Undertaking an annual legal health check of your company is one of the best decisions you will make for it’s reputation, growth and for your sanity.
Compliance and risk management don’t sound very sexy but they are crucial to having a sound business and are drivers to achieving business excellence – we call it Future-Proofing. Being compliant not only protects your business, but it can enhance your reputation with your customers, suppliers and your employees – and other important stakeholders, like your bank.
It is important to remember that every company, from start-ups to ASX listed are at risk if they are not compliant in some respect. External investigation and proven compliance breaches presents the following risks to your business:
We can’t throw an entire company in jail, so the most common consequence for corporations who breach legislation is a fine.
Fines can range from a small slap on the wrist from ASIC for failing to lodge on time, and million dollar fines for significant breaches of legislation such as the Competition and Consumer Act.
Industry specific regulatory bodies also have the power to issue fines and revoke licenses.
2. Removal from ASX
ASX listed companies are held to a much higher standard than privately owned corporations, because they have many more stakeholders than private companies.
ASIC also imposes heavy penalties for failure to comply with listing requirements and disclosure obligations, not the least of which is to have your listing suspended.
Most insurance policies and even certain laws mandate a time limit within which you are required to report an insurable event. If the time limits are not complied with your insurer may be absolved from its liability under the policy leaving your company uninsured. Make sure you understand your obligations, to make sure you make the most of the premiums you’re paying.
4. Unenforceable Contracts
Changes to legislation, or incorrectly drafted contracts can result in clauses, or indeed entire contracts, to be unlawful or unenforceable. To make matters worse, this determination is often only determined by a court following a lengthy and expensive legal action, which will probably not the best use of your time or money.
5. Criminal Consequences
Some legislation, such as Occupational Health and Safety Laws, and environmental protection legislation impose not only significant financial penalties, but also personal criminal liability. Directors can be found criminally negligent & be put in jail – it is critical for you to know where your personal risk is when you’re running a company.
6. Tax Liability
It is also worth noting that although you engage people as contractors of the company, in certain circumstances they can be deemed to be employees, giving rise to additional insurance and superannuation obligations.
The good news is, these risks can all be negated or mitigated by taking some time to review the legal framework in which your organisation is operating to set you on the right path.