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Common Mistakes in Company Management: How to Avoid Litigation

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Managing a company is like walking a tightrope. On the one hand, you need to make strategic business decisions, raise capital, and develop new products. On the other hand, you cannot neglect the legal aspects, which can lead to costly and protracted litigation.

We see both sides of the coin. Our commercial litigation department handles many cases of business disputes, class action lawsuits, and company liquidation. Unfortunately, we see the same common mistakes over and over again, which could have easily been avoided.

Here are 5 such mistakes, along with practical tips on how to avoid them:

Lack of Documentation:

  • The Problem: Managing a company without proper documentation is like sailing without a compass. Lack of documentation can lead to misunderstandings, legal disputes, and even financial losses.
  • The Solution: Make sure to document every business activity, from board decisions to contracts with customers and suppliers. Use advanced management systems and organized manual documentation.

Non-Compliance with Laws and regulations:

  • The Problem: A company that operates in violation of laws and regulations risks heavy fines, criminal proceedings, and even closure.
  • The Solution: Make sure to know the laws relevant to your company’s activities and consult with a lawyer regularly.

Poor Risk Management:

  • The Problem: Every business involves risks, but failing to manage them properly can lead to significant losses and even collapse of the company.
  • The Solution: Conduct regular risk assessments and take steps to minimize risks. Use appropriate insurance and seek help from professionals.

Ignoring Legal Advice:

  • The Problem: Trying to save on legal advice costs can cost you dearly. Professional legal advice can prevent critical mistakes and help you make the right decisions.
  • The Solution: Consult with an experienced lawyer in your field of business before making significant decisions, especially when dealing with legal challenges.

Unfair Conduct:

  • The Problem: Unfair treatment of employees, customers, or business partners can lead to expensive lawsuits and damage the company’s reputation.
  • The Solution: Manage the company fairly and equally, respecting the rights of all parties involved.