Bromley Solicitors

Bromley Legal and Business Audits

How often should I conduct an audit ?

There is no hard or fast rule.  The answer depends on the size and nature of your business, and the extent of the resources you have at your disposal to conduct audits.  Generally speaking, it is advisable to conduct an audit every six months or so.  Whether you conduct an audit on a more regular basis is up to you of course, but you should ask whether conducting an audit more regularly will bring about more cost savings, benefits and reduce risk that outweighs the costs and resources you need to employ in order to conduct an audit.

Why bother carrying out a legal audit?

The law changes very frequently, so it can be difficult to keep up with changes.  Conducting a legal audit will allow your business to adapt to these changes and pre-empt legal disputes, which can be expensive both in terms of legal costs and fines (if the OFT is investigating, for example).  A legal audit will also allow to streamline your business and potentially make significant cost savings.  By examining the contracts your business is currently engaged in, for example, you might find you have the scope to have them renegotiated on terms which are more favourable to prevailing market conditions and your business.  In summary, a legal audit will allow your business to adapt to change, identify opportunities and risks and devise a long term strategy to implement changes within your business.

What should I do when conducting a company law audit?

Companies are tightly regulated, so you should make sure you are compliant with your duties under the Companies Act, as well as ensuring your company registers are up to date and properly filed with Companies House.  This will mean reviewing the Director, Company Secretary, Members and Director’s interest registers, as well as minutes of board and shareholder’s meeting and the company’s Annual Returns.  You will also want to have a look at your company’s articles of association as well as any shareholder agreements.  With regards to duties under the Companies Act, you might want to make sure proper procedures are being used.  For example, you are under a duty to make sure your shareholders can review your registers and other relevant documents between 9am and 5pm on any business day, and the means to make copies are also available.

How should I carry out an audit of my contracts?

A contract audit is used to review your contracts, make sure you are in compliance with your obligations under the them as well as statutory laws, and renegotiate terms if appropriate.  You should look at your business’s terms and conditions of trading, commercial leases and licenses, agency, franchise and distribution agreements.

What are the benefits of conducting an intellectual property audit?

An intellectual property audit is used to identify all the intellectual property rights your company owns, make sure they are properly registered and protected.  You should review your patents, trademarks, design rights and copyrights.  You may discover some of your rights are not being fully utilised or not at all.  Where this is so, you may want to sell or lease your rights, therefore creating new sources of income for your business.

When is due diligence carried out?

Due diligence is carried out prior to purchasing a business.  It is used to identify the true legal and financial state of the business, so you are in a position to come to a more objective decision as to whether you should buy the business or not and the scope and extent of any indemnities that you request to be included in the sale to cover potential areas of risk that cannot be rectified.

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