Legal factors affecting the business
Form of business entity. The very early stage in starting business operation – in any level and business capacity – is determining the form of your legal business entity. In Indonesian laws, there are several forms of business organisation such as firm, private partnership, CV, Cooperative and limited liabilities company. As commonly acceptable in other law jurusdiction, limited liablity company is the most accepted form of business entity, considering of the limitation and separation of the owner’s responsibility. Under the Indonesian law, a limited liability company shall be treated as an individual “person” and therefore there is a veil that separating the responsiblity of the company and the owners / management. Generally, a third party may not drag the owner or directors of a LL company to be responsible for the wrongdoings or default of the LL co. But there are several things that may pierce the veil of responsibilities between LL Co and owners / directors such as failure to obtain corporate approval for certain transaction, mix up of the use the companies and personal’s account.
Compliance to laws and regulations. Compliance issues dont sound sexy for business companies not only in Indonesia but the whole of the globe, but actually they are crucial for having a sound business and drivers to the business excellent. Being in a high level of compliance rate will not only protect your business, but it will increase the repution among the consumers and banks. For some case, the bank even give you a lower interest than others. But it is also important to remember for every company, that incompliance will risk your busines and will present the risk of fines, revocation of business license, invalidate insurance policies, breach of contracts, tax issues with the tax authority and even criminal consequences.
Contract risk and management. Contracts may be very complex, but the dynamic between the parties are very simple; one parties want to get the largest leverage, while the other want to make lowest expense. Whatever you are looking for in a contract, the value you can get is only on the document you sign. Poor or perverse incentives, bad planning and demand management, ill-informed buying, deliberate contract manipulation, miscommunication – they can all erode the value of a contract. A fundamental part of managing contract risk is clearly understanding your contract in-depth. You also need to engage with the end users of your contracts to ensure they fully understand the terms of the contract and how it is intended to operate.
Handling disputes. Dispute sounds very lawyer-favourite but business-hate process. Nobody want to end his businesses or transactions in dispute either in court or arbitration. But when the time comes and you have no other option, you have to manage your dispute carefuly. When you want to appoint a legal counsel, you have to be certain whether the lawyer has a goood understanding on your case, he/she has sound experience in handling similar case, discuss the litigation strategy openly etc. We advise to our clients that contract file management must be handled based on an assumption that someday you will have to go to court with it. You have to collect all contracts and amendment, side letters, payment slips, correspondence, services complaint and all things in a very good maner, so when you have to use it as evidence in court, everything are already in place.