Qualification - Higher National Diploma in Business (RQF)
Unit Name - Business Law
Unit Number - Unit 7
Unit Level - Level 5
Assignment Title - Running a business with related legal concepts
Learning Outcome 1: Explain the basic nature of the legal system
Learning Outcome 2: Illustrate the potential impact of the law on a business
Learning Outcome 3: Examine the formation of different types of business organizations
Learning Outcome 4: Recommend appropriate legal solutions to resolve areas of dispute
Case Scenario:
You are a solicitor and working in a famous legal professional consultancy firm as a legal consultant. One day, your potential client, Marvin Lee, who is planning to open a café chain store in Hong Kong and asking for your legal advice for related issues. Meanwhile, he is seeking an appropriate place for his café restaurant and preparing to employ working labour and office staff for his business running. But he does not know whether there are certain ordinances for monitoring the recruitment, health and safety for working environment. He has lots of inquiries about the problems in opening his business. Therefore, you are hired and are preparing to answer his following questions. A formal and detail business report with related legal concepts are required to submit to him according to his request.
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Introduction
Background
I am working as a legal consultant in a professional consultancy firm. One of our clients is Marvin Lee. He has contacted us to get legal advice for his business plan to open a café in Hong Kong. He is in needs to find the best place for the café and to make an effective staff for the Café kitchen and administration to run their business. As a legal consultant, I have to guide him to the ordinance regarding the recruitment, health, and safety of the working environment. In this business report, we are going to guide the overall operation of related legal concepts according to the organization's request. I have to provide all detailed information on the legal environment of Hong Kong civil and criminal laws for innovative business
Based on the diverse tradition and different cultures, there are laws have been implemented to maintain justice and legislation in all parts of the world. For this case, we are going to discuss the root of various laws and their description of law-making to the legal measures of business. This legal report will provide information about the required improvements, various acts, and so on. The productive attar on the market and standard legislation are perceived in the business are illustrated in this report.
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Rationale for writing this report
The rationale of the research is to guide Marvia Lee to open a Café and advice legal issues and provider legal advice to run café business in Hong Kong. The legal consultation s providing an expertise range of efficiency to outline the solution and helps in client development strategies. The legal consultation focuses on actively managing tasks and offering solutions. The legal advice in dealing with all the frameworks and regulations to prevent future disputes in business (Jacobson, 2021)
The main purpose of the business law report is to help Marvin Lee to understand the fundamental business laws in Hong Kong. As a result, this report provides a careful explanation of the business law that was addressed in the document. The major sections outlined all legislation that is required for the organization and described the role of the government in approving business ideas. The common rules and their significance which is required to discuss before making business arrangements. This business law report provides a legal framework to inform all the professional practices within the accounting and related professionals.
1) He requests a clear and detail of legal environment / system of Hong Kong and the differences between civil and criminal law. How does the role of Hong Kong government in law-making together with the justice system and the organization of the judiciary. Therefore, a precise structures of HK jurisdictions and the structures of the court together with a series of legal knowledge, such as statutory law, common law and equity and the principles of company law and contract are required to introduce to Mr. Lee.
2) When Mr. Lee starts his café business, fundamental negligence in tort issues and consumer protection ordinances are required to recognize in order to avoid certain unnecessary liabilities being arisen in future. At the meantime, competition ordinances in Hong Kong are also required to introduce to him in ensuring a fairness competition during the business operation. Also health and safety issues for his employees/labours are required to set up in order to ensure all employees inside his organization are under protection and without against the related regulation of Hong Kong government.
3) As Mr. Lee's business will be running with the aid of computing literacy, therefore, a set of software security and data protection issues must be under consideration for his guidance.
4) Since Mr. Lee will recruit a team of employees, including restaurant attendances and office administrative staff (e.g. for accounting, marketing, management and human resources departments), a detail and precisely contract law concept (e.g. employment contract, dismissal, redundancy and discrimination ordinances etc.) must be catered to him.
5) As Mr. Lee is still considering whether he should set up the firm in form of sole proprietorship or in partnership/limited companies, you are required to distinguish the differences (advantages & disadvantages) of these three types of companies. A detail set up procedures in forming a company including registration, raising capital and liquidating process are required to illustrate for Mr. Lee's consideration.
6) As recently there have been lots of negative news about the failure of faithfulness among some companies' directors, you are required to write for the role of the shareholders, a usual practice in appointing directors, company secretary/auditor and their responsibilities.
7) Highlight the general legal solutions for different types of dispute, such as:
- Area of employment (e.g. health & safety and 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 and dispute between directors;
- Commercial property problems, e.g. commercial lease transactions, real estate and investment properties.
8) Also explain the terms of Citizens advice and the role of Alternative Dispute Resolution (ADR), e.g. specific tribunals or the role of unions etc., to your potential client if there is any dispute occur during business operation in future.
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Question 1: Explain the basic nature of the legal system
Solution: Legal environment in Hong Kong
The Hong Kong legal environment is completely different from other countries because Chinese laws follows "One Country Two system arrangement". The judiciary is independent of the Chinese government and provides a food foundation for the business and allows to gain more revenue. The Hong Kong court system allows to create a legal proceeding and perform provisions effectively to set up the business.
It consists of both civil and criminal laws under the court system of Hong Kong.
• Civil law is based on the resolution of dispute between two or more members whereas victim will win the argument along with compensation and benefits. The evidence is must for the proof before providing judgement. There is no probabilities that occurs before evidence. The type of punishment is about penalties and imprison. Appeal is allowed from both the parties involved in the case.
• Criminal laws involve in crime and focuses on identification of criminal event and focus on providing punishment to the offense. The proof is based on the reasonable doubt. The punishment may be misdemeanour, fines and imprison on the crime. The appeal is from the defendant side.
Role of Hong Kong Government in Making Law
According to article 62(5) civil code, the Hong Kong special administrative region has the power and duty to manage the subsidiary legislation. The legislative laws presented by the government were included in billing under government law correspondent to the Article 74. Members of the state assembly introduced the basic laws and legislation of Hong Kong. But these laws do not related to the governmental system, government operation and public expenditure. Before the legislation has proposed, the members of the legislation focus on getting approval from the chief executives which is in written format. After the legislation has introduced by member of congress called "Member's Bill".
The Hong Kong Executive Council plays a vital role in making the Law. The executive council consists of group of consultants, legal advisors, and Hong Kong chief executives to support the policy making. The executives have advised to focus on the policy and government management. The chief executives of the council have presented the bills to the legislation and issues order in council. Those bills presented were used to delegate the legislation and able to provide ordinances by the chief executives in council.
From the reference of the basic law and legal process, there are several laws have enacted, modified and repeated. The HongKong Government is responsible for introducing the existing laws. According to article 74, basic law states that the legislative council does not concern about political structure and government operation. After the policies were formed, all the members of legislation to government policy have to provide written approval on making government policy.
Source of Law
These laws of HongKong were inherited from English law system. The legislative council is followed efficient procedures in noticing the business process of approving the budget and public expenditure on monitoring the government. The Hong Kong statutory laws focus on the set-out checks and balances along with their government bills and budget (Johy, 2020). The check on action is reviewed with more mechanisms. The three major types of regulation that governs from the English law are Legislation, Common law ad European legislation
The important ability of the business to regulate in an expectation of the principle of regulation is based on the gathering of information. This is measured with the organization equity models with the extension of Hong Kong legal rules violation
Business law has relevant to the borders of china based on its regulatory string. The common laws are built to manage their custom-based regulation system which is completely distinct from each other for stating the essential regulatory framework.
The primary legislation focuses on the various prescribed rule with the Hong Kong parliamentary models. The additional members of parliament have the authority to improve their additional rules and policies to build the business (Lorenz, 2014). According to the case regulation, the primary thing is to regulate the legislation and to focus on the orders, warranties, and guidelines. The business case regulation focuses on the resoling of choices with regulation at utmost priority (Orie, 2016).
Public Act: The Public act protects the successful pass of the parliament with confirmation of all the members of parliament. The demonstration is based on two various varieties at different levels. This is based on the lodging act and other laws data back to the business
Local and Personnel Act: The local and personnel acts are offering private information which is closest to each other. The protest needs to focus on the organization's constraints on the development of citizenship awards and the business domain name.
Hong Kong Business Laws: HK possesses the same level of parliament business information as the ministry measure act with the incorporation of a business.
Privacy Law: The privacy council focuses on the common administration and foreign obstructions with the accordance of administration, top state leader and common possibility Act, and so forth.
The secondary regulation focuses on the demonstration of subordinate legislation with the public gathering, warranties, and business guidelines on all other statutes related to orders are included.
According to the Hong Kong rules and regulations, the shared code contains all information on common laws including the Association act, the laws of property act, and the selection committee on the procedure.
The process of enacting the regulation with the HK government lawmaking is based on the judiciary courts (Schaffer, 2016).
• The general political contest is grown with government plans and subtleties.
• Few issues arise with the ideological conferences and budget constraints
• Exchange of government strategies to meet cooperative action
• Recognize the issues and their evidence.
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Principles of Tort
The purpose of the business laws is to maintain the code of conduct in the legal system. The various sources of laws and their relevant legislation in Hong Kong are gathered from the legal advice of that country. There are two types of courts discussed in that country, in which one is dealing with local affairs and another manages state affairs. There are possibilities of more differences in the civil and criminal laws that are relevant to the business. The government is also playing a vital role in making the laws appropriately (Laucius, 2014).
Statutory Law
Hong Kong Special Administrative region legislation is a minimized constitution of Hong Kong. This statutory law is established in July 1, 1997 at the time China regained the control of Hong Kong after the republic. This law focuses on the safeguarding of individual fundamental rights and liberties towards the economic, legislative and judicial governmental issues.
Common Law
It is one of the most important law in HK legal system focuses on the decision of court for specific jurisdiction. According to the Article 84 under basic law, the HKSAR is permitted to invite experts of other countries to take part in court proceedings
Role of Equity
More than equality, the equity is one of the essential thing that the world requires. This basic concept is required for the legal system connection with common law. The equity laws such as equitable property rights focuses on the legislation, including rights and responsibilities to handle specific statement on various situation.
Company Law
According to company law, there are several company ordinance is available. The first ordinance is about the UK Company's act of 1862. This provides the business evolution practices and focuses on the corporate transaction and manage the regulation of public companies.
Hierarchy of HK court System
The Hong Kong business contract laws consist of several set of policies and procedures that governs the information of agreements and guide the particular policies consider in the contract with sample clauses. The contract law is usually built between two or more parties for managing their agreements and being aware of the legal implications. In this business, the contract has to make before the accomplishment of the business guaranteed model with the economic principles.
The legal system that has used in the special administration region focuses on the constitutional framework and enact with the legal systems. The HKSAR is about the supplement of various laws that has assisted in policy making and member's appointment. The HKSAR is responsible for various administrative affairs. This HKSAR is about communicating with the district courts and magistrate courts on supporting to the final appeal. The final court appeal is the special administration within Hong Kong administrative region and it supports the civil and criminal investigation from high court. Even at the time of court of appeal and court of first instanc.
The court of final appeal is the final level of appeal in the Hong Kong justice. This Jurisdiction is regulated by Hong Kong court final appeal regulation. For example, Cap484 enactment is about civil and criminal cases.
High court is divided into two sections as court of appeal and court of first instance.
• The court of appeal is done at the first instance and district court to high court. In addition to that all the arguments are collected from traders, and regulatory agencies. The court of appeal consists of family court and district court.
• The Court of first instance is about the jurisdiction in both the criminal and civil cases. The instance appeal is done at the Judge court, tribunals and justice boards. The Judges were able to provide their criminal cases in a special direction. The first instance is based on the magistrate court, labor tribunal, small claims tribunal, obscene articles tribunal, corners court, Juvenile courts and Land tribunal. The first instance hold more than 9 special direction so it requires 9 judges.
The following section will provide operating function of all courts.
» The court of appeal on civil and criminal matters are from first instance and provides supports both the criminal and civil matters.
» The district court could make decision about the laws and it is referred by the lower courts/
» The district court could gain $75000 for the civil and offer 7 years of imprisonment and dispute of worth $750000 - $3 million
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Question 2: Illustrate the potential impact of the law on a business
Solution: Fundamental Negligence in Tort issues
The tort of negligence is right to protect property from harm due to unreasonable behavior. In need to lawsuit, case of negligence is insufficient in Marvin Lee situation. There are four major components such as duty, breach, causation and harm. If one of the four components were not satisfied, the negligence is consider as insufficient.
In this case, employees working at café is careless in performing their duties will come under the violation. At that time, customer can able to file law suit against café and claim compensation. It is similar to Donoghue Vs Stevenson. The formulated rile and regulation of the café should be prevent the employees from being negligence and careless in performing their duties.
Consumer protection ordinance
This ordinance focuses on the payment made by the merchant for exchanging the goods according to HongKong Laws under the Goods Act and Goods exchange act. As here Marvin Lee is liable to provide services to consumer in exchange for their money. The customers of the organization is protected under sale of Goods act.
Competitive ordinance
This ordinance focuses on the amalgamation and merging of two organization by reducing the competition in HongKong market. Here Marvin Lee is not allowed to merge the entity according to the legal consequences against the Marvin Lee and his café.
Health and safety issues
It is the responsibility of the business owner to maintain an safety and health of employees through ensuring their mentoring and supervision to employees. As here, Marvin role is essential to provide safe working condition to the employees and to make appropriate safeguard his employees from unpredictable incidents.
Software security and data protection issues
Some of the possible data security and data protection issues that taken place in the organization is
• Data tamper
• Business information theft
• Leakage of passwords
• Unauthorized data access
• Fraudulent user identification codes
It is a legal foundation to collect, store, process and use the personal data. The owner of the restaurant will resolve the software security and data protection issue with data protection principles. Here Marvin Lee should use the data protection principles of collect, store, process to resolve the software security and data protection issues.
Concern on HR recruitment and employment
The rules, laws and regulation are focusing on the irrespective of the contract models. There are two major parties involved in the legal consequences. The rights of performing the duties and their faith models are bounded in an agreement and get signed from both parties. In the given scenario the Marvin Lee should motivate the employee and focus on the governing workplace relationship.
Both the employer and employee have right to terminate the employee under the contract. The termination of employee could cause without cause. The employee ordinance is focuses on the payment to manage the unfair dismissal and to manage their quality of services requires to success of changes that has made.
A sample advertisement for the recruitment of accounting officer along with the job description is attached in the appendix 2.
Redundancy Ordinance
Redundancy ordinance is a special kind of dismissal which involves in reducing the size of employees. It is caused because of various reasons to restructure the decline in demand. The Employment ordinance Cap. 57 in Hong Kong could able to manage their pay agreements and able to focus on the worker confidence in organization. This results in focusing on employee morale, wellness and productivity.
Discrimination Ordinance
Discrimination ordinance is focusing on the employers and employee to aware of rights and responsibility. Under this, there are several laws will occur which includes sex discrimination ordinance, disability ordinance, Family status bias ordinance and human right ordinance. The HongKong have revised specific interval grievance policies to protect the HRM policies. The Marvin Lee have to ensure that the café could follow all the laws at the workplace and to formulate in real time.
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Question 3: Examine the formation of different types of business organization
Solution: Mode of Business Operation
In order to set up an organization, it is more important to decide the organization type and working to select that the business. It is one of the critical decision that the business owner should take to discuss about structure of firm. The future of the organization is based on the mode of business structure. Some of the business organization structure were
• Sole Proprietorship
• Partnership
• Public Limited Company
• Private Limited Company
The examination of the different types of business organizations is based on the structure of the organization. The company setup is focused on applicable laws and legislation with raising registration required. There are more sole traders with the organization set up with the limited and unlimited models of traders, and partnership companies managing their registered models (STEIN, 2018). The distinction is made according to the legal structures. Several companies are enabled with registration models and enable different types of companies.
The following will discuss about the evaluation of the business according to the advantages and disadvantages based on their legislation.
Sole Proprietorship
It is a single owner concept which is simpler and most of the firms are following this concept. The benefit of these firms is owned and benefitted only by the owner. The organization decision making and all other responsibilities are made by the single owner.
Some of the advantages and disadvantages of the sole proprietorship business is listed here
Pros
- Owner have full responsibility
- The rules is insufficient and not existing
- Owner can able to change the approach
- The license to the business got easily
Cons
- Owner gets full responsibility from organization debts
- The assets were limited
- Burden is difficult to handle.
Business Law
According to business law of sole proprietorship, the individual owners does not pay any kind of entrepreneurship fees from the revenue of business. The individual business person have to pay yearly tax and insurance. In this, the business person can able to work in various firm as employee and run this business to get two income sources.
Partnership
In partnership business, there are more than one member involved in business hare. The business owners were invest their property, money and effort to the organization and tackle the business with commitment. One of the main advantage in this business structure is that one can able to invest little amount of money and handle their business. All the partners were responsible for their business obligation. There are several agreements were built between parties such as joint venture, limited entities and commercial responsibility.
Pros
- Can able to gain more assets
- Each partners were entitled in organization profits
- Allows both formal and informal company structure at low cost
Cons
- Difficult in selling this firm
- The partnership breaks if any one member is not willing
- Agreement should be holding all details.
- Decision making is not done in proper way
Business Law
Under the partnership Act 1890, the partnership in a limited business can be general and restricted. These two kind of partnership is based on the organization activities and responsibilities that made on agreement of users. The duties and commitments are focusing on the participation of operation. The firm liabilities are under the supervision and classified as the restricted association with companies.
Public Limited Company
The public limited company is a form of business organization that separate legal entities from owners. The shares of the public organization can able to trade at stock exchange market and subjected to additional regulation of code of takeover and SEHK rules governing.
Pros
- Limited number of owners
- Taxing should be done only one time
Cons
- The necessity of great deal of time of effort is required
- The legal and recording fees is expensive
Business Law
According to the HongKong business ordinance (companies Act), it is a voluntary association of members which consists of several owners. It follows all the legal assets within the company. It access the public need to be subjected by enabling the corporate organization. The company law should ensure comprehensive framework for enabling companies from one type of another. If the ventures fails, all the invested money will be regained in these business.
Private Limited Company
To get taxation benefits, organization is recognized as the independent firms and focuses on the organization payment activities. These organization compensation, wages, investments are burden to the owners. Shared in the PLC is not exchanged publically.
Pros
- All employees knows individual and focuses on controlling the authority
- Flexible business process
- Not necessary to manage the statuary report
Cons
- Share transfer is not possible
- Organization limit should be within 50 members
Duties
Duty of director
- The director is responsible for whole authority and power. The director of an organization cannot use their authority for specific purpose which is not granted. The power of a Director should focuses on the business improvement according to the Article of association. The director job is to utilize the benefit of business and shareholders.
- The director is responsible for the delegation of works. But without proper authorization, he could not able to explicit the power in certain situation to make expert judgement.
Duty of Auditor
The Auditor for business in Hong Kong is responsible for the examination of organization finance, liability and other paperwork. The auditor has the overall responsibility to ensure proper documentation, tax exemption and maintain finance records.
Responsibilities of Marvin as a Director of Cafe
- He have not condemned to criminal case or imprisoned under any laws
- He could not involve in crime under Foreign exchange conservation and smuggling prevention act.
- Marvin Lee age should be lies between 25 and 70 under the organization general resolution plan. Also it is flexible for the central government regulation.
Organization Liquidation process in HongKong
If an business faces certain situation that it could not able to pay for the debts which is known as financial distress. This causes insolvency in business according to the legislation of HongKong. There are two common types of liquidation is present which are under the Hong Kong organization (Pauwelyn J, 2022).
• Voluntary Liquidation
• Involuntary Liquidation
Voluntary Liquidation
There are two general kinds of liquidation is taken place which are creditor liquidation and shareholder voluntary liquidation.
Following conditions should be subjected by the Shareholder voluntary liquidation
• Organization accounting should be complete
• Shareholders of organization have to agree the resolution
• Company is required to have good financial standing
• Liquidator needs to manage all the liquidation process
Some of the creditor voluntary liquidation have some criteria which are listed in the following
• It is must Complete the accounting book of organization
• No bankrupt service for business
• Creditor have to appoint an business liquidator to manage their whole process
• The liquidator must be an law professional
Involuntary Liquidation
The statutory liquidation is nothing but the court ordered liquidation which focuses on the registration, official received and firm models. The court will focus on the liquidation and server as mediator to ensure that those procedures will take in the organization. Or else the procedures are essential for the organization stakeholders. The contract breach is a commercial property issue. It is caused because of violation in business contract causes damage, performance, revocation. There are some of the solution to tackle the commercial property problems were
• Prepare to purchase or rent commercial property
• Inspect the property
• Communicate contract policy
• Note purchase contract transfer
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Question 4: Recommend appropriate legal solutions to resolve areas of dispute
Solution: From the discussion, it is observed that the unusual information is focused on the resolved model and there are more possibilities of having a solution to meet the legal models for this café. From the business models, it is recommended with a solution of suitable legal solution with areas of disagreement.
i) Deliberation in court is one of the best options which focuses on the workplace policies and procedures for handling ta the Café location. The common business background is followed to make the business popularized.
ii) The cost applied for the lawsuit toward the solo business is understandable and this is considered the reasonable one (Lorenz, 2014).
iii) The judgemental efforts are focused on the various scenarios of medium-sized organizations and this is considered an enormous model which provides the commercial connection which is rather than a common model.
When compared with the legal bits of advice and support for the ADTR processes in resolving disputes on managing the notifiable business model the people are open to the traditional court procedure in managing the strategies that may be used in the organization.
Alternative dispute resolution
Mr. Marvin Lee should be aware of alternative methods to manage disputes is listed here.
Mediation - In this business parties were agreed to have a mediator and to resolve the disputes but not legally binding. (Lorenz, 2014).
Conciliation - It is also more similar to the process of mediation but this focuses on the business parties works with best interest of both parties.
Arbitration - It is a formal type of the dispute resolution process and involves in legal binding of all business parties.
The main aim to save the time and cost to prevent from promoting settlement. Those law procedures took too long and might take several months. The business parties will attain huge benefit because of attaining satisfactory result because of conflict resolution procedures.
The ADR procedures are aimed to enable the fair and affordable settlement according to civilian procedure act 2005 according to the article 56. The mediation, settlement of disputes and negotiation for the promote conflict settlement.
Conclusion
It is concluded that this report provides holistic discussion on the legislation principles of Hong Kong. This report will be beneficial for Mr. Marvin Lee to start a café business in Hong Kong. The legal framework discussed in this report provides more information about the framework which prevents from legal challenges in starting a new business. This legal consultation of the business is offering more information about the profit and efficient factors and this could provide them guidance to make an effective decision. From the comparison of three business structure, I would suggest Marvin Lee to choose sole proprietorship instead of others (Joshuva, 2017). Compare with another business model, this would be the best suitable for the business structure of the café that you would like to build in HK. For making more business benefits, it is suggested to start your enterprise information as the sole proprietorship organization and register this as a legal model.