Legal Framework of a Company

The legal framework refers to the set of guidelines, rules of conduct and regulations within which any entity operates. Similarly, the corporate legal framework describes the set of laws that govern the conduct of business activities in a country. Any business within this legal space must carry out its activities taking into account that the laws that govern the way of doing business in a country must be obeyed since these laws are enforceable in the courts.

Founders are by nature people with a global vision, we love to imagine new ways of doing things. The problem, however, is that sometimes we try to paint the larger image before set up the mechanics to run a business.

The legal aspect of starting a business is often viewed as a time-consuming task, one that is overlooked until it becomes an absolute necessity. But to allow your business to run freely, this needs to be prioritized before even considering attracting clients, hiring staff, or ultimately launching into investors.

For companies to continue to exist in a country or region, they must dshow that they are committed to complying with the laws governing business activity in that country. A business organization that is not committed to operating within the legal framework of its host country is bound to have problems in the future.

For businesses to thrive, they must be backed by a strong legal framework based on four key principles: simplicity, transparency, fairness, and accountability.

Importance

The legal framework of a company is what guarantees that your service or product is protected, that you are not operating illegally and that you do not lose out if things change on your team. An excellent example of not doing this well are the Winklevoss twins, who, as is well known, did not legally document the first stages of his social media platform, allowing Mark Zuckerberg to launch Facebook using some of the code he had written to they.

Although they can be easily avoided, legal challenges are one of the main reasons startups fail. Founders who don't identify their legal needs early on could end up realizing there's a fundamental problem with their business at the end of the journey.

Key principles for a strong legal framework

Aim for simplicity

Laws governing businesses should be strict, but not complex. The report argues that the simpler rules governing business structures (meaning they are limited in scope and are easy to understand and explain) are easier to administer and therefore do not impose a substantial cost burden on companies Business. They are also, the report continues, more difficult to break undetected.

However, over the past century, the regulatory burden on businesses has increased significantly. The report presents some suggestions that could help address this problem.

'As a matter of convenience', say the authors, 'policy-makers may consider the adopting a one minus two approach, whereby, for every new business law adopted, two laws are removed unnecessary.

They also suggest the use of expiration clauses in business law, according to which a law automatically expires on a certain date if it is not renews: In many cases, socially undesirable business outcomes can be traced back to outdated and inappropriate business forms that are being used. Reviewing regulations can help ensure that they remain up to date and appropriate for the current needs of society.

Be open and transparent

The second principle identified in the report is that legislators should be open and transparent with business during the development and implementation of business law.

For the good of society, lBusinesses need a predictable environment in which to thrivesays the report. The government should indicate where possible the direction in which it intends to orient the business environment to enable companies to plan for the long term. In practice, this means consulting with stakeholders before the new trade laws are implemented and a "reasonable time frame" for implementing the new laws.

Behave consistently

The report stresses that business law must be applied consistently and equitably among business enterprises. This is important for effective law enforcement, because the perception that regulation is designed exclusively for one group will discourage others from engaging with it, and also to avoid protectionism and abuse of the competition.

'Governments must be ready to intervene when it is clear that the legitimate exploitation of competitive advantage has become in an abuse, "says the report," and especially when such activity is coordinated between interests to create an impression of acceptability. " Governments must also take care that the application of uniform laws does not harm particular groups, he adds.

Prepare to be responsible

The responsibility of companies builds trust, the report argues, and business law should facilitate this. "Companies must be prepared and able to explain their actions and strategies to stakeholders," he says. «The legal framework within which companies operate must be designed in a way that allows such openness and, at the same time, gives interested parties are confident that the disclosures made by the companies are complete, comparable and reliable ”.

Not having a legal framework could bring your business to a halt just as it starts to gain momentum. By dealing with these processes from the beginning and applying the elements mentioned above, both you and your company will navigate smoothly through the most exciting phases of your journey, without being afraid of pitfalls avoidable.

In this way, the company will be able to prosper and be with solid legal support and avoid legal problems with the country you reside in the future.