Mind the Gaps – Caveat’s Legal GAP Analysis

Caveat Legal

“If you’re proactive, you focus on preparing. If you’re reactive, you end up focusing on repairing.”

― John C. Maxwell

You are a director and shareholder of a small company. Things have been going well for your business, which is scaling better than you could have hoped for.

The financials are looking great. Your reputation in the market is good. You want to grow the business further. You decide that it is time to start looking for investors to take the business to the next level. The interest is there but the due diligence reveals too many red flags, leaving you with nervous and uninterested investors or disappointing offers.  At this very late stage, you are forced to go back and take time to start fixing the gaps.

If you own a business and want to avoid this picture or generally want to ensure the all-round strength of your behind-the-scenes business operations, it is vital to ensure that all “legal” boxes are ticked. This means ensuring that all  items that form part of a legal due diligence investigation, usually conducted to inspect the vitality of a business from a legal perspective, are in good order. Proactive steps are required to ensure this, and the sooner these steps are taken the better for your business in the long run.

Caveat Legal has devised and packaged a fixed fee Legal GAP Analysis product for small businesses, which entails a proactive due diligence aimed not only at having things in order for a big commercial deal but, more generally and importantly, ensuring  the peace of mind that comes with good corporate governance.

The process commences with a questionnaire to be completed in respect of your company, a review of the documents and information provided by you and the provision of a simple report identifying legal gaps, what is needed to plug them and the urgency with which each should be addressed.

These are some examples of the kinds of issues identified in the Legal GAP Analysis package:

  • CIPC documents (i.e. Companies and  Intellectual Property Commission) and other documents, records and registers that are required in terms of the Companies Act 71 0f 2008 are not in place or have not been updated;
  • There has been a tendency to get the business going without considering the finer details in contracts. For example, in agreements between companies and their customers the commercial terms regarding product and price are clearly set out, but the agreements lack any provisions that reasonably limit the exposure / risk of the supplying company. On the other hand, where companies are the customer, the terms and conditions of the other party (i.e. the supplier) have not been carefully considered in order to ensure that their interests are adequately protected;
  • Companies do not have the necessary certificates, permits or licences in place (or they have failed to renew them), as required in terms of applicable laws;
  • Companies do not have adequate employment agreements, policies and/or disciplinary frameworks in place;
  • Companies do not have training for employees on the laws and regulations which they are required to comply with, nor do the companies have employment policies in place which bring those legal requirements into the ambit of their terms and conditions of employment;
  • Key agreements have been misplaced through the absence of contract management policies and procedures;
  • Key intellectual property is not protected through registration where such registration is possible, and no clear record of such intellectual property is kept; and
  • Inadequate or no preparation has been made for the Protection of Personal Information Act 4 of 2013 (POPI) which comes into full force and effect on 1 July this year. Failure to be adequately prepared for this Act will not only involve financial risk but reputational risk as data breaches attract publicity.

You may be wondering “what next?”, after the GAP analysis review has been conducted and the report has been provided. By this stage, you should have knowledge around what needs to be addressed within your company.  The choice will be yours as to how best to tackle the identified gaps. Fixing gaps need not be a once-off exercise – it can be phased in accordance with urgency and budget. Depending on your report, some tasks could be completed by you and others could require the attention of your lawyer. Either way, knowledge is the first step.

Tony Robbins has said that “Knowledge is NOT power. Knowledge is only POTENTIAL power. Action is power”. With this quote in mind, the Legal GAP Analysis product provides you with the potential to secure your company’s power.

Shaylyn McDonald

Shaylyn has an LLB (Cum Laude) from Wits and was admitted as an attorney in 2008 after having completed her articles at Werksmans where she rose to the level of senior associate. After joining Bell Dewar (now Fasken) she took up an in-house position at Transunion where she rose to the level of general counsel. Shaylyn joined Caveat in 2018 specialising in corporate and commercial work.

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