Smart Investor Malaysia


Review Your Business Legal Health Yearly


Whether we are business owners or in employment oftentimes we neglect our legal well-being. The general notion is ‘what isn’t broken need not be fixed’.

What we fail to recognise is that most of the time, a lot of our legal problems, which may at the material time appear small or insignificant, can with time and neglect, multiply and become costly to rectify.

Most times these legal crises and complications can be averted or reduced if the right steps are taken at the appropriate time.

Why is a Legal Health Check Important?

It is important to remember that if your financial and legal matters are badly managed, you are directly exposing yourself personally as well as your company and clients to various legal implications.

These risks can cause unnecessary cost, loss of business relationships, knowledge and possible statutory or regulatory breaches. The effect of a badly managed business is far- reaching and can in some situations take years to rectify/remedy.

The advice here is to be constantly aware and apply your mind to a couple of key areas when you are performing your own legal health check. Here are some of them:

1. Have You Complied with the Relevant Statutory Regulations & Laws?

legal compliance

Often, as business owners, you may not be aware of the changes in law that may have taken place, and as such need to be advised by your legal advisers on the latest legislation or amendments to any current legislation that concerns the industry you are in and the services you render.

There are currently more than 20 new Acts that have been made and countless new regulations and amendments to the current laws.

If you are not keeping abreast with the changes, you will be exposing yourself and your business to risk. What you do not can hurt you!

2. Partnerships and Shareholding

legal partnership and shareholding

Make it a yearly affair where you have a formal discussion with your partners/directors on their roles, scope of work, performance and entitlements.

Have these discussions minuted and served on them officially. This makes it easier to address partnership or business issues and enables you to make any necessary changes to your business structure, revising targets, scope of work etc.

It is also of utmost importance to have written partnership and/or shareholders agreement to cover all terms of your partnerships and shareholding.

Ensure that your agreements adequately deal with matters such as buyouts, raising capitals, succession, put & call options and exit clauses. Your partners/directors must also be fully aware of their duties and obligations under the new Companies Act 2016.

3. Trade Creditors and Debtors

By this time of the year, you must know who owes your company money and how you intend to recover those unpaid debts. Have a list of creditors prepared and send out the necessary reminders and letters of demand.

Start the process of recovering monies before the New Year. The longer you wait, the harder it will be to collect these debts.

For those creditors who, for whatever reason cannot pay you in full, it would be advisable to speak to them about an instalment plan and get a settlement agreement drafted to confirm the instalment terms. If possible collect post-dated cheques.

4. Employment Contracts

legal contract

It is pivotal for you to know what your exposure as a company or business in an employment dispute. It is also important for you to know the processes and procedures that you need to carry out before you terminate a belligerent employee.

It is prudent that you have an Employment Handbook prepared and served on all your employees.

This year alone there have been a lot of discussion on the need for change to our employment laws in particular, to laws covering sexual harassment at work, maternity and paternity leave, data protection and personal information.

5. Intellectual Property

Whatever industry you’re in, it is prudent to consider registering your trademark and tradename. As your business gains popularity and people start recognising your brand and name, it is inevitable that a competitor may want to benefit from your goodwill to gain some traction.

You do not want a competitor to proceed to use your name and logo in a similar industry and reap the benefits and goodwill off your hard work.

Please do consider securing your intellectual property rights. It makes it easier for you to enforce your rights when you have the requisite trademarks being registered.

6. Written Contracts and Agreements

Always have your written contracts and agreements revised and up to date. Review the terms of your Purchase Orders, Invoices, Supplier Contracts, Equipment/ Machinery Leases, Rental Agreements.

It is important that at all material times, you are aware of your key suppliers and key customers. Review these contracts and agreement as there may be renewal clauses in those contracts that may have slipped your mind, which could cause you undue losses.

7. Train Your Staff

legal staff training

Always train your staff to be aware of what type of legal documents to look out for. For example, a Winding up Notice that is served on your registered address needs to be brought to the immediate attention of the Board of Directors, as there are dire repercussions of not responding to the said Notice within the statutory imposed period of time.


There is no such thing as a ‘one size fits all’ when it comes to legal matters. You will need to design your own Legal Health Check which is suitable for your own business or company.

Like a well-tended garden, you will need to constantly prune, remove and regrow your legal structures to ensure that it is in perfect order.

Always remember that a detailed examination of these key areas will help you identify any danger or grey areas which will then enable you to circumvent or reduce any potential risks and liabilities to your business.

About the author

SHARMILA RAVENDRAN is the founder of the law firm, Messrs Ravindran located in Mont Kiara, Kuala Lumpur. She has more than 14 years of experience in the legal industry servicing clients that include local and foreign companies. She is now actively involved in corporate advisory work and commercial litigation and is a Panel Adjudicator with the Kuala Lumpur Regional Centre for Arbitration. She also sits on the Bar Council Child Rights Committee and is the Legal Director for Lean in Malaysia. She can be contacted at                                                                                                                                            

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