Question 5

How important are legal framework in the business world.

A legal framework is a system of legal documents comprising a set of rules, rights and
obligations of companies, governments, and citizens.

Documents in the legal framework include a country's constitution, legislation, policy,

regulations and contracts.

When it comes to the business world, a legal framework is meant to guide a business:
its existence, its legal recognizance and especially how its business activities and
operations are being executed.

For instance, on deciding to operate a business in Mauritius, whether a foreigner just

like a Mauritian native will ensure to take note of the following laws which are in
place in the country so as to ensure that business is being carried out in a clear,
transparent and legal manner:

In order to encourage foreign investment on our island, the government acts as a

facilitator, promoting a healthy and transparent policy and practice to incite
investment, from the legal and procedural levels, to the responsibility of its
institutions and authorities.

 Company’s Act 2001which governs the various types and categories of

companies
 The "Business facilitation Act 2006’’-This law facilitates the administrative
procedures for starting up new activities and buying property in Mauritius. This
law allows for a temporary Occupation Permit to be granted to all non-resident
investors, be it individual investors, professionals or pensioners by submitting
an application to the Board of Investment (BOI).
 The "Financial Services Act 2007" - This law applies to those companies which
operate outside of Mauritius. The nature of these companies is the main factor
which comes into play in this new law. Thus, a global business company that
wants to submit an application for a permit must in fact be a "resident
corporation that proposes to conduct business outside Mauritius". According to
the same principle, call centers and free port activities do not qualify as global
businesses under the FSA. Advisory services will be treated on a case by case
basis.
 The "Trust Act 2001" - A trust exists when a physical or moral person
("settlor") transfers the ownership of possessions to another person ("trustee"),
 who will then hold these possessions in favour of all person(s) ("beneficiary")
or for any other purposes, including charitable causes. Non-resident trusts are
not subjected to tax in Mauritius.
 The "Insurance Act 2005"
 The "Banking Act 2004"

It is thus important for those engaged in business to be well acquainted to the laws of
a country at all levels so as to make sure that the activities being performed do not
infringe the rights.

A legal framework is meant protect property interest and provides established and
predictable means by which disputes can be resolved.

Together with the argument that a legal framework represents the set of rules that
people and businesses must follow to avoid being penalized, the system allows
businesses to understand what is expected of them from their dealings and
transactions.

If for instance in the United States, the rule of law provides a sophisticated system of
federalism, where state and federal laws coexist. This allows people and businesses to
determine which system of government pertains to them and which jurisdiction they
belong to. Similarly, in Mauritius, if a business is to be operated in a town, a permit
must be given by the Municipal Council whereas in villages, same is to be received
from the District Council.

A legal framework also sets the rule under which employers and employees
relationship must be made; the obligations of each party. Likewise, business partners,
members of boards of corporations, and members of limited liability companies all
know what is expected of them in their roles vis-à-vis the business and other people
within their organizations. When someone does something that is not permitted, there
is legal recourse.

An established law also provides protection for property like trademarks copyrights
and it would be very difficult to protect this type of property if we did not know the
rules of the game. People would not have the incentive to create or share new
intellectual property if they had no reasonable expectation of being able to protect it or
of being rewarded for their creations.

Businesses also rely on the legal aspect to govern their debtor and creditor
relationships. And, if financial matters do not go as anticipated, the legal system
allows businesses to ask the court for protection from creditors under the bankruptcy
law.

Businesses must be well versed with the system of taxation which is a legal obligation
towards the country. They must be aware of the legal aspects surrounding tax evasion
which are offenses towards the country. Similarly, comply to the anti-money
laundering and anti-bribery framework is found to be among the most important
aspects when operating business.

Without a legal framework, business people and companies would have to exact
satisfaction for the wrongs committed against them on their own. They would have to
physically protect their own property. This would lead to a breakdown in social
structure, and it would result in vigilante justice and physical strength playing primary
roles in dispute resolution.