Assignment I

Legal Environment for Business in Nepal

Submitted by
Aditya Kumar Jha

15113

Submitted to
Hem Raj Pokhrel Upadhyaya

Q1.

What is legal environment for business activities? How is it made? Elaborate it with
examples?

Ans: -

The legal environment of business refers to the code of conduct that defines the

legal boundaries for business activity. In todays business world, all companies, regardless of
their size, business model and scope of activities, are required to understand and comply with
laws and regulations which includes intellectual property rights, tax laws and regulations,
common legal relationships with employees, creditors, and landlords, various licensing
requirements imposed by the State, domestic and international laws etc. These requirements
apply regardless of whether the business is operated as a proprietorship, a partnership, a limited
liability company, or a corporation and also apply to non-profit organizations. Moreover, each
form of legal entity available for use by an organization has its own set of rules regarding
formation and internal operations that must be followed in order to gain the legal benefits from
the use of the entity. For example, in order for the shareholders of a corporation to take
advantage of the limited liability offered through the use of the corporate form, they must
observe certain governance procedures and operational formalities. The nature of business spans
over a number of legal realms, all of which are continuously influenced by the needs and
demands of the business community, consumers, and the government. Each has a distinct stake
and voice in this vibrant legal environment.
Legal environment is an aggregate surrounding of laws coming from the
government, which are originated from the sovereign authority of the state. To make the legal
environment, various components play a vital role. Those components are classified into two
parts i.e. direct factors and indirect factors. Direct components or factors are those which are
directly involved in making of the legal environment of business. Others, which are playing the
supportive roles indirectly to create positive environment related to the law are indirect
components.
The direct components comprise of legal provisions, law makers, law followers,
law executor and law administrator. Legal provisions help the society to follow law and order

and create good environment which will further help in smooth running of the business. It
guides, regulates and controls human activities to act in a well and disciplined manner. Law
makers are that natural body that has authority to make law. The law and provisions made by the
law makers must be followed by everyone including the business organizations. The law makes
are generally the Legislature and the Court. They are the bodies of government that make laws.
The law executor and law administrator are the judicial body of the government. These are the
direct factors that are involved directly in making the legal environment. The business
organizations must follow the laws and regulations otherwise there can be bad consequences.
The indirect components contains economic soundness, peoples conciousbness,
socio-cultural environment etc. Economic soundness of a country help in making the legal
environment good and effective. For example, the econopmic policy of a government will affect
indirectly the law. Due to which, the law makers have to follow the economic policy. The
education and consciousness of the genral public will help the legal environment because the
business organisations wont be able to cheat them and they will have to strictly follow the rules
and regulations. The society also affects the law making process. The business organization runs
in a society so it has to follow certain norms and values.
Hence, to make the legal environment various factors plays important role. Since
business organizations runs in an environment, it must perform on a set guidelines or code of
conducts which is the law. The business must operate in a legal environment and must follow the
rules and regulations made thereof.

Q2.

Introduce the Legal Institutions that help to build up legal environment for
business.

Ans: -

Legal institutions are those bodies of government which have the authority to

make laws, rules and regulations and also execute and administer those laws, rules and
regulations. There are various legal institutions that help in building up the legal environment for
business. The important ones are listed below:

Independent Courts;
Representative Parliaments;
Accountable Executives;
Bureaucratic Organizations;
Legal Professionals; and
Civil Society

Independent Courts or in other words judicial independence is a concept that the

judiciary needs to be kept away from other bodies of the government i.e. courts should not be
subject to improper influence by political parties. The independent courts help in making legal
environment by giving verdict on the cases about which the legislature is silent or there is no
provision regarding those cases in the law. Further those verdicts are used as law to solve similar
kinds of cases.
Parliament is a legislative, elected body of government which represents the
whole public of a country. Generally, parliament represents the electorate, make the laws and
oversee the government. It also makes the laws and regulations which the business organizations
have to follow. By providing set guidelines for the business to operate, it helps in making the
legal environment.
The executive in a legal system serves as the center of political authority of the
State. Executive is the body of the government that has authority and responsibility for the daily
administration of the State. The executive body enforces the law. The role of the executive is to

enforce the law as written by the legislature and interpreted by the judiciary. It helps to build up
the legal environment for business by enforcing or executing the laws and regulations.
Bureaucracy is an integral part of the executive. It is a body of non-elective
government officials. It is the administrative system governing any large institution. It
administers the activities of the government. It makes sure that the laws are properly executed
and implemented by administering the works done by the government.
Legal professionals include judge, lawyers, auditors, accountants, consultants,
barristers, and etc. Legal professionals practice law which is overseen by either the government
or independent regulating body such as bar council, bar association, or law society. The custom
and practice of the legal profession is an important part of people's access to justice.
Civil society is a term used to refer to the social institutions, communities and
partnerships that form law's political basis. Civil society is the local authorities which are not the
part of the government. The most familiar institutions of civil society include economic markets,
profit-oriented firms, families, trade unions, hospitals, universities, schools, charities, debating
clubs, non-governmental organizations, neighborhoods, churches, and religious associations.
Freedom of speech, freedom of association and many other individual rights allow
people to gather, discuss, criticise and hold to account their governments, from which the basis
of a deliberative democracy is formed. The more people are involved with, concerned by and
capable of changing how political power is exercised over their lives, the more acceptable
and legitimate the law becomes to the people. These are the various legal institutions which help
to build up a good and effective legal environment for business organizations.