UNIT 2: LAWS RELATED TO BUSINESS ACTIVITIES
Key unit competence: To be able to identify laws related to business activities
Introductory activity: A case study
Looking at the situation above in photo and talk about the activities carried out there.
In Rwanda today we have many businesses having different organization
according to their activities. These organizations may be public or private.
As a result of liberal economy Rwanda is currently adopting, any legal
entity or person is allowed to carry out business activities. For instance, a
business organization can be a company which is traditionally a business
organization, a cooperative or individual him/ herself. These kind of
business activities need order, standards, right protection in order to
clear some disputes that may happen. What is the solution to thesechallenges in business?
2.1. Law and Business Law
Activity 2.1
A community made up of people who concerned to pursue their own self
interest, needs regulation because there are situations where everyone
pursues their own self-interest, everyone will be worse off than they would
have been if they acted differently.
Through the situation at school and in your home community, what cangovern relationships between individuals and their society?
2.1.1. Meaning of law
The word “law” is difficult to define, particularly as it is used in different ways.
It contains, however, the concepts of orderliness, universality and objectivity.
Nonetheless, one may define it as a set of binding rules established and enforced
by competent authorities in order to govern relationships between persons in
a given community. The binding aspect of a legal rule is very meaningful as it
differentiates it from other norms such as moral rules, ethical or religious rules
which are deprived of immediate sanctions once they are violated.
Law is defined as a body of enforceable rules governing relationships between
individuals and their society (Miller & Jentz, 2008).
Law is a social phenomenon; as the roman maxim says, there is no society
without rules: “Ubisocietasibi jus”. In the middle Age, law was considered to
have been dictated by Divine Will, and revealed to wise men. This was known as
natural law deriving from God and transcending personal will of any individual.
From the time of ancient Greek empire to the contemporary world, law has been
and remains a human phenomenon.
Philosophers, writers and politicians have always demonstrated the importance
of legal norms meant to regulate relationships within communities. However, the
way it is perceived, its interpretation and its sources have undergone several
mutations.
The term” law” can be defined in different ways by different scholars. More
commonly, when people speak of law, they refer to the rules themselves. The
law says that you” must ...”, a phrase we use and hear. This is the sense in whichthe law will be generally used.
Therefore, the law can be defined as follows: Law is a set of principles;
rules and standards of conduct that have general application to the society,
have been developed by an authority for that society and for which the violation
imposes a sanction.
2.1.2. Business law
This covers business related activities like law of insurance, law of bankruptcy,
agency relationship, sale of goods, negotiable instruments, company law,
carriage law, banking law and labour law.
Business law is a section of code that is involved in protecting liberties and
rights, maintaining orders, resolving disputes, and establishing standards for the
business concerns and their dealings with government agencies and individuals.
Application activity 2.1
a) What do you understand by law?
b) Explain what you understand by law governing relationships. Mention
your opinion.
c) Why do you think that law is set of principles; rules and standards of conduct?d) Do you think law is necessary in society?
2.2. Important terms used in law
Activity 2.2
Looking at the photo above, think about the activities being carried out. Then
discuss some terms used during these activities.
2.2.1. Claimant/Plaintiff:
This is the person who sues another in a court of law. Or a plaintiff is the person
or entity initiating a lawsuit by filing a complaint in a court of law.
2.2.2. Defendant:
This is the one against whom a law suit is brought.
2.2.3. Appellant:
A person who appeals to a higher court against a decision of a lower court and
requests that that decision be set aside.
2.2.4. Law suit:
Accusation in the court of law
2.2.5. Remedy:
This is the relief given to the innocent party to enforce a right or to compensate
for violation of a right.
2.2.6. Counsel:
Legal advice given in a case; also means a lawyer or attorney in a case.
2.2.7. Damages:
Money that a defendant pays to the plaintiff in a civil case if the plaintiff has won
the case.
2.2.8. Fine:
Money paid by the defendant to the public or government
Application activity 2.2
Discussion in groups on the meaning of the following terms used in law:
Plaintiff: this is the person who sues another in a court of law. Or a plaintiff is
the person or entity initiating a lawsuit by filing a complaint in a court of law.
Defendant: this is the one against whom a law suit is brought.
Appellant: a person appealing to a higher court against a decision made by a
lower court, seeking reversal of that decision.
Damages: money that a defendant pays to the plaintiff in a civil case if the
plaintiff has won the case.
Fine: Money paid by the defendant to the public or government
2.3. Importance of business law in business operations
Activity 2.3
One of the most frequently debated topics is business. Business is the effort
of individuals to produce and sell, for a profit, the goods and services that
satisfy society’s needs. The goals of the business will vary based on the type
of business and the business strategy being used. The money raised from
business supports the government and allows it to fund in public expenditures.
As a business to be or referring to business activities in your community, what
are benefit of law in the businesses?
With examples from your community or Rwandan community at large, why doyou think people and business enterprises need law?
Business law refers to a set of laws that govern the dealings regarding commercial
matters, namely business organizations. It encompasses all laws that guide on
how to set up a business and then how to run it. This includes all the laws that
govern on how to set up, start, manage, run, close or sell a business. It includes
contracts, laws of corporations, other business organizations, commercial
papers, income tax, secured transactions, intellectual properties, and othertransactions and dealings related to the business.
2.3.1. The prime purpose of business law
The prime purpose of business law is to maintain order, resolve disputes,
establish generally accepted standards, protect rights and liberties when it
comes to business and its relation to other businesses, government authorities,and the customers.
2.3.2. The importance of business law
– Set of standards: Earlier, the customer had to suffer a lot due to the
absence of a proper law that could safeguard their interests and money
invested in a particular business. As there was no such law regarding
maintenance of order, rights, and liabilities, etc., the business owners made
their own standards and made the customers suffer just because of the
greed to make more money. With the establishment of business law, many
standards have been established which have to be followed by businesses.
– Maintain Equilibrium: This creates a sense of satisfaction among
customers. In the absence of the law, different countries had different laws
regarding the business dealings which made it difficult for the customersas well as the seller to establish a deal. But now every country has the same
standards, and the deal between buyer and seller is easily established. This
brings ease in business dealings and transactions all across the globe.
– Decrease chances of frauds: Business law helps the owners themselves
to get aware of the laws against other businesses and individuals. It also
helps the individuals, to be aware of the rights against the businesses so
that they can use them in case they fall prey to the frauds and misery of the
business.
– Presence of Ethical conduct: With the help of business law, business
owners may make better decisions, and also know when to seek legal help.
Every business has to maintain an ethical conduct but most businesses, in
the greed to earn more profits; do not follow such conducts. Business law
makes it mandatory for all the businesses to maintain an ethical conductwhich in turn pleases the buyers and they form a good image of the business.
Application activity 2.3
1. Determine why the business law is important to business.
2. Identify how the business law protects people from harmful business practices
2.4. Laws related to businessToday in Rwanda we have many businesses having different organization
according to their activities. In Rwanda, there are arms of the government
(ruling bodies) from the village, sector, district, provincial and national levels.
These bodies comprise: Legislature (who make laws), Executives (who
enforce laws) and Judiciary (exercise laws).
With examples from your community or Rwandan community at large, why doyou think people and business need different laws to govern their activities?
2.4.1. Land act:
An Act to provide for the tenure, ownership and management of land, to amend
and consolidate the law relating to tenure, ownership and management of land;
and to provide for other related or incidental matters.
2.4.2. Food and drugs law:
The Food and Drug Act prohibited interstate commerce in misbranded and
adulterated foods, drinks, and drugs. While it has since been repealed, new
laws regulate a wide range of consumer products. This Law establishes
Rwanda Food and Drugs Authority and determines its mission, organizationand functioning.
2.4.3. Consumer protection law:
Consumer protection laws offer an important part of a reliable market economy.
While “buyer beware” was once the motto of the free market, these regulationshelp keep sellers honest, with no threat of unpleasant surprises.
2.4.4. National environmental law:
This Law determines modalities for protecting, conserving and promoting the
environment against climate change. Environmental law refers to a variety ofprotections which share the goal of protecting the environment.
Application activity 2.4
Discuss on the role of laws related to business in Rwanda
2.5. Legal institutions related to businesses in Rwanda
Activity 2.5
In Rwanda today we are living in society where there are many government
institutions whose mandate is to accelerate Rwanda’s economic development,
introduced to facilitate the wellbeing of the society as well as the business.
As a business to be or referring to business activities in your community,which government institutions do you think businesses need?
2.5.1. Commercial Courts:
The commercial court system, established in 2008, is made up of three
commercial courts based in the three major urban areas in Rwanda, that is:Kigali, Musanze and Huye and the Commercial High Court located in Kigali.
These courts were introduced to handle commercial matters in order to deal
with a big backlog of commercial cases, speed up the resolution of businessdisputes and thus play a part in the promotion of investment in the country.
2.5.2. Rwanda Revenue Authority (RRA):
The Rwanda Revenue Authority is a government revenue collection agency
established by the Parliament of Rwanda. The RRA is charged with enforcing,assessing, collecting, and accounting for the various taxes imposed in Rwanda.
2.5.3. Rwanda Development Boards (RDB):
Rwanda Development Board (RDB) is a government institution whose mandate
is to accelerate Rwanda’s economic development by enabling private sectorgrowth.
The Rwanda Development Board is under the supervision of the Office of
the President and is governed by a Board of Directors made up of global
entrepreneurs and experts.
RDB was established in 2008 out of a merger of 8 Government institutions,
primarily to create a One Stop Shop for business and investments. RDB has
been built with global expertise and modelled on international best practice.
Currently, RDB’s key services are; Investment Promotion, Export & Special
Economic Zone (SEZ) Development, Investment Deals Negotiation, Tourism
and Conservation, Skills Development and One Stop Center services (business
and investment registration, visa facilitation, tax incentives management, etc.)
RDB is here to provide support throughout the entire investment journey and
to ensure that Rwanda remains one of the best places to do business in Africaand the World.
2.5.4. Rwanda Utilities Regulatory Authority (RURA):
Rwanda Utilities Regulatory Authority (RURA) was initially created by the Law
n° 39/2001 of 13 September 2001 with the mission to regulate certain public
utilities, namely: telecommunications network and/or Telecommunications
services, electricity, water, removal of waste products from residential or
business premises, extraction and distribution of gas and transport of goodsand persons.
2.5.5. Food and Drug Authority (FDA):
The FDAR Department protects and promotes human and veterinary public
health through conducting assessment and evaluations of application dossiers
for processed foods/ drinks, food additives, food supplements, both human
and veterinary medicines, vaccines and other biologics, medicated cosmetics,
medical devices, chemicals and pesticides, and tobacco and tobacco products.
The FDAR Department also recommends for registration and/or marketing
authorization (MA) to products that comply with Rwanda FDA regulatoryrequirements for registration.
2.5.6. Rwanda Standards Boards (RSB):
Rwanda Standards Board (RSB) is a public institution established by Rwanda
Government Legislation N° 50/2013 of 28/06/2013 determining the mission,
organization and functioning of the Rwanda Standards Board to undertake all
activities pertaining to the development of Standards, Conformity Assessment
and Metrology services in the country.
It is the only body with powers to define and possess national standards. Public
services and public or private firms must present their standards to RSB for
adoption at national level. RSB is governed by the Board of Directors composed
of major stakeholders from government, industry and academic institutions, aswell as consumer associations.
Application activity 2.5
Discuss the role of institutions governing business in Rwanda.
2.6. Business registration according to forms of business
Activity 2.6
Registering a business can be one of the best ways you can expand your
business and help ensure its success. Rwanda has the fewest procedures
and fastest processes to register and start a business.
Search and share the information of registering some businesses in Rwanda.
As a business to be in your community and in Rwanda at large, what kind ofbusiness do you think need to be registered.
2.6.1. Registering a sole trade business or Individual
Enterprises:
Business registration operates as a single point integrated service. Once you
complete your business registration, you have also completed tax registration
with the Rwanda Revenue Authority, employer registration with the Social
Security Fund of Rwanda and notification of business activities to the National
Institute of Statistics of Rwanda. This integrated registration is achieved through
the filling of a consolidated application form covering all the information required
for registration and notification with the relevant agencies.
Business Registration is concluded by the issuance of a business registration
certificate which has a unique enterprise code that acts as a unique identifier of
the business in relation to any public agency. The Enterprise/Company code is
also the Tax Identification Number (TIN).
The business registration services cover all businesses determined by the
Company Law No 07/2009 of 27/04/2009 and/or the Ministerial Order N°02/09/MINICOM of 08/05/2009.
2.6.2. Registering a company:
Rwanda has the fewest procedures and fastest processes to register and start
a business. Below are the steps followed to register a business in Rwanda.
You can register your business online at http://org.rdb.rw/ or at the Office of
the Registrar General which is a department within the Rwanda Development
Board located in Kigali, the capital city (see links below for full address).
What are some of the important documents needed before I can register my
business in Rwanda?
Domestic Company Registration
• Copy of ID/Passport
• Complete two copies of Memorandum of Association Art 14
(downloaded on our website here).
Opening a branch/ Foreign company
• Power of attorney to present the company in Rwanda. (Notarized)
• A duly authenticated copy of the memorandum Articles of Association.
(Notarized)
• Certificate of Registration/Incorporation issued by the registration
authority in the country of incorporation. (Notarized)
• Notarized resolution from the authorized agency authorizing to open a
branch.
• Passport copies of the shareholders/directors.
• List of directors residing in Rwanda (at least One)
2.6.3. Registering a partnership:
A partnership company is a type of business where two or more individuals
pool together their resources to achieve a common goal through business. This
type of business is usually helpful when an individual does not have enough
resources to start a venture.
You can register your partnership business online at http://org.rdb.rw/ or at the
Office of the Registrar General which is located in Kigali.
2.6.4. Registering a cooperative:
Registration of a Cooperative is the action or process of registering a cooperative
by attributing a registration number or of being registered in registration book
for Cooperatives.
When, How and where to register a Cooperative?
A cooperative is registered when it fulfils all legal requirements. The exercise is
done online by the applicant him/herself through the Cooperative Management
Information System (CMIS) (to be soon open).
Requirements for a cooperative to be granted legal personality:
– to have Internal regulations
– to define its domain of activity and objectives;
– to have the required number of founder members;
– to have a certificate issued by the Sector in which it will operate indicating
that the cooperative meets the requirements;
– to have a business plan indicating
a) the intended business model;
b) a clear outline of the economic and social benefits the cooperative
provides to its members
c) an action plan for at least the first three (3) years;
d) to present its working capital to finance its activities.
Detailed steps to register a Cooperative:
1. Cooperative applies for legal personality through the CMIS
2. Sector Cooperative Officer (SCO) assesses the application and may
decide to visit the cooperative. The sector has 5 days to approve the
application.
3. Once approved, the application is moved to the district. The District
Cooperative Officer (DCO) assesses (review) and approves or rejects.
He / She has to approve or reject the application the application.
4. After district approval, the application is moved to RCA.
5. RCA requests approval from BNR in case of SACCO’s application
6. If RCA approves, legal personality is granted within two (2) working days.7. If application is rejected, it is sent back with comments for rectification.
Requirements for membership in a primary cooperative:
A person who wishes to be a member of a primary cooperative must:
1. be at least sixteen (16) years of age;
2. Submit a written application for membership;
3. Not be engaged, either directly or indirectly, in any business likely to
jeopardize that of the cooperative he or she intends to join;
4. Pay his or her share in accordance with the bylaws of the cooperative;
5. Be committed to work with the cooperative in all or part of its operationsas provided for under the bylaws;
Application activity 2.6
1. How can register a business in Rwanda?2. Registering a business is one way of ensuring its success. Discuss?
2.7. Benefits of registering a business
Activity 2.7
In Rwanda we have many businesses ensure economic development of
country. One of those businesses are registered and another one is not
registered.
Look at the situation of business at home and around the country then shows
if registering business is necessary or not.
As a business to be or referring to business activities in your community, whydo you think businesses need to be registered?
2.7.1. Reputation from customer
Registering your business gives your potential customers confidence that they
are dealing with a reputable organization. Building reputation especially from
customers and clients if you’ve never done business before is very difficult.
2.7.2. You get legal liability protection
When you register your business as Limited Liability Company, you are a different
entity from your company. If you incorporate, you will not be held personally
responsible for certain accidents and other liabilities.
If you obtained loan and you defaulted in payment, your bank will not seize
your property except the company asset because you are protected from such
incidence.
2.7.3. Branding and Legitimacy
To prove that you have a legitimate business, legally in Rwanda, you will be
required to provide proof of business registration. A registered business helps
in building reputation with your suppliers, customers, and employees.
2.7.4. Loan facility
When your company is registered, accessing loan becomes very easy compare
to personal loan application. With your documents, you are going to have to
prove that you’re actually a business. This gives credibility and trust and also
ensures confidence. Your investors or lenders will see that they are dealing
with a company and will be willing to do lend you money if other terms andconditions are made.
2.7.5. Create employment
A registered business can employ full-time employees and pay them salariesand other benefits.
Application activity 2.7
Discuss on the benefice of registering business in Rwanda.
2.8. Consequences of not registering a business
Activity 2.8
In Rwanda we have many businesses ensure economic development of
country. One of those businesses are registered and another one is not
registered.
As a business to be or referring to business activities in your community,show consequences of not registering business.
2.8.1. Pay Fines and Penalties
If business fails to comply with business license requirements and you operate
your business without a valid license, you should expect to have to pay a fine orpenalty.
2.8.2. Lawsuits
Not having the proper business licensure opens your company up to lawsuits.
There are several ways that this can occur. A customer that is unhappy with the
goods or services you provided could take you to small claims court and citeyour lack of business licensure as fraudulent activity.
2.8.3. Closing business
Failing to obtain or renew a business license can cause to close business.
2.8.4. Arrests business responsible
You could even be arrested for not having a business license. Operating a
business without a license can be considered to be fraudulent activity, so somejurisdictions might decide to arrest the parties responsible.
2.8.5. Inability to bid
Another consequence of operating without a business license could be the
inability to bid on specific projects or opportunities. Sometimes, to win a bid,you have to show proof that you’re licensed.
2.8.6. Loss of reputation
If you do get fined or sued as a result of not having a business license, the
resulting negative press can be more cost than any penalty, because your
reputation is everything. When a customer is informed that your business is
not operating legally, it could call into question the quality of your work and
the trustworthiness of your business, which can be devastating and difficult torebuild.
2.8.7. Difficulty to Obtain Financing:
Having a business license is one of requirement for loan agreements andfinancing
Application activity 2.8
1. Give the reason why not having a business license can cause business
to be closed?
2. Explain the reason why not registering business can be result of losingreputation for business?
Skills Lab2
Via internet search, visit the RDB website and write a note on the following
aspects:
1. Requirements for starting a business
2. How to register a business3. Institutions that are involved with starting and developing a business
End of unit assessment 2
1. Determine the scope of law in business.
2. Identify how the rule of law protects people from harmful business practices.
3. Imagine that you have businesses. What types of permits are
required to conduct your business and which government entities
had jurisdiction over your business?
4. Registering a business is legal requirement. Is this statement true or
false? Give reasons to justify your response.
5. What would business be like in a land without any rule of lawsystem? Be specific