An unexpected legal dispute can nearly — or completely — sink your business. What can you do to protect yourself? While the first step should always be consulting with a qualified attorney, here are our top 10 key legal risks you should be aware of so that you can avoid them before they cause trouble.
1. The wrong ownership structure
Choosing the ownership structure is the most important initial decision you can make when you start your business. It impacts whether and which kind of investors you can accept, your tax liability, your personal legal liability, how easily you can sell the company, and many other issues. Select the wrong kind of structure, and you might end up with unlimited personal liability for debts incurred by your company. Therefore, understand all your options and choose carefully when you form your company.
2. Poor or no organisational documents
If you decide on an ownership structure which requires documentation and formalities, you must actually follow through and prepare these documents. If your organisational documents are improperly done or not done at all, the protection you were hoping to get from your ownership structure might be void if it ever comes to a legal challenge in a court of law.
The same is true of keeping proper corporate records, such as human resources and tax records. If your records are not well kept, you could end up facing personal liability when and where you least expect it.
3. No or copied Website Terms and Conditions
If you are selling or transacting business online, as a rule you are required by Australian law to post Terms and Conditions. The ACCC (Australian Competition and Consumer Commission) has stepped up their pursuit of websites which do not comply and the fines can be significant. Even for websites which are not technically required by law to have Terms and Conditions, having a Terms document posted is often useful in protecting against legal disputes.
At the same time, copying Terms and Conditions can be worse than not having any at all. Not only is the ACCC checking for this, but this kind of plagiarism also violates copyright law and risks bringing in Terms that are not relevant to your website.
4. Commercial leasing disputes
Always consult with a lawyer before entering into a commercial lease, lest you end up spending many thousands of dollars extra later. Commercial leases tend to have somewhat tricky clauses requiring tenants to pay for things which they should not need to pay for, from legal fees to make good and options-to-renew. These are nothing new but commercial landlords have been using them for decades and there’s no sign they are planning to stop the practice any time soon.
5. Lack of a shareholders’ agreement
Just because your shareholders are family or friends does not mean there will not be disputes. In fact, disputes between owners are especially common in family-owned and small businesses. The best way to avoid them, and the expensive litigation which often follows, is with a shareholders’ agreement.
6. Changes in competition laws
We don’t yet know what will be coming, but big changes in the competition laws have been announced. Keep a close eye on this area of the law, as while it hopefully will present a business opportunity it could also represent a significant risk.
7. The new anti-bullying law
As of 2014, workers who feel they are subject to bullying can make an application to the Fair Work Commission for resolution of the situation. Most of the time, accusations of bullying are made against a manager, and while the commission can intervene, it cannot require financial remedies unless you defy the commission’s orders. Nevertheless the expense, impact on morale, and time involved is something every business wants to avoid. To prevent this from being an issue, ensure that workers are able to come to you with complaints of bullying, and that you handle them in a fair, sensitive, and impartial way.
8. Sexual harassment
Simply because it is no longer in the headlines does not mean it is no longer an issue. The number of claims for sexual harassment is growing steadily and they often involve very large financial damages. You can avoid being the target of a sexual harassment suit by instituting a standardised sexual harassment policy, educating your employees on the subject, and ensuring everyone understands you will not tolerate it. A few simple steps here can save you thousands or even hundreds of thousands of dollars later on down the track.
9. Discrimination for disability
Often, a worker who returns to work with an injury or otherwise has a long-standing injury is able to make a successful claim with the Human Rights Commission. Complaints of victimisation due to a physical injury are the most common complaint type they see. To avoid a discrimination claim, you must understand your obligations and ensure these workers aren’t treated differently.
10. Workplace injuries
Though the number of injuries in the workplace is largely stable, the cost associated with a workplace injury continues to spiral out of control. Closely watching your risk management and safety systems both helps keep injuries down and ensures you are compliant with the numerous clauses in workplace, safety, and health laws that require you to be proactive about preventing injuries.