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Updated 29 Sep 2020

Legal compliance for entrepreneurs

It’s a myth that SMEs are governed by different laws to big business, one you could entertain at your peril.

27 August 2012  Share  0 comments  Print

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Too many SMEs fail because a legal aspect is either ignored or not satisfactorily addressed. Eugene Botha of Sirdar Legal South Africa says that the average South African company needs to comply with an astounding 2 897 statutes, 3 000 to 5 000 subordinate measures as well as various voluntary codes and standards.

Who’s responsible?

One of the key responsibilities of any management team is the compliance and protection of the enterprise and its intrinsic value. However, when your business is small this is often the last issue that you consider. This is despite the fact that in many ways it is one of the most critical.

Botha says, “SMEs walk a tightrope of risk – even though most entrepreneurs are risk takers, the key is to manage the risks. Sticking your head in the ground and ignoring the risks is not the same as taking calculated risks. A legal partner that can assist with risk assessments and management is crucial if the entrepreneur wishes to reach the summit of business success.”

What are the issues?

Do you as a business owner understand all the compliance issues faced by your business? For instance, the law controls all relationships in your enterprise.

Internal relationships:

  • The company structure
  • The rights and obligations of shareholders
  • The board of directors
  • Rights and duties of employees

External relationships:

  • Suppliers
  • Landlord
  • Bankers
  • Business partners
  • Clients
  • Industry
  • Government

The law and your business

You need to understand the requirements of the law and ensure compliance to these. Just some of the pertinent acts include:

  • Companies Act
  • Consumer Protection Act
  • Protection of Private Information Act
  • Promotion of Access to Information Act
  • Broad Based Black Economic Empowerment
  • Employment Equity Act

There are far more acts that impact on your business, but these are the major ones.

Five immediate action steps

  1. Evaluate all current legal and business structures, applicable laws and enterprise risks
  2. Incorporate legal strategy into business plan
  3. Develop a prioritised legal implementation plan
  4. Keep company secretarial and governance documents updated
  5. Seek assistance from legal professionals who understand SMEs
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