Article by Yulia Barnes, Managing Partner, Barnes Law
And as a commercial lawyer, I am all too familiar with the things that can go wrong in business when founders don’t have the right legal protections in place.
At Barnes Law, my boutique commercial law firm based in the heart of Mayfair, we have a strong track record in resolving disputes through mediation, helping our clients avoid costly legal proceedings – however, it’s always preferable to avoid litigation in the first place. And to help you do so, here are five legal things that every female founder needs to get right:
When setting up your own business, it is of course essential to map out your direction of travel, to have a clear vision and purpose. Haphazardly doing a little bit of this and that is a sure-fire route to stagnation and, ultimately, failure. Nailing down your business idea and planning for success from the outset is therefore crucial.
However, one thing that founders often overlook as they draw up their entrepreneurial road map is the importance of legal protection for them and their business. So as you write your plan, you should also consider the legal documentation that you will need to put in place to bring said plan to fruition.
When founding a business, an ounce of prevention – i.e. sound legal advice – at the outset is worth many pounds of cure in the form of protracted, costly and stressful litigation further down the road. I therefore recommend that every business owner have a legal ‘health check-up’ so they can be confident that they, their business and their customers are protected.
Budget is often a concern here, with many founders worried about the expense of legal services. Some are tempted to cut corners and download generic contract templates from the Internet; however, these may be out of date and not offer founders the specific protection they require, leaving them and their business vulnerable.
We offer a free consultation to founders; but even if you have to consult a law firm that charges for this initial advice, the sums involved versus the knowledge and protection thereby gained make this a no-brainer and an essential step in your entrepreneurial journey.
When it comes to compliance, the regulatory hurdle is extremely high and the legislation is being amended on what sometimes feels like a daily basis. This makes it extremely difficult for lay people to keep on top of their obligations without professional help.
Yet it is vital to have the right policies in place: you need to ensure that all client documents are kept private and confidential; that you’re not breaching any anti-money-laundering procedures; that you have privacy policies in place; that you have good contractual terms with your clients and that they are also compliant with consumer law. It is also important to remember that employers are regulated and that you are required to have terms of employment in writing. Certain employment policies became mandatory too.
This is why I advise that you work with a good compliance officer to make sure you have all your bases covered – for your own peace of mind and that of your customers and clients.
It doesn’t take much to do this, but you would be surprised how often founders trip up here. For example, we have had instances where founders commission artwork for a logo or even a name for their brand, and then go ahead and use this without anyone first checking whether anything similar already exists. So it is very important to check the trade mark register before committing to any branding, so as to avoid having to redo all the work.
Intellectual property is another area where founders can stumble if they’re not aware of the pitfalls. The thing to be most aware of is that if you commission any creative work, the intellectual property rights belong to the creator, regardless of whether or not you have paid them for the work. It is therefore vital to have the rights assigned to you before you can register the IP.
Of course, it’s wonderful when you have strong working relationships with your co-founders, business partners and customers. But business is stressful, things change and relations with other shareholders and partners can sometimes turn sour despite the very best of intentions. And customers – may they be ever so friendly – can sometimes fail to pay for goods and services, leaving you high and dry if you haven’t taken steps to protect yourself.
This is where good contracts can help you avoid a world of financial and legal hurt. A proper shareholder agreement with co-founders and business partners is essential, as are contracts in writing with your customers, clearly stating that they will be liable for any legal costs if you have to resort to debt-recovery measures. Hope for the best but have protections in place for worst-case scenarios.