salomon was forced to pay the same as per the jury’s order s Salomon was the sole trader of the company and hence the sole owner of the same for which the entire liability fell on him as a proprietor which is a strict criticism of sole trader based business.

1.2 Unlimited partnership 

The unlimited partnership is a partnership related to the phenomenon of combined or clubbed ownership of various proprietor or entrepreneurs of business. In terms of unlimited liability, the business based debts and credits and the profits and losses related with the inflow of cash and outflow of cash to and fro from the companies do come under the liability of the each and every partner or proprietor in equally proportional amounts or probability (Vimercati, 2015, p.55). Privacy . It indicates that unlimited liability is such a feature that the intensity of liability can never be easily assigned to or accrued or taken or withdrawn away from a single proprietor but to and fro from each proprietor or partner in connection with the business process or procedures. In addition to this personal stock of wealth should not be confiscated for paying the debts of any kind of liabilities arising in companies monitored under the system of the unlimited partnership-based framework.

Partnership Act of 1890: This particular act states that all the people or partners of this act are generally responsible for a common profit earned by a particular company being practised by the feature of unlimited partnership processes. The behavioural patterns and conduct of the partners related to this scenario is individually liable for the profit earned by the company agreed in terms of oral, written and legally assigned document of legislation-based contract. Each partner is assigned with the role cum ordeal of participating of each and every managerial process of the business being conducted in specific segments of the organisation at specific times.

Case studies

Carlen v Drury (1812): In terms of Case study process the case of Carlen vs. Drury can be exemplified in terms of the case study related with the Backside Brewery company which is a company jointly owned and supervised by a group of partners cum managers. In the year of 1812 a case occurred in form of mismanagement related crisis which made the company bankrupt up to a certain extent or amount and since it was a company following the strategy of joint ownership, the entire managerial body consisting of the group of managers was sued and each of the managers was punished with penalties in terms of their joint irresponsibility and miscarriage of plans which reprocessed in form of mismanagement. This case study expressed the loophole of the unlimited liability partnership in terms of criticism (Dickerson, 2014, p.265). 

1.3 Limited liability partnership 

Limited liability based partnership is a criterion or system of business partnership in which all the partners have the financial obligations to the company in terms of the limited profit owned by him or her in terms of his other contributory investment in the profit based and performance appraised role executed by the business activity practised by the company. The concept of the limited liability partnership is centred around the idea that in case of any loss due to misallocation of resources or misappropriation of funds by the business carried out by the company, each and every member is charged only the limited amount of loss money corresponding to his or her investment is liable to be deducted from his or her personal account (Ghanavati. and Hulstijn, 2015, p.27).


Limited partnership Act, 1907: In terms of limited liability partnership, only the partners who are inactive or sleeping will be charged or be imposed with liabilities with the condition that the numbers of participating members are limited in numbers.

Limited liability partnership Act of 2000: In terms of the provisions of this act-limited partnership, members are assigned with legal formalities in terms of achieving protection against gross negligence. It is correlated with the business based processes and activities of companies so that the person or member for whom the majority of business negligence has taken place cannot be exempted from punishment.

Case Study

The collapse of Joe Jeans limited (2003): Joe jeans were a manufacturer of the superior variety of fashionable jeans market. His business was running successfully from the advent of business until and unless there was an intervention of foreign competitor in his jeans market which hurt his business adversely causing the business of Joe Jones limited to become bankrupt. In terms of compensation money, Joe Jeans granted 2000 pounds to its workers and received a loan of 500 pounds from the bank. Only the value of Joe Jeans was at risk indicating a severe and critically defined case study of limited liability based partnership (Gomes-Casseres, 2015, p.22). 

Task 2: Fiduciary duties of the directors of the following private limited companies in United Kingdom 

2.1 Duty regarding act within powers 

Directors of the private limited companies in United kingdom are assigned with some of the powers of the company to carry out the activities of the private limited companies in the United Kingdom and they are entitled to do that obeying the constitutional principles and statutory rules and laws of company based doctrines. The directors must use these powers keeping into account or in terms of interests of the company and not in terms of their own interests or self-interests. For interest, if the directors are assigned with the responsibility of issuing new shares in the company, he must do so without any selfish motive or in other words issuing of shares should not be done for gaining superior control or position in terms of popularity based on voting perspectives but rather should be done with interest of earning some profits for the business of the company in which they are working with utmost sincerity (Kemp, 2014, p.488). 


The Companies Act (1995): The Company has the capacity and capability or enjoys the rights or duties to affect the privileges and benefits of the people coming under the purview of the business practised in the company as per the terms and conditions of this act. A company also has the powers to influence the people being engaged in its business to carry out the orders of its authoritarian body and conduct the duties assigned to it in terms of exercising them with freedom suitable with the needs and necessity based parameters of business. Similarly, the company of private origin is entitled with the duty of not to start or kick start its business processes before it is being done with the process of allotment of shares. A company should be entitled with the duty of exercising its power of attorney in the business processes in the context of obeying the rules and regulations of business based laws or legal modalities of doing business. 

Case study

Éclairs Group limited vs. JKX oil and gas limited: The case study based on which the duty of directors to act within its powers can be presented via this case law. The case arose between the two above mentioned companies of Eclairs and JKX in which the company after running with full authority in the market was challenged by another company namely Eclairs in terms of allotment of maximum proportion of market-based shares. At first, the directors of the company made an agreement to sell its shares to Éclairs but afterwards, it restricted the sale of shares, Éclairs sued against the other company that the latter has violated the terms and conditions of the agreement. However, the jury's decision went in support of JKX saying that JKX has the full authority to monitor and control its shares as much as is needed by it and hence it is against the principle or decorum of duty of the director to act within its powers.

2.2 Responsibility to promote the success of the company

The responsibility cum duty of the directors of the private limited companies is to promote the success of the company through working with sincerity and faith conducive to better than the best interests of the business of the company. Additionally, the duty to achieve success for the profitability of the company should be done in order to work for the benefits of the members as a whole (Mayo, 2014, p.671). The best way for directors to exercise this duty is by the process of working hard to increase the shareholder's value of businesses as increasing the share or equity of business obviously add values to the profitability of the company in absolute terms.


Companies act 2006:The act entitles the director to do the duties regarding following or satisfying the following criterions of company based business in terms of having the risk taking the ability to face the consequences of any activity or activities which has long term durability. The duties should be done in lieu of the employees of the company. The duties should be practised with regard to protecting and safeguarding the interests of the all the stakeholders of business in terms of its relationship with producers cum suppliers and other business entities directly or indirectly linked with the businesses and in accordance with the protocols of providing as many benefits as possible to the hard working employees. The duties should be also in accordance with the fair behaviour and fair treatment being meted out to the general members of the company (Oyegoke, 2016, p.320). 

Case study:

The case study relevant above is based on the structural framework of case study as being mentioned in the previous case of duty of directors to exercise its powers where there was a case between two companies in Éclairs Group limited vs. JKX oil and gas limited where there was a case violation of rules based duty to remain within the powers and capabilities of the company as a whole (Peng, 2016. p.55)

2.3 Responsibility in order to exercise independent judgement

Duty or ordeal assigned to a director to assign independent judgement should be exercised in terms of arbitrarily exercising the powers of the company but not being hostile in terms of the statutory provisions of company's basic business laws of private origin. The directors as per this duty is concerned is not forced to act pie to pie with the orders of the above authoritarian body but is strictly responsible for acting by not abhorring or neglecting the pros and cons of industry based statutory provisions in terms of company based laws of business being recognized as statutory policy or binding contract for doing this kind of work in all segments of business. Additionally, in terms of exercising the duties to exercise independent judgement related with business based processes, it is mandatory for the directors to maintain strict negligence from influence or effect of any third party other than the government in the business processes.


The laws or legislations related with this kind of duty are strictly, none other than the laws mentioned in section 173 of the Companies act of 2006. As per the mentioned provisions of the law or legal provisions of the business, the recruited directors being employed for performing independently in terms of business. It can be entreated with the responsibility of being representatives of shareholders being exercising full authority of exercising the role of buying and selling of shares in all segments of company's business based processes (Raine, 2014, p.20). 

Case study

Here also the case study of Éclairs Group limited vs. JKX oil and gas limited can be cited in terms of critically analysing the duty of exercising independent judgement being exercised duly by the directors.

2.4 Duty to act in terms of conflicts of interest:

Conflicts of interest arise when there are two or more parties engaged in the business face a skirmish or battle between the oppositely poled interests, or between duties and between conflicts and interests of the members of the party in terms of legislations and fiduciary duties and laws related to the same. Actually, it arises because of mismatch between the interests of the parties or members of the business having different views or considerations regarding the particular business matter. Inconsistency is another process or term in terms of which the conflict of interest is generated within the parties being engaged in business. Conflicts of interest arise because of breach of certain aspects of duties regarding the duty of loyalty and duty of confidentiality being arising because of the cause of quarrel arising between the two parties due to their different views (Ferrell and Fredric, 2015, p.77). Additionally, other duties in terms of which the conflicts arise are the duty to disclose informations and duty to not to put the interests of one person before another’s one which raises friction between the ideologies of the two parties. Both actual and perceived conflicts may be encountered before the directors and it is their duty to frame strategies to resolve these types of conflicts.


Conflict of interest Act (2006)

As per the conflicts of interest act, there are many provisions assigned to the staffs of different types namely commissioner, common-law partner and dependent child based.  There are different interest and duties or between interests and duties can be minimised via certain rules and strategies to be efficiently adopted by each staff member of the business enterprise or institution (Carroll and Buchholtz, 2014, p.88).

Case study

The Law Society of New South Wales Vs Holt (2003)

In the case mentioned above that the claimants namely the person who is investigating and receiving orders to solve a case came into the conflict of ideas and claimed a motion against the solicitor where the latter is charged for not disclosing some very important information is required for solving the case. However, the solicitor remarked that he couldn’t do the same because he cannot break the rule of maintaining the confidentiality of his data and information’s interlinked with the case. Therefore, there was a conflict in this case between the interests of the investigator to get more disclosed information’s for solving the case and the fiduciary duty of the solicitor to keep his information is confidential forcibly. At the last stage, the jury went in support of the solicitor (Bryman and Bell, 2015, p.99).


The business law, in short, is being discussed in details from all parameter based angular facets and ideas of the business being conducted efficiently through some laws and duties in terms of which the business performance is gauged or measured. Various acts and case studies have been provided for different kinds of business partnerships like sole trade based businesses, liability and unlimited partnerships and others along with the duties of directors connected with the same.

Holistically, the entire feature of the business law is being discussed in details in this essay.