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Blog • 06 Jan 2017

Guest Blog: Your Business Needs a Health Check-up: The Top 4 Legal “Diseases”

Member Guest Blog

We are so happy to have our member Yong Wan Mei,  a Legal Specialist at Thomson Reuters to write a guest blog to talk about legal. 


We have grown accustomed to giving our bodies a yearly health check as a matter of maintenance. Hidden medical issues lie undetected until we go for that all-important check-up. You could now take your business for a similar check-up. Just like checking your body’s health, your business needs regular looking after to ensure there are no legal hiccups in the engine. For start-up owners and entrepreneurs who have so little time left, this may be just what your business needs. Getting your business off the ground, you have probably done only the absolute minimum in terms of legal requirements for your business. This is a potentially dangerous situation akin to driving a car that has not been regularly serviced; in other words an accident waiting to happen. Your business could be suffering from legal “diseases” that could blow up later in the same way. Here I will outline the top 4 legal “diseases” you could detect in a legal check-up session.

 

Shareholder issues make the top of the list due to the frequency of shareholder disputes businesses encounter. You may have your own personal anecdote or your friend may have gone through this. When all is smooth sailing it is easy to think everything is fine until the relationship turns sour! Avoiding such shareholder disputes starts with setting out pertinent terms and conditions to protect your rights. With more thought put into drafting the Shareholders’ Agreement, each shareholder’s rights can be clearly outlined, giving some more decision-making powers for example through the use of veto rights.

 

Raising capital for your business is likely to be on the top of your mind, and you might be thinking about issuing new shares in order to raise funds. What you may not be aware of is the potential dangers of dilution to you and other existing shareholders. With each issuance of new shares, your relative ownership percentage of the business drops. A check-up session would help you detect loopholes in your Shareholders’ agreement and protect your shareholding rights through special clauses.

 

Intellectual Property (IP) protection is another of the top legal “diseases” often left brewing. The dangers and business impact of neglecting to protect your business’s logo or branding through a Trademark registration are substantial. All it takes is a moment to undo all that hard work you have put into establishing a good reputation. A competitor starts using your logo/branding on their products. The consumer buys your competitor’s products with the assumption that it originates from your company, and takes it home to find that it’s faulty. Word gets out and this seriously injures your brand’s reputation. This is an accident waiting to happen if you have not protected your IP rights in the right manner – another “disease” you could detect through a check-up session.

 

As your business expands and you hire more employees, have you thought about the obligations you need to follow? Are you fully prepared when it comes to terminating an employee? A check-up session reveals any loop-holes you may have missed, including MPF/ORSO and other core statutory benefits you need to take care of. When it comes to dismissing someone, there are minimum notice periods to comply with according to HK’s Employment laws. But there are times when you are entitled to dismiss someone without notice (summary dismissal) for example when the employee is guilty of misconduct or fraud. Knowing where you stand heavily depends on the individual circumstances, so it is worth seeking expert advice to help you avoid a heated employment dispute.

 

Following the 2010 Octopus marketing scandal where they sold personal data of customers for HK$44m, laws binding data privacy have tightened considerably with the new Personal Data (Privacy) Amendment Ordinance (Oct 2012). With the failure to comply attracting a penalty of up to HK$1m and 5 years’ imprisonment, you want to ensure your business is well protected against some common mistakes. If you are planning to collect personal data for a survey, your business is required to inform clearly what information is being collected and how it will be used. What if you are using this data you collected to send out e-newsletters? As this is a form of direct marketing, you are required to obtain consent first. You must then provide an ‘Unsubscribe’ option which is honoured within 10 working days – a simple step often forgotten.

 

Take a step back and think about whether you’ve protected your business from all these 4 legal “diseases”. The earlier you take your business for a check-up session, the lower the risk of these hidden “diseases” exploding into full-blown problems that impede you from growing your business.

 

Custom Legal Solutions provides Legal Health Check-up Sessions for a comprehensive look into your business needs. Contact us to find out more at [email protected] or +852 3951 6715.

 

By Yong Wan Mei

Business Development Director

Custom Legal Solutions