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Business Landscape

Avoid These 7 Legal Pitfalls

Legal tips that will keep you in the boardroom and out of the courtroom.

Yvonne Wakefield

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Most entrepreneurs will confirm that starting a business is a lonely affair. As business owner you get to take all the decisions, but you also carry all the risks and the costs that come with trial and error.

When you start your own business you ideally want two people on speed dial: a mentor and a commercial lawyer. While a mentor with goodwill to spare can still be found, commercial lawyers come at a price.

Unfortunately entrepreneurs often run substantial risks by trying to avoid legal costs by foregoing legal advice, which often results in businesses being incorrectly structured or basic business agreements not being in place.

Entrepreneurs frequently incur unnecessary opportunity costs by trying to progress important business deals as far as possible on their own in order to minimise the costs of briefing a law firm.

Related: (Video) What Makes SA a Good Place To Do Business?

7 things you should know

Since most entrepreneurs do not have a lawyer on speed dial, here are some basic pointers aimed at keeping you in your boardroom and out of the courtroom.

  1. Ensure that your company is properly set up and registered in order to protect you against personal liability
  2. Every transaction has a tax consequence. Make sure you understand what these consequences are. If you are not sure, it is worth investing in a consultation with a tax specialist
  3. Do not make promises or commitments in writing if you are not completely committed to honouring them. Always assume that what you say in an email or text message is as legally binding on you as a signed agreement
  4. As soon as there is more than one shareholder or member of the business, all parties involved should sign an agreement to govern their relationship. Make sure you address the following aspects: how profits are shared and paid out; how new partners/shareholders can be brought in to the business; who will fund the business; and how and when loans will be repaid
  5. If your business supplies goods or services to the public, know what your obligations are in terms of the Consumer Protection Act
  6. Avoid signing personal surety, especially a covering surety, since it cancels the benefit of limited liability that trading through a company provides. Instead consider other forms of security such as a bank guarantee
  7. If you are selling your business, do not forget that your employees must transfer to the buyer and cannot simply be retrenched. Also, remember to transfer your rights and obligations under the business’ contracts to the buyer. If you do not transfer the contracts to the buyer, you will remain liable under those contracts.

Related: Significant Legal Changes Affecting Your Business

Yvonne has a BA (law) and LLB from Stellenbosch University, a Diploma in International Studies from Antwerp University, and an LLM from UCT. She has qualified as both an attorney and an advocate in South Africa, and as a solicitor of England & Wales. Yvonne now heads up Caveat Legal, a legal consultancy aimed at making quality commercial legal services more accessible to the business market.

Business Landscape

Hooked On Ethics

The business that puts ethics at the forefront of its culture is the one that will shine in a landscape littered with dishonest behaviour.

Howard Feldman

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There is significant research into how the work environment influences ethical behaviour. Study after study has shown how the ethical values upheld by management filter down to all employees, affecting behaviour and business practice. The biggest influence on a person’s ethics is their environment. In South Africa, the after effects of the recent political regime continue to shake both country and citizen. Corruption has seeped into almost every part of the government and in some of the country’s most prominent private organisations.

The old saying that the ‘fish rots from the head’ has never been truer, nor more obvious.

The ethical dilemma

The reality is that the government’s flagrant disregard for ethics saw corruption become a part of everyday life. This makes almost everyone ask themselves questions like – why should I pay X utility bill? Why should I pay my TV license? The money is being clearly used fraudulently. Sure, it is the law, but leadership has proven that ethical behaviour isn’t rewarded or recognised.

But it is. The value of building an ethical business and upholding a culture that promotes honesty and integrity cannot be understated.

Related: Developing Your Business’s Ethics Policy

Here are five reasons why…

  1. Those who skirt the edges of ethics almost always get caught.  There has been a steady shift in the country’s moral compass as leadership has taken a far stronger stance on rooting out corruption and already some of the country’s biggest names have been found guilty. KPMG, McKinsey, Bell Pottinger and SAP have all had their names tarnished by the scandals that have rocked the country.
  2. Employees are more engaged and better behaved. A weak ethical culture filters down from the top, influencing behaviour and attitudes. If employees feel that they can get away with bad behaviour that benefits them, or if they feel that their environment encourages this, then they will.
  3. A strong ethical influence will dictate how employees treat customers and one another. If your company enforces and rewards honesty and integrity, then these will be the qualities that clients will perceive. Their lack may also see you lose market share and your reputation.
  4. Like attracts like. If you create a culture that rewards employees that work all hours, deliver the goods and commit themselves then you will attract more people with these qualities. The same applies in reverse – reward bad behaviour and the results will rapidly speak for themselves.
  5. Your business reputation. Trust can’t be bought. It is hard won and easily lost. If you lose your reputation then it is very unlikely you will win it back and it will follow you for the rest of your life. The same applies to your staff. If their behaviour is questionable it could damage your company. Make sure you set the rules of what is or is not tolerated by your company culture and consider investing into ethics courses that allow your teams to stay ahead of the curve.

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Business Landscape

Solutions To Get Your Business Through Tough Times

We are happy to announce that times are changing and that Start-Ups and SME’s never have to leave legal unattended again!

Nicolene Schoeman-Louw

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It is no secret, things are really tough at the moment. South Africa is in a technical recession and consumer spending is at a low. To many small businesses this means that the pressure is very, very real. As a result, cost cutting will inevitably have to follow, and the reality is, that the legal side of things are often one of those aspects left unattended. Resulting in massive risk exposure that could threaten the business’ ultimate sustainability or success.

But everything is not just doom and gloom! We are happy to announce that times are changing and that Start-Ups and SME’s never have to leave legal unattended again!

We have put in a lot of money, time and effort creating a pioneering online platform that hosts standard legal documents, which are the crucial pillars of best practices for any business. By utilising technology, we aim to provide access to trusted legal products and services in order to empower Entrepreneurs.

The SchoemanLaw SME Self- Service Desk TM is the first solution of its kind in South Africa! In testimony hereof, SchoemanLaw was honoured earlier this year as a finalist in the Nedbank Business Accelerator Programme, for the platform’s unique ability to provide access to trusted legal resources that empowers Entrepreneurs, to create sustainable businesses that are scalable.

The platform further addresses the need of effective management of individual needs, such as drafting your will, the management of crucial relationships in business, including employment relationships and contractors, as well as stakeholder relationships in the ecosystem, such as clients, debtors, shareholders, directors and joint ventures. It also allows the users access to personalised support in case of any unforeseen legal incident occurring. Supporting entrepreneurs to effectively establish legal foundations in their business for optimum growth and overall business success.

Related: When To Collaborate And When To Employ

The following documents are examples of those available on the platform:

  • NDA (Non-Disclosure Agreement)
  • Independent Contractor Agreement
  • JV Agreement
  • MOI (resolution included)
  • Shareholders Agreement
  • Various Company resolutions
  • Acknowledgement of Debt
  • Distribution Agreement
  • Agency Agreement
  • T&C’s
  • Supplier Agreement
  • Last Will and Testament
  • Residential and Commercial Lease Agreements
  • Loan Agreement
  • Letter Demanding Payment
  • Various HR Documents, such as:
    • Employment Contract (fixed and indefinite term)
    • Generic Human Resource Policies
    • Certificate of Service
    • Written Warning
    • Disciplinary Hearing Pack

Free samples:

  • Offer to purchase (freehold and sectional title)
  • BBBEE Affidavits (EME and generic QSE)

and many more!

Related: The Role Of Trust Now And In The Future

Prices range from R195 and R895 per document if downloaded on a pay as you need basis or R249 / R495 per month on a subscription basis, this is over 75% less than usual rates if traditionally drafted by an attorney. What is more, users have the support of a law firm not only having created, but who maintains the platform and supports each User.

The platform is also ever evolving and completely customer driven because documents are added constantly as customers request them. All the documents are also constantly updated to ensure that they align to the latest best practice. So, never leave the legal unattended ever again! For more information or to Empower your small business today, go to: https://www.schoemanlaw.co.za/online-legal-services/

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Business Landscape

Effective Business Insurance Supports The Economy

The insurance industry has an important role to play in assisting SMMEs to effectively manage risk and resist the temptation to save money by buying less insurance cover than their actual risks suggest.

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The success and growth of small, medium and micro-enterprises (SMMEs) are essential to the development of our economy. The insurance industry has an important role to play in assisting SMMEs to effectively manage risk and resist the temptation to save money by buying less insurance cover than their actual risks suggest.

Value of advice to create trust

This is where the value of advice can be clearly demonstrated. Henry Ford said: “If we asked our customers what they needed, they would have said faster horses.”

Therefore, as risks become more complex and costs grow, we need to, as an industry, enable SMMEs to trust us to advise them where to place their hard earned money to safeguard themselves against potentially devastating setbacks.

In every business, customers are unique and face their own challenges and risks. For a manufacturer, protecting valuable stock during storage or transportation will be essential. A motor fleet owner will need comprehensive cover for their specialist vehicles to protect them against accidents, theft or liability.

Insurance brokers have the knowledge, experience and skills to guide SMMEs in identifying the risks their businesses face and choosing the correct insurance products to meet their specific requirements.

Related: Government Funding And Grants For Small Businesses

Changing environment = changing needs and solutions

Property damage cover, such as fire insurance, compensates SMMEs for buildings or stock, while business interruption cover allows them valuable time to recover without feeling the strain of lost profits after an unfortunate event. Comprehensive motor insurance can cover vehicle repair costs and provide replacement vehicles allowing businesses to continue to render a service after a loss or damage occurred.

In addition, lawsuits can be costly and time-consuming, with exorbitant legal fees and resulting court awards. Liability insurance protects SMMEs from these and similar claims.

Other important insurance products provide security against financial losses, resulting from theft, fraud or dishonesty by the company’s own employees.

Partnering for success

Any business failure or loss can have far reaching effects on the rest of the economy. Therefore, it is necessary for brokers to partner with insurers who understand the risks inherent in a particular SMMEs field of business – a winning partnership to build the economy by supporting the sustainability of our small businesses.

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