What does it mean to be proactive, rather than reactive
Feb 01, 2016We have all heard of the saying – “be proactive, rather than reactive” – but what does that actually mean, particularly when you are talking in the context of a business? It means taking steps sooner rather than later to avoid issues arising, rather than only taking steps once the issue has arisen – which usually takes more time, money and worry. In the legal context, this can best be demonstrated by looking at some of the issues we have dealt with in recent years, issues which could have been avoided if the client had their legal affairs in order at the start:
Situation 1:
An employer was in dispute with an employee as to what the employee’s entitlements were. How could this have been avoided? By having a customised employment agreement drawn up and signed off by both parties at the time that the employee commenced.
Situation 2
After operating her business successfully for a period of years, a client allowed her sister to start working in the business as well, and after a short time, transferred ownership of the business name to her sister, and also allowed her to operate the bank account. The client had a falling out with her sister, following which her sister proceeded to operate her own business under the same trading name, took some of the business’ core equipment, and continued to draw monies out of the bank account. Neither the client nor the sister knew how to resolve the dispute between them. How could this have been avoided? By having a partnership agreement drawn up between them, they could set out the circumstances within which the partnership would come to an end, and what steps would need to be taken to those circumstances.
Situation 3
A client was challenged by the ACCC about the labelling on its product. How could this have been avoided? By having a specialist lawyer review and approve the proposed labelling before it went into production. The review would ensure compliance with labelling requirements regarding:
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country of origin (ACCC)
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industry specific regulations (e.g. Food Standards Code)
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imported goods (Commerce (Trade Descriptions) Act 1905 (Cth))
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measurement of the product (National Trade Measurement Regulations 2009 (Cth)).
Situation 4
At the end of the fixed term of the franchise agreement, the franchisee was unsure as to whether or not they should renew the franchise agreement for a further term. In the meantime, the franchisee continued to operate the franchised business, giving the franchisor the impression that the franchise had been renewed (although documents had not been signed). When the franchisee decided to exit the franchise, the franchisor attempted to bind the franchisee to the terms of the franchise agreement, and sought damages. How could this have been avoided? By approaching a specialist franchise lawyer at the end of the fixed period, the franchisee could have been guided as to what to do and not to do, to preserve their rights regarding the agreement, and to avoid creating the impression that the franchise agreement was continuing.
Situation 5
A client entered into negotiations with a prospective purchaser of its business, and subsequently signed off on a 1 page document by which the client agreed to sell the business to the purchaser for a fixed price. This created a number of issues – the real asset to be sold was not the business as such, but the client’s shares in a Pty Ltd company which owned the business. The lease was in the company’s name, and any change in control of the company lessee required the landlord’s approval. Some of the business assets were under lease, and not owned by the company as such. Although the client and the purchaser had negotiated to settle the deal within a matter of days, the matter eventually settled after a number of months because of the numerous issues to be dealt with. How could this have been avoided? By contacting lawyers at first instance, the 1 page document could have been drafted with the correct details and with the correct procedures, ensuring that the deal was negotiated and settled within a reasonable time frame and with correct documentation in place.
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Statements like “I don’t need a lawyer” or “I haven’t got the time/energy/money to get a lawyer involved in this” could end up costing you more time/energy/money in the long run.
Contact the Shire Legal team if you have any questions.
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