Articles

Top Ten Legal Tips

Posted 07 April 2004

1. Survey the legal landscape before you open. In your business plan, take note of general and industry specific legislation, government regulations and any licencing requirements that may be relevant to your new enterprise. By sorting out compliance issues up front, you don't need to keep re-inventing the wheel.

2. Choose the correct legal vehicle. Whether you wish to limit your liability, save tax or add legitimacy to your business, choosing the right vehicle is important. Close Corporations (cc's), private companies (Pty Ltd) and business trusts are the most popular for small to medium sized businesses.

3. Protect your business ideas and products. An entrepeneur is someone who often pushes the boundaries and develops something unique and special. Don't lose out before you leave the starting gates. Ask your attorney about copyright protection, patents and trade marks, or, at the very least, have a good confidentiality agreement in place when dealing with potential investors, customers or suppliers.

4. Treat business partnerships like a marriage, sign an ANC. Whether you are members, directors, shareholders, partners or simply business associates, put the relationship on a sound legal footing from the start. Even if your partner is a friend or family member, get an association or shareholders agreement signed.

5. Have well drafted terms for doing business. Unfortunately gentleman's handshakes are a thing of the past. A good set of terms and conditions can add certainty and confidence to business relationships, provide deterrents for late or defaulting payers and limit your exposure to liability in your daily business dealings.

6. Watch out for personal liability. Watch out for certain provisions in the Close Corporations and Companies Act and make sure you read all documents and contracts before signing. You might think you are merely signing on behalf of the company but the fine print may state otherwise.

7. Know as much as you can about current labour laws. Employees, and even prospective employees/job interviewee's, have a number of rights that cannot be ignored. Keep a copy of the Basic Conditions of Employment Act and get your attorney to update you on all the latest developments.

8. Draft and implement comprehensive office policies. Whether it is to avoid unwanted sexual harassment lawsuits from disgruntled employees or simply to prevent excessive personal use of e-mail or Internet facilities, office policies are an effective way of regulating your workplace.
NOTE: If these policies are not signed at the beginning of the employment relationship, it will be very difficult to implement them later without the employee's express consent.

9. Don't let bad debtors affect your bottom line. The older the debt, the harder it is to recover. Whether your terms are 7 or 30 days, notify the debtor immediately on the 8th or 31st day of his non-payment. Choose between the "carrot or stick" approach for individual debtors - either by offering early settlement discounts or by charging penalty interest.

10. Develop good document management systems and keep good records. Cases are often decided or settled on the strength of an innocuous sentence in a letter or memo. Be especially diligent when it comes to e-mail.

There has been a lot of hype about the compulsory business manuals that have been prescribed by the Promotion of Access to Info Act. Use this exercise to get your house in order by implementing sound document management systems.
There are many demands on today's business leader and there is a risk of taking on too much. Surround yourself with competent experts who show a genuine interest in your business and its development, freeing you up to concentrate on what you do best.