Why Your Company Needs A Legal Health Check

Why Your Company Needs A Legal Health Check

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Why Your Company Needs A Legal Health Check

Oct 23, 2023 | Articles

 

Why Your Company Needs A Legal Health Check

Readers who have celebrated their 40th birthday at some point may remember getting a letter from the NHS inviting them to attend an over 40s health check. This involves several tests, including measuring your blood pressure and taking blood samples to check your cholesterol. The check is designed to give you an idea of your risk of getting a disease such as diabetes or developing heart problems. Working on the principle, ‘you cannot fix what you don’t know exists’ an over 40 health check gives you the information you need to understand the changes required to mitigate the risk of serious illness. A Legal Health Check does the same for your business. By examining your compliance with laws and regulations, looking at your commercial contracts, and company governance, details gleaned from a Legal Health Check will ensure you know were your risks lie so you can build an effective risk management strategy to treat, transfer, tolerate, or terminate them.

What is a Legal Health Check and why should I invest in one?

Because it could save you a pile of money and ensure you stay in business. This is not being dramatic, in late 2022, the FCA fined a global bank over £107 million for alleged gaps in its anti-money laundering controls. This included failing to verify the information business customers provided about what commercial activities they were involved in.

Ask yourself – could your business manage a fine of tens or hundreds of thousands of pounds?

The key reason to invest in a Legal Health Check is to identify areas where your organisation may be falling short of compliance or is exposed to risk through your commercial agreements. It is a proactive measure and provides the following benefits:

  • Identifies potential legal risks and liabilities allowing you to take proactive steps to mitigate those risks before they escalate into legal disputes.
  • Provides stakeholders with confidence that your business is in full compliance with the legal framework relevant to its operations, whether that be industry-specific regulations, employment laws, tax laws, environmental laws, or intellectual property rights.
  • Streamlining compliance processes and commercial contracts can reduce the time and resources spent on legal matters. These resources can be directed into looking into any opportunities for improving business processes, strategic planning, and risk management that the Legal Health Check may uncover.
  • Legal and regulatory compliance will protect your company’s reputation, help build trust with stakeholders, and go a long way towards attracting top talent, partners, and investors.

What is involved in a Legal Health Check?

When you invest in a legal health check you can expect the following tasks to be undertaken:

  • A comprehensive review of your commercial contracts, company agreements (for example the Shareholders Agreement and Articles of Association), terms and conditions, and supplier agreements.
  • An examination of your organisation’s employment contracts, Director’s Services Contracts, workplace policies and practices, and staff handbook. HR systems will also be reviewed. Your ‘Legal Doctor’ will analyse things such as: Does your recruitment process comply with the Equality Act 2010? Do you have a procedure for managing employee grievances, sexual harassment claims, dismissals etc?
  • An assessment of your organisation’s intellectual property. Do you have registered trade marks, patents, and design rights where required? Are there any risks of IP breaches? Do you have relevant Confidentiality Agreements (NDAs) in place?
  • An examination into whether your organisation complies with the rules and guidance issued by relevant industry bodies. For example, the Solicitors Regulation Authority (SRA) has strict rules around price and service transparency. If you do not display the information correctly on your website, you could receive a fine plus costs. And, yes, the SRA do run random website checks.
  • An assessment into your organisation’s environmental law compliance. This is an area that can make or break your company’s reputation so it is vital to ensure that your waste management, anti-pollution, and energy efficiency practices meet not only UK standards, but also the standards of any other country in which your business operates in.
  • A check on your data protection and privacy policies. This will not only examine your GDPR policies, procedures, and record-keeping, but also any other data protection legislation your business’s activities may be subject to, for example, the Privacy and Electronic Communications Regulations (PECR). In addition, the ‘legal doctor’ can check that you understand and are in a position to comply with any new relevant data protection laws, for example, the EU Data Act, which is now awaiting formal approval.
  • A check to see if your company is subject to any UK or international ESG reporting requirements. In addition, an analysis will be conducted on your ESG statements and claims to ensure that your business is not at risk of misrepresentation-related legal claims or greenwashing.

Final words

Successful businesses are proactive rather than reactive and this applies especially to legal compliance and risk management. Having regular Legal Health Checks may not only save you a fortune in future fines and legal fees, it will also provide confidence to the Board, shareholders, and investors that the company is well run, compliant, and can provide an excellent return on investment.

To find out more about any matters discussed in this article, please email us at [email protected] or phone 0121 249 2400.

The content of this article is for general information only.  It is not, and should not be taken as, legal advice.  If you require any further information in relation to this article, please contact 43Legal.

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