In the area of complex legal environment and competition, companies have to be very vigilant towards regulatory laws.
Often, businesses have entered into contracts over a period of time which may contain terms which they are not aware of, or which are not in their best interests commercially.
The lawyers of the law firms of our ‘competence network’ provide a service to audit existing commercial documentation to provide a report on the legal areas of concern for a business, as well as suggestions to reduce contractual risk going forward. As part of this service getsix® create a central registry for clients to enable them to be aware of any clauses of note, and of dates for the service of notice so that auto-renewals can be avoided if necessary.
getsix® understand a legal audit as an assessment and appraisal to ensure due compliance with various laws and regulations applicable to our customers. A legal audit according Polish law, by warranting due compliance, reduces the risk of unnecessary litigation and imposition of fine and penalties to ensure smooth running and growth of a concern.
An independent legal audit establishes trust in a company as it reduces legal liabilities against it.
Importance of a legal audit
A legal audit is significant for a number of reasons. Listed below are a few examples:
- Ensures corporate responsibility;
- Ensures applicability of variety of laws applicable to a company;
- Is in the interest of the public, in general, who can be attached to the company in the form of shareholders, resulting in constant watch on its actions by government, non-governmental organisations etc;
- Ensures plethora of guidelines are followed by companies;
- Compliance as a sine qua non many a times while trading with foreign firms;
- Requirement as to submission of compliance certificate by listed companies to the stock exchange.
When to conduct a legal audit?
A legal audit should be made part of routine business of every company – like a health check-up is for an individual. Though it depends upon the size and type of business, a legal audit should be conducted every two or three years. Most importantly, a legal audit should be conducted as soon as any legal omissions are discovered or suspected, as it will enable the concern to take immediate remedial steps and the legal liability will be avoided or minimised, as in case of many such faults, the penalty increases per day.
Areas to audit
- Proper documentation for the nature of company as it varies, as in case of private and public company;
- Registration of partnership firm;
- Licence for industry, factory or manufacturing unit;
- Modes of litigation planning
- Compliance with labour laws with respect to the working conditions, harm during the course of employment, health insurance, retrenchment etc;
- Compliance with environmental laws;
- Submission of various documents by companies to the Registrar of Companies and regional director;
- Intellectual property of the concern;
- Product liability.
Legal audit mechanism
- Determination of audit goals;
- Preparation of compliance audit checklist;
- Meeting with senior managerial officers;
- Preparation of non-compliance list and talk with concerned person;
- Making observation and recommendations;
After the meeting, our team studies entries made in the checklist and the documents submitted by the concern to find out to the extent to which the company has complied with the applicable laws. It identifies the budding legal liability of the concern and suggests ways to get rid of it.
getsix® Legal audit report provided after the audit
The final report will contain status of compliance and non-compliance of the company concerned. It will highlight the legal liability, legal errors in papers or agreements etc. and possible solutions to cope up with the risk involved. The report will categorise the contents of the list of non-compliance according to their gravity and repercussions, as some may threat the establishment of the concern directly, some may invite criminal prosecution, while some may simply be punished with penalties. The report will containing the findings and recommendations is an important document for the company, which should duly implement the recommendations made by the legal audit team.
Advantages of legal audit
- Reduces potential legal liability;
- Improves the efficiency and outcome of a concern or a division thereof;
- Update of documents, registration, policy etc. of a concern;
- Facilitates good corporate governance;
- Establishes and increases trust and credibility of a concern;
- Protects public interest as well.
Challenges before legal audit
- Lack of co-operation of the divisions of the target concern or its officers;
- Chances of manipulation in documents and concealment of facts;
- Confidentiality of information is at risk.