Legal Factors - Business


What are laws?

There are a number of different laws that affect the way businesses operate. Theyare designed to protect individuals, customes, employees and the evironment from possible negative acts of businesses.

laws are there so that businesses don't take advantage of its customers and employees just to maximise its business profits. 

Business legislations covers a number of areas. 

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Company Law

When a business is incorporated, it exisits as a separate legal entity, separate from shareholders. The business is reponsible for its own debts and liabilities. 

Many LTD's employ professional company secretaries to ensure the company meets the required legislations. Failure to comply with company law can lead to compnay directors being fined, struck off or even to the compulsory liquidation for the compnay.

(Often non payment of taxes)

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Employment Legislations

Health and Safety - employers have a duty to take all reasonable care to ensure the wellbeing and saftey of their employees. Employers have a legal responsibility to ensure that working environments are safe and that employees are able to understand and are trained to deal with the risks involved in their jobs. Employees must ensure they abide byand provide health and safety rules.

Employment - employees have to be provided with a written contract of employment within two months of starting. Cotract must state: levels of pay, holiday entitlement, maternity pay, pension rights, disciplinary procedures and length of notice period. Employees are protected against unfair dismissal.


  • Age - it is illegal to make work place decisions based on the age of employees when consdiering recuritment, employment terms and conditions, promotions, transfers training and dismissal. Retirement age is now when the employee choses to retire. An employer can only retired a worker under specific circumstances. 
  • Racial - illegal to discriminate on grounds of colour, race, nationality or ethic when considering recuritment, employee terms and conditions, promotions, training and dismissals.
  • Sexual - illegal for the employer to discriminate based on the persons sex, or because they are married or in a civial partnership. 
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Consumer Protection

When consumers purchase goods or services, a contract is formed between the consumer, the retailer and the producer of those goods or services. Legislation clarifies the nature of the contract and how suppliers of goods and services are required to behave.

Goods must be merchantable quality - fit for their intented purpoe as described. 

(Criminal offence to give unture or misleading descriptions of goods or services in regards to their content, size and weight)

ASA - Advertising protection

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Minimum Wage

Businesses must pay minimum wage or they can face prosecution.

Minimum wage was introduecd in 1999 intended to boost the pay of very low-paid workers. The workers who have benefited the most have been younger workers in low paid industries such as care services, office services. Minimum wage has allowed people to move away frompoverty.

Employment in low paid sectors has continued to grow following the minimum wage introduction. 

The living wage introduced in April 2016 is more controversial in regards to the impact on employees and employer costs. 

It is argued that the minium agehas made the UK much less attractive to inward investment, discourgaing investment in the UK by foregin companies. Some businesses have moved production and investment to countries in east europe where cost of labour is low.

Overall wage has also increased because of the pressure to keep exisiting wage differentials in place, as wages of lowest paid workers increase. 

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Competition Policy

In the UK is focsued on controlling the abuse of market power of big businesses. Businesses in a monopoly position hold a dominant market position, they can have control over price or amount produced within the market.

Behaviour of exisiting monopolies is monitored by the Compeitiors and Markets Authority (CMA).

Another role of the CMA is to investigate situations where companies may be acting together, forming an illegal cartel which limits the compeition within an industry.

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Intellectual Property Law

Covers the rights of individuals and companies in regards to designs, inventions and artistic works. 

Trademark legislation covers designs and artwork, such as labelling, brand logo design and product design.  Trademakrts and other design aspects can be registered and protected from copying. 

This law means it is an offence to:

  • Copy work: rent, lend or issue copies of the work to the public
  • Perform, broadcst or show the work in public
  • Adapt the work in anyway

Consent can be given, but the owner of the copyright may demand payment. 

Illegal online downloads

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Data Protection

Concerned with how personal data gathered by organsiations is used abd kept secure. Businesses are required to have a Data Protection Officer whose role is to ensure that the requirements of the Data Protection Act are met.

Data gathered from customers must be:

  • used fairly and lawfully
  • used for limited, specifically stated purposes
  • used in a way that is adequate, relevant and not excessive
  • accurate
  • kept for no longer than necessary
  • handled according to people's data protection rights
  • kept safe and secure, businesses who fail to protect data can be subject to large fines.
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Impact on Businesses

Making necessary improvements or adjustments to products in order to comply with consumer legislations can increase costs considerably. Quality control systems are expensive to impletment but will benefit a business in the long run.

Compliance with employment legislations can be very costly indeed and human resorce departments are constantly having to deal with increasing amounts of legislations in relation to recruitment, employee well-being and training. Minimum wage has impact upon some businesses. 

If comany law creates a more compeitive business enviroment, so helps those businesses struggling to overcome barriers to entry set up by dominant players in the market. Some would argue that too much legislation slows down the process of many business venures.

To ensure thatthey comply with the vast amount of health and safety legislations that exisit, businesses have to spend large amounts of money. Employees will want to work in an enviroment which puts their safety first. Employee loyalty and mtivation enhanced. 

  • Cost of constantly having to change and adapt to changing laws.
  • Slows downs the process of ventures 
  • Improves staff moral and motivation with businesses sticking to employment laws
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