Dear new Business Owner
Congratulations! As lawyers we love to hear about your great business ideas and come alongside your business.
I’ve often been asked to advise entrepreneurs on what legal documentation and compliance processes they need to put in place to ensure that their business is protected from legal risks. This is my best attempt at giving you a “To Do” list for all the legal aspects that may apply to your business. It’s formulated for a business that focuses on services, rather than products, but most of the list will apply across the board for a new South African-based business.
I’ve grouped the requirements into three tiers so that you can tackle the legal side of your business needs according to priority – tier 1 and 2 need to be fairly urgent priorities for a business owner, and tier 3 is for a business which has grown in complexity and once your cash flow is more established.
Tier 1- highest priority / greatest legal risk area
- Contract with your contract staff
- Contract with your clients / customers
- Sales records (contract terms on your invoices / receipts)- section 26 of the Consumer Protection Act
- Tax registration and reporting requirements
- Key compliance requirements that are easy to put in place- see 4 d-h, 5 a-b below
- An attorney should check the lease for your premises before you sign it
Tier 2- medium priority / risk / medium-term planning
- Active marketing on social media / in the press- gather and publish client recommendations / reviews
- Ensure if you ever do direct marketing (contacting a consumer), that it complies with the legal rules
- Comply with the detail of the Consumer Protection Act- e.g. for a consultant providing services:
- Ensure you don’t discriminate between consumers unless it’s not unfair – section 8-9
- Be careful never to make any statement to a client that you can’t prove you have reasonable grounds to believe was accurate- section 4, 29, 41 and 51
- Bundling rules- section 13
- Fixed-term contract rules- section 14
- What if service delivery is delayed-section 19 and 54
- Disclosing the price of your services upfront- section 23
- Brokerage services e.g. when you find a buyer for the client’s goods- section 27 and regulations 9, 10 and 14
- Contracts not concluded in person (e.g. over email or on the phone)- section 33
- Treating a client fairly, reasonably and justly- s48 and giving quality service- s54
- Making sure the risks and your boundaries are communicated to the client- s49 and 58
- Duties when you take control of the client’s possessions- s65
- Comply with the detail of the Protection of Personal Information Act
- Start by registering as Information Officer with the Information Regulator (you can do that yourself- find the form online)
- Get the client’s written consent to use their and their family’s personal information
- Put a manual / policy / records retention register in place.
- Industry-specific requirements, e.g. if you sell on credit, comply with the National Credit Act, if you
Tier 3- longer-term priority / risk not that likely to materialise (but may have huge impact if it does)
- Consider trading as a CC so that your personal assets are not at risk if there’s a big claim against your business
- Once your turnover hits R3m per year register for VAT
- Are there any key suppliers with whom you should have a written contract?
- Promotion of Access to Information Act manual (if required)
- Audit whether you’re complying with the major legal duties for your business / industry
- Professional indemnity insurance?
Remember, you can call an attorney for advice at any stage- it becomes expensive if the attorney’s job takes a long time, but a five or ten minute call will not break the bank. In fact, many attorneys won’t charge you for a short phone call during which they give you advice. It’s good for your peace of mind to have established a relationship with an attorney, especially once they understand your business, so that you have someone to call in need. See our video on this website’s “About Us” page with tips on keeping your legal costs within reasonable limits.
How does one select a good, cost-effective attorney?
Step 1- consider what type of lawyer you need? For your business needs, you either need a commercial attorney or an attorney who is a specialist in your industry, e.g. media, intellectual property, consumer law, property law, aviation law, shipping law, international trade, entertainment, banking and finance etc. For employment contracts or problems with your staff, you usually need a labour lawyer.
Step 2- ask colleagues and friends and family who act as your mentors for recommendations. Make use of the internet, but take into account most law firms are quite old-school and may not advertise much on the Net. Your attorney’s office doesn’t need to be close to you- most work is done via email and phone calls, and if you need to meet, that can easily happen over Zoom.
Step 3- make sure the right lawyer within the law firm is doing your work- certain jobs need more senior attorneys, but it will be cheaper to have a junior attorney do the work under supervision of one of the partners. Ask the senior partner / managing director of the firm to recommend the best person for the job and tell them clearly it’s cost-sensitive. Get a cost estimate before you give the go-ahead for the work to be done. You can negotiate to pay off the legal fees over a few months. Prioritise paying your lawyers on time or if you can’t, call them immediately to make an arrangement- if you don’t, they won’t hesitate to sue you.
Step 4- communicate with your lawyer so that they fully understand your situation and challenges that are relevant to the legal problem / requirement. Lawyers charge based on the time spent, so I recommend instead of going to see your lawyer and talking for two hours, rather draft an email in which you logically and carefully explain everything the lawyer needs to know, attaching the relevant documents. That will probably take him or her 10 minutes to read, and you’ll get a bill for 10 minutes, not two hours.