Legal Cover vital for Protecting SMEs

Legal cover critical for protecting SMEs

April 25, 2014 Sarah Bassett Better business

According to the most recent Global Entrepreneurship Monitor (GEM) report, South African’s complex regulatory environment costs small, medium and micro business (SMME) owners R79 million annually and represents business owners’ greatest area of concern.

With mixed responses to the recent African National Congress suggestion that an SME ministry be instituted, insurers suggest that low-cost legal cover can go a long way to covering your business-owner clients’ risk, freeing them to focus on core business activities.

“Ever-changing legislation could see an entrepreneur crippled by a simple labour or client dispute. SMMEs must comply with a slew of complex regulatory requirements, and professional legal assistance is necessary in order to become – and stay – compliant, but the cost of legal representation and advice is so high that most SMME owners simply cannot afford to be compliant,” explains Sunette Ansara, the divisional head of Legal Sense.

“This leaves businesses wide open to risks when confronted with labour disputes with employees, contractual disagreements with suppliers, service providers or clients, potential liability claims, unrecoverable debt and ultimately, costly litigation,” adds Ansara.

According to the GEM report, the most costly red tape issues are:

  • Tax administration
  • Mandatory regualtions
  • Labour issues
  • Black Economic Empowerment (BEE)
  • Municipal regulatory requirements

Many business owners may not be aware of the protection that legal insurance could afford their business, enabling access to crucial legal representation and professional legal advice.

The value of commercial legal protection insurance for SMMEs is that business owners have access to legal advice, support and infrastructure to ensure compliance on all levels, without breaking the bank. It also frees business owners to focus on actual business activities, without having to waste their time trying to resolve legal problems and challenges when it could be better spent on production and revenue generating opportunities.

“It is well worth the relatively small monthly investment by a business owner to subscribe to a prepaid commercial legal protection plan for peace of mind and to ultimately safeguard the business,” Ansara concludes.

Common disputes requiring legal expertise:

  • A supplier does not supply the correct service or goods, negatively impacting a business as a result.
  • A business partnership or trading relationship goes sour and matters need to be settled.
  • A customer does not pay for services or products and it is too expensive, or the business does not have the legal expertise at hand, to recover the money owed to it.
  • An employee committing fraud or giving bad service under a company’s name.
  • An employee stealing a business’s customer base or breaching the terms of their contract and taking business away from the company.
  • Debtors not paying, requiring legal action against them.
  • An employee takes a company to the CCMA for unfair dismissal.