Business law ensures that companies can confidently trade, deliver services and make deals, but commercial law is a complex field. Few companies have the in-house skills to draft and review legal frameworks and the supporting legal documents.
Instead, too often companies spend the bare minimum or indeed nothing at all on the legal aspects of their operations. In a recent survey carried out by Fusion law, we found that 38% of business owners admitted that they copied legal terms from a competitor – or worse – relied on legal templates found online.
Other companies try the “file and forget” approach: employing legal experts to set legal aspects into motion – with no ongoing review once the initial legal configuration is complete.
Neglecting legal reviews can be costly
Scrimping on legal advice or leaving legal matters to a one-off, box-ticking exercise carries risks, however. Laws change and business circumstances shift which means that the initial advice may no longer be suitable, and there’s always the chance that the initial advice was incorrect in the first place. A company cannot rely on the same NDAs and confidentiality agreements year in, year out without review – while the relevance of shareholder’s agreements, employment contracts and terms of business also require regular scrutiny.
Skip on the review process and your company may be exposed to liability or could miss out on key opportunities.
In fact, a 2017 YouGov survey found that UK SMEs lose over £13.6bn per year because companies neglect the legal aspects of their business. In contrast, a regular review of your company’s legal framework will flag issues for remediation and is an important process your company should regularly undertake.
Read on as we outline six reasons why your company should consider a regular, end-to-end audit of the legal framework and the documents coverings its business operations.
1. Prevention is better than the cure
It’s not hard to see why getting ahead of potential legal trouble can save a business a ton of money. Problems, gaps and other issues with legal frameworks may never emerge – but when they do, the implications could be devastating. Indeed, your business may be ticking over nicely – yet governed by a flawed legal framework that doesn’t accurately match your business profile.
However, the day that a conflict arises your business may find itself at the short end, battling to make a stand based on legal agreements that do not support its cause. A legal review will spot the potential for trouble before it becomes a cost to your business. Post-review, your company could modify agreements or at least act with awareness of any weak spots.
2. A fresh perspective
Grasping the full complexity of a legal framework and the associated legal agreements can be challenging for the most practiced of law professionals. Even where consultations with a client are as transparent, as frank and as close as possible, omissions and misunderstandings may still creep into legal work.
A review provides the opportunity to gain a fresh perspective on existing agreements: spotting mistakes made in the past and identifying the scope for improving on legal frameworks – reducing legal risk and boosting business outcomes.
3. Compliance risk is on the increase
Most businesses go about their daily activities showing due concern for the interests of their stakeholders. However, compliance regimes are in place to regulate those businesses that skirt their responsibilities. Unfortunately, with time, compliance law has grown steeply in complexity and scope – consider GDPR, for example.
The result – even where a business operates in the best interest of its employees, clients, and partners, compliance law can catch it unawares. After all, your job is to grow a business – not stay ahead of ever-changing compliance law. A legal review is an opportunity to check that the growth in compliance obligations is met by a matching change in your company’s legal framework.
4. The law changes over time
Compliance is just one legal aspect that can trip up a business. A few years can be a short period of time in terms of the law – companies should not underestimate just how quickly the rules can change. Consider, for example, the issues currently caused by IR35 and the implications it has for companies employing contractors and freelancers.
Or, the impact of recent changes in dividend taxation and how that affects the optimal way to dispense profits. A legal review is an opportunity to re-assess the legal status quo, minimising business risk and maximising the return on business activities – within an up-to-the-minute view of the current legal framework. It’s an exercise that becomes more and more pertinent as time goes by.
5. The nature of a business changes
It’s not just the law that changes. While some companies may carry out identical operations year in, year out it is arguably more common for a business to change over time. These changes need to be reflected in a company’s legal framework, but too often legal agreements are not revised to match changing circumstances.
A legal audit provides the opportunity to compare the business status quo with the legal status quo. And, as suggested before, fixing any legal problems early on is a far better approach than resolving challenging legal issues where a business has outgrown and out of date legal framework.
6. Best practice shifts
Finally, unless a company operates in the field of law, it is unlikely to stay up to date with the day to day minutiae of legal practice. These details change, however, as legal best practice evolves even where the law stays the same. Up to date legal practice can deliver business benefits within the scope of decades-old laws.
Competitors who retain the latest, best advice may outfox your company with smarter legal moves. A legal audit can highlight where existing arrangements differ from current best practice, ensuring that your company operates on a level playing field.
A review from Fusion Law
At Fusion Law we deliver a comprehensive, fixed-price review of your company’s legal framework, including the documentation and agreements that cover it. From articles of association and shareholders agreements, through to NDAs, employment contracts and agreements for director’s services.
We perform a 15-point audit of your existing legal documents and provide you with a concise RAG report outlining any issues to follow up on. In doing so we can ensure that your company is compliant, while using the law to its maximum commercial effect.
With years of experience across businesses both small and enterprise-scale, Fusion Law is ideally placed to get your business to perform optimally within the context of the law.
Legal advice can reduce your costs
The YouGov survey we reference above also found that 83% of companies surveyed said that using a lawyer reduced the risk of higher costs.
Consider, for example, the additional costs of trying to defend a claim from a business partner or employee when you’ve just found out that your legal framework is not watertight. Or, the profits lost to excess tax payments where tax structures are not optimal.
So, why not consider getting a legal review before it is too late to recover excess costs? Get in touch to see how Fusion Law’s fixed-fee legal review can highlight the legal risks – and the legal opportunities – for your business.
We offer a free one-hour consultation where you can discuss any deal you are currently working on with one of our solicitors, accountants or business advisors.
Contact us to book your session in now, completely free of charge. You can request a call from one of our team here.