Liability & indemnity

Essential business legal responsibilities to keep your company within the law

For the secondin histhree-part business lifecycle series, Simon Wallwork, head of the corporate and commercial team at?Slater Heelis LLP, outlines the business legal responsibilities every owner needs to be aware of to keep their company on the right side of the law.

Owners of established firmsface ever-growing business legal responsibilities, often referred to as “red tape”. It is vitally important that these business owners pay close attention to the legal obligations imposed upon them, both to ensure that neither the company nor the directors become liable for non-compliance with such legislation, but also to create a foundation for the value of the company.

Having strong foundations is vitally important in ensuring that on an eventual exit of the company, its value is not undermined by potential legal liabilities.

Put another way, a company that can show that it has taken its corporate responsibilities seriously and has the necessary policies, procedures and records to substantiate this, will have a greater value than one that doesnt. This will make an exit potentially quicker and at less costly.

When a company starts looking at its corporate responsibility, it first of all needs to look at the director’s duties under the Companies Act 2006.

All directors have a duty to promote the success of the company. In making decisions, they have to have regard not only to what benefits the company shareholders, but must also bear in mind the interests of the company’s employees, the impact of the company’s operation on the community and the environment.

Further, they have a duty over the company’s business relationships with its suppliers and customers and the desirability of the company maintaining a reputation for high standards of business conduct.

Some of the areas that directors need to have regard to, and develop policies for, so as to comply with these general duties, and also to comply with applicable laws, are as follows:

Records

Is the company maintaining accurate and proper records both of its internal accounting and operational procedures, but also of its external relationships? These records need to be accurate and in the company’s possession or control.

Employees

Is the company complying with its obligations in respect of employees? contracts, does it have all necessary procedures and policies in place and evidence they are being followed? Is the company providing all necessary pensions to employees? Is the company fully aware of its obligations in the way it treats its employees to avoid potential claims for discrimination? Is the company taking proper and appropriate action, where employees are making complaints or highlighting grievances?

Bribery Act 2010

Does the company have adequate procedures to ensure that it is not involved in bribery and corruption? Is it clear that the company is paying proper regard to the policies and procedures that it has put in place?

Data protection

Is the company registered with The Information Commissioner in respect of the data that it holds? Has the company assessed what personal information it is holding and what the company can and can’t do with that information? Is the company collecting personal information correctly with the appropriate consents from the individuals whose data the company holds? Has the company put proper procedures in place should they receive a request for access to personal data? Has the company got all necessary security to ensure data is safe from theft or unlawful access?

Health and safety

Has the company attained all required health and’safety permits and certificates to carry out its business? Has the company put in place all necessary procedures and policies to ensure it can show that it is complying with health & safety legislation? Is the company taking proper and adequate steps to ensure that it is complying with its obligation not only to employees and other persons with whom the business is in contact, but also in respect of the environment? Does the company have proper records to show this?

These are just an example of the areas of a company’s operations that have significant legislation applying to them. That legislation can not only lead to liabilities for the company, but also to potential prosecutions and/or personal liability for the company’s directors.

A company that properly attends to these areas and has records to prove it, however, will be able to use this to promote its own image of corporate responsibility, enhancing its ability to employ, to contract with customers and importantly, its own value.

For early-stage companies, check out Simon Wallwork’s previous article on legal advice for startups.

For further advice on your business legal responsibilities, read our Q&A regarding all aspects of advertising law.

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