Understanding rights and liabilities to safeguard interest

  • News
  • Thursday, 17 Mar 2016

Wong said with proper legal advice, start-ups would know the extent of their legal rights and liabilities.

ENTREPRENEURS talk about business strategies most of the time.

But there are other important areas to look into as well.

As the saying goes, a small leak will sink a great ship and some aspects, such as legal risks, can be costly if not looked into.

It is commonly assumed that small and medium sized enterprises (SME) think engaging a lawyer would be costly.

“Start-ups normally will spend time, money and effort in marketing and branding, but neglect the importance of understanding terms of agreements which they have to enter.

“Even if they take time and effort, start-ups still need to understand the terms,” said legal firm partner of Munhoe and Mar Advocates and Solicitors, Wong Mun Hoe.

The terms and conditions may vary from engaging a supplier, entering into a franchising arrangement, employing helpers and renting or purchasing a premises to engaging a contractor to renovate the premises.

“With proper legal advice, start-ups won’t rush into commercial agreements blindly, and more importantly, they will know the extent of their legal rights and liabilities under the agreement which they had signed,” Wong said.

Understanding the legal environment that involves laws that govern the industry is vital for SMEs too.

Elaborating on the mechanism that can safeguard the SME’s interest, Wong said an agreement was one of the simplest tools to manage legal risk.

Highlighting the various stages of a business where legal advice would be needed, beginning with setting up a business, Wong said if a company with multiple investors were involved, they should regulate the shareholders’ relationship with a shareholder’s agreement.

Another example is a partnership agreement if the parties decide not to form a company to save on costs.

Moving on, after running a business for a while, when there are more staff or new business opportunities, Wong said the business owner might feel the employees’ handbook is inadequate and would like to review and redraft, or if the entrepreneur decides to expand its business by way of franchising, then a franchising agreement will come into play.

“When it comes to franchising agreement, both the franchisor and franchisee should seek advice from a lawyer who has experience in drafting similar franchise agreements,” he said.

Legally qualified persons are constantly in negotiation on the subject matter and they have tested the law (as they litigate, arbitrate and seek declaration from the courts of law), he added.

Last but not least, when a commercial relationship turns sour, SMEs will need pre-dispute advice.

“When an amicable settlement cannot be reached, the pre-dispute advice will at least mitigate the damage if the dispute has to go to litigation,” he concluded.

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