Legal issues can arise in every business for many reasons. It could be because of a misunderstanding within the company or a dispute among partners and clients. A business can also face legal troubles when it fails to comply with state laws and other government-mandated regulations.
Being caught up in a legal matter can be costly and time-consuming for many companies—even for established ones. Facing a legal issue can also hurt a company’s reputation, especially if it becomes publicised. As a business owner, you must ensure your business operates according to government regulations and public policies.
The more you know about the legal issues that your business may face, the more you can prepare yourself against them. That said, read the critical points below to learn the most common legal issues and challenges a business could face in 2022.
1. Employee-Related Legal Issues
Employee-related issues include termination, discrimination, and health and safety issues. To avoid termination disputes, write a notice and provide relevant reasons for the employee concerned. The reasons must be clear to them, and they must be based on existing company policies and guidelines.
If you’re doing business in accident-prone industries such as construction, mining, and even warehousing, it pays to strictly follow workplace safety guidelines that are established by your state. Aside from that, make sure to equip your workers with the proper protective gear and other machines that can ensure their safety.
If you’re running your business in Perth, Western Australia, it’s good practice to consult a law firm in your area that will help you understand and comply with all the health and safety guidelines that are established for your specific workplace or industry.
2. Class-Action Lawsuits
Class-action lawsuits occur when numerous people have suffered the same kind of loss or damage by a single company or defendant. Generally, class-action lawsuits would amount to millions of dollars in damages that can cause immense financial difficulties—especially for a small business owner.
Class-action lawsuits usually arise when products are defective, harmful, or dangerous to the health or safety of consumers or the general public. A class-action suit may also arise if your business is found to have caused immense damage to the environment. Shipping companies that caused oil spills and factories that fail to filter waste and pollutants are just examples of this.
Even multinational companies like Pfizer and Shell are not safe from class-action lawsuits. Small to medium business owners have to protect themselves from this legal risk early on. Consider hiring a lawyer to know what measures you can take to avoid this. This is very important, especially if you’re engaged in the cosmetics, food and beverages industry, or the manufacturing industry in general.
3. Lacking The Necessary Permits Or Licences
Every company requires a licence, registration, or permit to operate legally. Businesses that lack these government-mandated requirements may incur hefty fines, penalties, and may even be shut down temporarily or permanently by the proper authorities.
Accordingly, if you’re not sure whether you need a specific permit, consider consulting a lawyer or an official from a local government agency. The proper licensing can help you build credibility. It’s also easier to manufacture and distribute your products and offer services to the general public when you have permits and licences to operate legitimately.
4. Shareholder Disputes
Shareholder disputes are disagreements between shareholders in the company. The common causes of shareholder disputes include breaches of shareholder agreements, disagreements over business direction, fiduciary misdeeds, and differences in compensation or contribution.
Although existing agreements and corporate bylaws may help resolve shareholder disputes within the company, this is not an absolute shield against intra-corporate suits or derivative suits. In shareholder disputes, mediation should be the primary option to resolve the issue. The second-best option is arbitration if all parties can’t reach an amicable resolution after mediation.
If the dispute is still not resolved at the arbitration level, the parties can still elevate the issue to the courts. In this case, the final and least favourable option is litigation, where a judge will determine the outcome.
Conclusion
For most people, running a business is just about increasing profits, managing day-to-day operations, and expanding (if necessary). Young entrepreneurs are usually oblivious to the fact that a business can face various legal issues at every turn. It could be from within the company itself, such as employee and shareholder-related concerns, or external forces such as consumer safety. Seeking guidance from the right business lawyer or law firm can help you avoid or deal with legal issues—even before they arise.
