5 things to know about the legal steps to help protect your business
Entrepreneurs can take certain precautions to fortify their companies during the Covid-19 outbreak and beyond. So how can one, as a business owner protect such a situation from adversely affect business in the future?
A global pandemic that is particularly affecting SME owners in myriad ways through disruption in supply processes and businesses' rights and obligations under contracts coming under the scanner calling into question “force majeure” effects.
Business owners are still reeling in these developments as they continuously unfold largely especially because SME owners never really are prepared for the worst.
Whilst businesses are still coping with the issues that are occurring on, business does go on.
So how can one, as a business owner protect such a situation from adversely affect business in the future? Image: AFP
Review existing contracts: Add a well-drafted ‘force majeure’ clause to your business contracts, if you do not have one already. Appoint a good legal consultant and have all business and employee contracts carefully reviewed. Fortification of contracts would mean addressing all the worst-case scenarios that could affect your business and providing remedies for the business to either gain compensation, pause services, or exit.
Create a contingency plan: A contingency plan covers a business for situations like the current one when there is no revenue being generated for whatsoever reasons and the business needs to be kept afloat. Depending on the strength of the contingency plan, businesses can survive and stay afloat through situations like this for months altogether. Contingency plans usually include foreseeing alternate ways of generating and retaining revenue.
Image: ITP Media Group
Pre-empt a contingency fund: Under the Federal Law 2 of 2015 on Commercial Companies, ‘a Limited Liability Company shall set aside in every year 10 percent of its net profits to form a legal reserve. The partners may decide to stop such deduction if the reserve reaches half the capital.’ Limited Liability Companies should ideally be maintaining such reserve funds although the reality may be far from.
Bring out insurance policies: Legal risks can be addressed only by having a really robust contract or a very good insurance policy in place. Apart from these two options, a business may only rely on available remedial measures if, and when adverse situations occur. Now, its that time of the year when we dust off our insurance policies, buffer them up, understand the claims’ process.
Have a business plan: If you don’t have a pathway for the future of your business, then you simply do not understand your own business. It is advisable to create and ensure implementing this business plan for your business. This is especially valuable if you are an SME facing critical times like these. If you have a business plan in place, refer to the section that discusses force majeure situations or deals with online working strategies. Image: Getty Images