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Five tips to help you avoid costly business disputes

Legal risk can lie dormant within any business and the cause is often the underlying structures that were put in place at the very start. As any sensible adviser will tell you, growing a business without solid foundations will eventually become problematic and when it comes to legal risk this can result in costly and time-consuming disputes that will disrupt your plans and eat away at profit.

The Goodman Derrick dispute resolution team regularly help clients devise strategies to manage areas of risk, and in this article we have highlighted the five most common issues that give rise to problems.

Co-founders, shareholders, investors, fellow directors

Your business partners might be family, friends or colleagues who you may have known and worked with for years. Despite the bonds that have been created there is every chance that, over the lifespan of your business, you will have disagreements. 

Your business and business model will also have changed since it was founded and the agreements you have in place may have their origin in an earlier, perhaps less complicated, time.

You should review your key intra-company agreements so that they remain relevant and effective now and in the future, so that if disagreements do arise you can deal with them quickly and constructively to prevent them becoming serious disputes.

The key legal documents that you should review on a regular basis, and certainly after a period of change, are your Memorandum of Association, Articles of Association, employment and service contracts and shareholders’ agreements.

Look out for our guide relating to shareholders’ agreements in a future issue.

Data

If you are obtaining, storing or using data it is vital you ensure you have effective and compliant data management policies in place. The business benefits are potentially very large and if you fall foul of GDPR you will find yourself facing potentially very large fines and sanctions. These can be easily avoided if you comply with the new regulatory framework.

Our GDPR compliance guide is available here.

Ideas and intellectual property

Whether you are just about to launch an app or have developed a new product range, all of the proprietary innovation you have must be fully protected before it hits the market.

There are many ways to do this (patents, trade marks, designs or copyright) but make sure you have what you need in place from the outset to prevent others from using your ideas and hard work as if it were their own.

A thorough review of all of your intellectual property to identify and deal with any lose ends should be undertaken to protect your business going forward.

Contracts

Your business ought to have a set of structured terms and conditions of trade. These need to be reviewed regularly to make sure they remain relevant. If you do not have such terms, is that deliberate or have they been forgotten?  This also applies to your suppliers - deals and agreements regularly change in scope and price and your supplier contracts should be flexible enough to cope with changes in demand and specification.

You should ask your solicitor to review your core documents and major contracts and to advise you regarding renegotiation where necessary.

People

Your people may be your biggest asset and a healthy workplace is essential to the success of any organisation.  Whether you prefer contractors or employees, all of your staff need to know what is expected of them and what they can expect in return. Directors should have service contracts and all employees should have employment contracts.

It is increasingly important to have clarity from the outset on who owns/controls any intellectual property rights that may arise as a result of employment. A clearly drafted employment or service contract will assist in resolving any issue which has arisen over ownership and use of IP rights.

At Goodman Derrick our dispute resolution experts have built up extensive experience in helping businesses at every stage of their lives protect themselves against potential disputes.  If you would like to discuss how your business could take full advantage of that experience,  please email Jonathan Cole at jcole@gdlaw.co.uk or call Jonathan on 0207 7404 0606.