As the calendar turns to a new year, it is a good time to review your company's legal needs and circumstances. Let's begin the discussion by remembering the Prime Directive that it is almost always less expensive to resolve a legal issue early on – such as through a proper contract prepared with professional assistance – rather than trying to fix the issue later through litigation. If you have a business attorney, this post will cover some of the items that you may wish to cover in an annual legal review. If you do not have a business attorney, perhaps the list of items will encourage you to find and hire a good one. If you do not know how to find one, the Insider's Guide will explain the process.

Here are a few of the items that should be considered during your legal review:
  • Has your business properly maintained its registration with the secretary of state or other authorities? It is surprising how many companies fail to maintain their annual registration and have been administratively dissolved. The result? Possible loss of the corporate shield against liabilities. Most of the time, reinstatement is possible, but you will need to act quickly. 
  • Does your business maintain proper corporate or company records? Does it have corporate minutes, minutes of shareholders' meetings, or resolutions in lieu of meetings? Many businesses fail to maintain these basic documents, which again places the corporate liability shield at risk.
  • Does your business properly maintain separate financial and other internal records? Are loans from shareholders or members properly documented? Do you have more than one company, but their records are intermingled? Are bank accounts properly kept for each entity without intermingling funds? Are proper and separate financial and accounting records kept? Again, the failure to maintain and document separation of company business from personal business, or the business of other companies can place the liability shield at risk.
  • Does your business properly document its contracts? Does your business have contracts, or at least terms and conditions, for every transaction? Do these documents protect your company against making unintended warranties and other consequences? Have the terms and conditions been professionally prepared? Have they been reviewed recently?
  • In reviewing your contracts, do you have proper contracts in place for subcontractors and suppliers? Do these contracts have proper provisions in place to make sure that your subcontractors and suppliers warrant their products and services?
  • Does your business have procedures in place for handling and documenting potential claims? Are potential claims reported to your insurance company? Failing to report claims promptly may result in the denial of coverage.
  • Have you reviewed your insurance coverage lately? As a general matter, commercial general liability ("CGL") coverage is becoming more restrictive and insurers are trying to force companies to buy specialized coverage, such as environmental liability, professional liability, and cyber liability policies. For more information, you may want to check out my insurance blog, which can be accessed here.
  • Does your business have in place procedures for protecting confidential information and trade secrets? This concern applies not only to your own confidential information, but confidential information of other companies that your company may handle, such as customer information regarding orders.
  • Are employees who handle the information subject to non-disclosure agreements? Have the non-disclosure agreements been professionally prepared? Have the non-disclosure agreements been kept up to date and reviewed recently? 
  • Do you have other appropriate agreements with key employees? Do you have covenants not to compete? How about covenants not to solicit your customers if the employees leave? If so, were the covenants not to compete professionally prepared? Have the covenants been reviewed recently? In Georgia, for example, there was a substantial change in the law effective two years ago that should be considered.
  • Do you have procedures in place to comply with legal obligations regarding employment? Do you have a company employee handbook? Do you have procedures for dealing with employee complaints?
Please note that this is not intended to be a complete list. What makes the most sense is to have an annual legal review with your business attorney. Of course, in order to do that, you need to have one. If you do not have a business attorney, the Guide will help you find a good one.
 


Comments


Comments are closed.