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Legal Audits and Checks You Should Conduct to Ensure Compliance in Your Business

Writer's picture: Jonker Vorster AttorneysJonker Vorster Attorneys

In today’s fast-paced business environment, maintaining compliance with South African regulations is critical to safeguarding your business and avoiding costly penalties. Regular legal audits are an essential tool to identify risks, streamline operations, and ensure compliance.


This blog explores why legal audits are necessary, the areas you should review, and how they can protect your business from legal liabilities.


What Are Legal Audits?

Illustration explaining what legal audits are. For example a legal audit is a systematic review of a company’s processes, policies, and documentation to ensure compliance with applicable laws and regulations. The goal is to identify any gaps or risks that could expose the business to legal disputes, penalties, or operational inefficiencies.

A legal audit is a systematic review of a company’s processes, policies, and documentation to ensure compliance with applicable laws and regulations. The goal is to identify any gaps or risks that could expose the business to legal disputes, penalties, or operational inefficiencies.


Regular audits also provide an opportunity to align your business with best practices and make proactive adjustments to changing legal requirements.


Why Are Legal Audits Important for Businesses?

Identifying Potential Risks

Legal audits play a crucial role in identifying areas where your business may not comply with current laws. These risks include:

  • Non-compliance with labour laws, such as the Basic Conditions of Employment Act.

  • Outdated contracts that no longer reflect current operations or relationships.

  • Insufficient data protection policies, especially under POPIA (Protection of Personal Information Act).


By identifying these issues early, you can take corrective action before they lead to costly legal disputes.


Avoiding Financial Penalties

Failure to comply with legal obligations can result in significant financial penalties. For example:

  • Non-compliance with tax regulations may lead to audits and fines by SARS.

  • Breaches of labour laws could result in legal claims from employees.


Regular audits help ensure you meet all obligations, reducing the risk of fines and reputational damage.


Key Legal Areas to Audit in Your Business

Contracts and Agreements

Review all business contracts to ensure they:

  • Are legally enforceable.

  • Include up-to-date terms and conditions.

  • Reflect current business relationships and obligations.


For example, outdated supplier contracts may fail to include penalties for late delivery, leaving your business exposed.


Compliance with Employment Laws

South Africa’s labour laws are stringent and require regular review to ensure compliance. Areas to assess include:

  • Employment contracts: Do they meet the requirements of the Basic Conditions of Employment Act?

  • Workplace policies: Are they aligned with the Labour Relations Act and Occupational Health and Safety Act?


Regularly updating employee documentation reduces the risk of disputes and ensures a safe working environment.


Data Protection and Privacy Policies

Under POPIA, businesses must protect personal information collected from employees, clients, and customers. Legal audits should assess:

  • Whether privacy policies are clearly communicated and compliant.

  • How personal data is stored, accessed, and shared.

  • Security measures in place to prevent data breaches.


Non-compliance with POPIA can result in fines or reputational damage, making this area critical for legal audits.


Tax Compliance

Ensure that your business meets all tax obligations, including VAT, PAYE, and corporate income tax. Areas to audit include:

  • Accuracy of tax filings.

  • Proper documentation of financial transactions.

  • Payment schedules to SARS.


Intellectual Property Rights

Audit your intellectual property portfolio to ensure:

  • Trademarks, copyrights, and patents are registered and up to date.

  • No unauthorized use of your intellectual property by third parties.

  • Your business is not infringing on the intellectual property rights of others.


Licenses and Permits

Check that all required business licenses and permits are valid. These include:

  • Basic operating licenses.

  • Industry-specific permits, such as health and safety certifications for food businesses.


When Should a Business Conduct Legal Audits?

Start-Up Stage

Conduct an initial audit when establishing your business to ensure compliance from day one.


Annually or Biannually

Regular legal audits, either annually or biannually, are essential for keeping up with changes in laws and regulations.


During Significant Changes

If your business undergoes restructuring, expands into new markets, or changes ownership, a legal audit can help identify and address new risks.


Steps to Conduct a Legal Audit

  1. Engage Legal Professionals: Hire an experienced attorney to conduct a thorough review of your business practices and documents.

  2. Identify Key Areas for Review: Focus on high-risk areas like contracts, data protection, and tax compliance.

  3. Evaluate Current Policies and Procedures: Assess whether your policies align with current laws and business objectives.

  4. Implement Corrective Measures: Address any gaps or risks identified during the audit.

  5. Monitor and Update: Establish a system for regular reviews and updates to maintain compliance.


FAQs About Legal Audits

Why is it important for a business to have regular audits?

Why is it important to conduct a legal compliance audit for a management system?

When should a company be audited in South Africa?

What is the main reason why an audit is considered to be necessary?

What are the risks of skipping legal audits?

Conclusion

Regular legal audits are not just about avoiding fines—they are a proactive way to protect your business, improve efficiency, and build trust with clients and stakeholders. By identifying and addressing compliance gaps, you can ensure that your business operates within the law while mitigating risks.


At Jonker Vorster Attorneys, we specialize in conducting comprehensive legal audits tailored to your business’s needs.


Contact us today to ensure your business stays compliant and protected.

Illustration of Jonker Vorster Attorneys located in Paarl and focusing on property law, debt collection, litigation and commercial law director telling clients to contact us if they need help.

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