Business Law

Chapter 1

Introduction

Business law is derived from two words, business aim to earn profits and law to govern the business should have some ethics, restrictions that are required to be followed to earn those profits. Law is the basic essential of the human code of conduct which needs to be followed in order to have a sense of equality and prosperity with in the society. In order to follow the pattern of life with extensive prosperous rules it is important that one must know the law to a greater or lesser extent for all persons. With out law, our rights would not be secure because we would not know whether rights exist today would be respected tomorrow. Ignorance of the laws is taken as the offence and that it is not excused at any way with out any penalty imposed on the rule violator.

An individual is controlled on daily basis with situations that demand legal information for the correct action. Life in general and in business world in particular could not continue with out law to regulate the conduct of people and to protect their property and contract rights. With out law life and business would soon become a matter of the survival not only of the fullest but also of the most ruthless.

Example

For instance when an individual is going up for a job it is important for him to know the rules and regulations authorized by the government which are technical right of the employee to implement. Be it in the contract or not the employee has the right to take a vacation of 30 days up most if not followed the employee can go in the court. These rules are to be kept in mind as per The Shop and Establishment Act and as per Factories Act.

Another important law that has to be kept in mind is the retirement benefits that are gratuity fund provident fund. Gratuity fund is held back by the company on behalf of the employee and is used in the operations of the firm where as it has to be paid to the employee once he leaves the organization where as the provident fund is not authorized to be used by the firm and are supposed to be transferred to the account o9f the board of the trustee on the 15th of every month.

Looking at the recent history people working for KESC (Karachi Electricity Supply) know that the organization can not cancel their contracts prior to the period of their maturity and have them removed from their particular jobs.

Definition of Law

Law is the principle standards and rules developed by the government. It is the expression to show the supremacy of the state over the individuals in order to run the affairs of the entity. A rule or method according to which phenomenon or actions co exists or follow each other, it is in general a body of rules related to actions which are prescribed and are controlled by the respective authorities that have the legal force to enforce the rules and regulations. Laws are established so that they must be followed by the citizens or may have to face sanctions or legal consequences for not following the rules. A general rule of human actions, taking cognizance only of external acts enforced and among human authorities, is that which is paramount in a political society.

Example

In group/team games of hockey, football, volley ball or tennis etc, certain rules and regulations are supposed to be followed to play the game

In carrying out any kind of business or commercial activity there are certain prescribed rules and regulations to regulate and conduct them properly, All such rules and regulations are categorized as laws which govern and regulate the transactions made under the sets of regulations. With out such laws and rights of the members of the society might not become secure and it may not be ascertained whether right existing today would be valid and respected in future.

Forms of business organizations

There are three types of organizations

* Sole Proprietorship

* Partnership

* Limited companies

o Private companies

o Public Companies

 Listed

 Non listed

Sole proprietorship and partnerships are the unlisted organizations and that the assets of the owners of these companies are liable top be auctioned out to pay of the liabilities on the organization. Where as for the limited companies there is no liability paid off by the property of the owner in case of liquidation. Sole proprietorship has no laws or act where as for the partnership there has to be a contract between the individuals getting in to the partnership. Where as the limited company is formed as per the Companies Ordinance 1984.

Definition of the Company by the Companies Ordinance 1984

The definition of the company is "Artificial Juridical person created by state/law". As per the law it shows that despite of its existence it is made under the law and established and that it operates as the individual who can run the business but exists in terms of law and regulations. The company like the human being does has birth and the Death certificates which are known as Certificate of Incorporation and Certificate of Liquidation respectively. Prior to the establishment of the company it is important as per the Companies Ordinance 1984 that the Memorandum of Association and Article of Association be established and submitted to the SECP (Security and Exchange Commission Pakistan) in which the following things need to be informed

* Name of the new firm

* Registered office

* Capital of the firm

* Subscription Closure

* Object Clause ( object of the company)

It is a book let in which every thing the basis, funding and reasons for the establishment and described. Further more the company is divided in to the public limited and the private limited the difference between the two is that the private limited is solely loped by the investment of the owner where as in the public limited it is worked by the funds from its share holders.

Types of law

As seen before that under the companies act 1984 that the limited companies are the ones that are operated under the act there for the law is divided in to two sections

* Public Law

* Private Law

Public