Without business, we wouldn’t have growth, taxes or society. But how should we design and implement the essential rules that guide, encourage or (where necessary) constrain this most vital of activities?
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Key principles of business law that are the foundation for conducting business are:
- laws that govern business should be stringent but not complex
- compliance should not impose substantial cost burdens on business
- laws defining business structures should be limited in scope and easy to understand
- in many countries the burden of regulation on business has grown significantly over the last century. Countries could consider adopting sunset clauses where the law expires automatically at a certain date
- lawmakers should consider the surrounding and political environment to ensure interactions with business law does not drive enterprises to unnecessary or undesirable behaviours.
Openness and transparency
- lawmakers should be open and transparent with business when designing and implementing laws
- governments should consult before implementing new laws; they need to ensure laws designed to benefit wider society do not inadvertently introduce sanctions, incentives or barriers that distort business behaviour
- businesses require a predictable environment to create the greatest returns
- businesses can plan long-term if government indicates future intention and direction. This helps business planning and general economic stability.
- business law should be applied consistently and equally across enterprises
- if businesses believe laws have been designed for the wider public good they are more likely to see the law as legitimate, adopt it and follow it
- countries should co-operate to encourage enterprise, avoid protectionism and unjustified trade sanctions
- governments must step in where legitimate commercial exploitation becomes abuse. They should act to break up cartels which stifle competition
- laws designed to deal with the one group should not disadvantage others– for example regulation for large companies may have to be dis-applied to smaller entities, who would not have the resource to comply and where the burden would not repay the benefit.
- business law should encourage accountability and foster trust
- businesses should be encouraged to communicate with stakeholder, for example through publishing annual reports
- through the legal framework stakeholders should have confidence that company disclosures are complete, comparable and reliable.
This article is an overview of this topic.
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"A common legal framework is fundamental to economic activity and growth. The framework allows trade and business to flourish. Good business law facilitates trade between friends and peers and also between strangers, across long distances and increasingly across national boundaries. "
From principles to action
If the principles are to have any meaning in practice then the law must:
Provide dispute resolution mechanisms: disputes between businesses will arise. The way to resolve disputes should be timely, cost-effective and confidential. Although confidentiality is important, a digest of principles and decisions would help others.
Provide encouragement for business enterprise: successful entrepreneurs manage risk sensibly while also being aware of being part of the fabric of a wider community.
Support an ethical approach to business: enterprises should be encouraged to behave ethically commensurate with prevailing cultural sensitivities.
Maintain stability and confidence: governments should instil confidence in markets and financial systems and show it is supportive of business.
Enable business to drive society’s prosperity: business law provides a framework in which business success make a net positive contribution to the wider community.