Are you starting your own digital business during Coronavirus? Six legal tips you should be following.
Six legal tips for digital businesses start-ups and entrepreneurs
Introduction
The Coronavirus pandemic has put a spotlight on all aspects of digital business. As the ripple effect of COVID-19 continues to impact the entire world, entrepreneurs must take a proactive approach to create new businesses. Where are the new business opportunities in a post Coronavirus world?
Apart from tearing the entire world economy to shreds, COVID-19 has prompted businesses to keep at least 75 per cent of their human resources at home. Keeping the workforce at home means more users at home relying on Internet-enabled devices to buy goods and services, find work opportunities, seek medical assistance and just about every other day to day social and economic function.
Being stuck at home for health and safety concerns, we are learning about using the Internet to meet our needs. Those who did not use the Internet before are now forced to use it and will not want to go back to doing things the way they did before Coronavirus.
There is, therefore, a "new normal" and within its bounds are new business opportunities. Every industry must adapt to the modern world. Digital marketing, commerce, marketplaces, finance, banking, and many others present some of the best opportunities for entrepreneurs. Finding new ways to launch, market and generate business growth in a Covid-19 world can be daunting, but the digital entrepreneur is better suited to thrive while others struggle.
Are you a small business owner ready to take on the new normal? Strengthen your chances of success by following my tips as to what you'll need to have in place legally to win those strategic partnerships and protect your businesses presence.
The impact of Coronavirus on business
According to McKinsey, around 7.6 million jobs, or 2% of the UK workforce, are at risk due to Coronavirus.
In a UK parliamentary briefing updated on the 22 September 2020 employment has dropped significantly between May - July 2020 for 16- 24-year-olds.
There have been similar and even more profound shocks to the healthcare system, retail and finance.
These massive shifts from previous quarterly employment, healthcare, retail and finance stats indicate opportunities for the insightful entrepreneur.
Six Coronavirus Legal Tips You Need to Consider to Start Your Digital Business During Coronavirus
Take the right steps to protect your business. Follow these legal tips and take a proactive approach to give your business the best chance of success:
1. Get your contracts written by a lawyer specialising in digital business
Typically, digital companies will need the following types of agreements:
Partnership contracts – these will set out what you and your co-founders are contributing to your business and are taking out.
Shareholder contracts – these are similar to partnership contracts except tailored towards ownership of shares in a company. See my informative article on shareholder agreements specifically - What are ten important things to consider when making shareholder agreements for small businesses?
Employment contracts – these include everything from freelancers in various roles, to full-time equivalent contracts.
For the start-up there a wide variety of legal template website all offering a comprehensive range of contracts written by lawyers including:
Legal Contracts; Simply Docs; The Legal Stop; The Rocket Lawyer and many more.
Low priced template contracts are exceptionally good for essential protection, but they have obvious limitations in specialist situations. For example, who owns the content or has the right to use it when the freelancers' work is a derivative of a copyrighted work? A template contract will not adequately cover complex intellectual property rights ownership issues and other complicated but quite common issues of dispute.
Further template contract websites limit their liability to the price of the agreement, which is about £35 to £350 plus VAT if you run into legal problems because of their agreements. Since employment and intellectual property disputes always run into thousands of pounds, the accountability of template contract providers for negligent advice is absurd.
Typically these online legal services businesses also select non-UK jurisdictions like the United States or Canada, which makes taking legal action against them for inadequate contracts pointless if you are UK based. The cost of a legal claim in an overseas jurisdiction will significantly exceed the liability cap of £35 - £350.
Partnership contracts – a digital business could involve several different types of partnerships. Digital companies will contract with data analytics businesses to better understand consumer behaviour and improve marketing. There will also be partnerships with warranty providers, point of sale retain credit providers, customer identity verification businesses, affiliate marketers, influencers and other third parties.
2. Clearly define and set out your business and how you will interact with users, customers and third (Terms and Conditions and GDPR compliant Privacy Policies)
You must outline details of your business both what you will provide and the responsibilities to users, customers and third parties both legal and commercial in the form of your terms and conditions and privacy policy.
Privacy Policy (GDPR)
As from the 25, May 2018, businesses marketing to the EEA had to comply with General Data Protection Regulation, Regulation (EU) 2016/679 (EU GDPR). The adoption of the EU GDPR into UK law was assisted and supplemented by the Data Protection Act 2018 (DPA 2018). It would be best if you considered both the GDPR and UK DPA 2018 when drafting a UK compliant privacy policy.
Brexit
According to the Withdrawal Agreement, EU law remains applicable in the UK until the end of the implementation period on 31 December 2020.
ICO has confirmed that businesses do not need to take any immediate action during the implementation period to deal with any differences between the UK approach to privacy and the EU's.
The UK has also agreed on equivalent data protection arrangements with countries outside the EU.
Privacy Shield (Data Transfers Outside EEA)
It is worth noting the end of the privacy shield and the Schrems II decision.
The European Commission can decide whether a country has an equivalent level of protection for personal data. Under Article 45 of the GDPR.
Countries outside the EEA, including the US, were not recognised as having adequate protection. But because of the large volume of business between EU countries and the US, the Commission issued a Decision in 2000 under Directive 95/46/EC (the Data Protection Directive), enacting the so-called Safe Harbor Privacy Principles. A UK controller was lawfully allowed to transfer data to a Safe Harbor registered organisation.
Following a reference to the Court of Justice of the European Union in 2015 Schrems v Data Protection Commissioner ( Schrems I), the Court of Justice declared the Safe Harbor framework invalid.
But very soon after Screms I in 2016 the Commission reached an agreement with the US to replace Safe Harbour with the EU-US Privacy Shield (the Privacy Shield).
On 16 July 2020, the Court of Justice ruled in Schrems II that the Privacy Shield was no longer valid with no grace period. The Schrems II decision has a severe immediate impact on small businesses marketing to the US. It will have a significant effect on UK businesses selling/marketing to the EEA after the implementation period.
Terms and Conditions
Your terms and conditions are a long and formal contract of how your business works and the limit of your legal obligations.
Terms and conditions go on forever, meaning that they will need to be tweaked as your business evolves. You should indicate the creation date and time stamp updated versions of your Terms and conditions because they are a working document.
Ecommerce
If it is an eCommerce business, you need to be clear about your exchange and returns policy, cancellation policy and provide a model cancellation form.
Force Majeure
Covid-19 means that deliveries may be delayed or may not arrive at all, you need to account for Force Majeure events in your terms and conditions now more than ever before.
Children
If your target market includes children, then you must consider the ICO children's code introduction for small businesses.
Anyone can enter into a contract except in exceptional circumstances. One of these circumstances is if you are a minor. Although minors can enter into contracts in certain situations the age of majority is 18. When contracting with users under 18, you should make sure you are complying with laws that protect minors.
I have previously written several articles on website terms and conditions. Please see this article on the dos and don't's of website terms and conditions writing which provides a detailed overview.
3. Build Your Online Reputation
Because of the Coronavirus pandemic, there is more effective digital marketing, but it also means more noise drowning out your brand. Online reputation has never been more critical. Google reviews, social media sharing and independent validation of you and your brand has never been more urgent.
Many entrepreneurs and business gurus struggle to maintain their review management strategies and other online reputation content during the pandemic because of the increase in malicious content.
Aside from burying harmful content under positive news, you can take action to get Google and Yelp to disclose the identity of online users, and permanently stop those users, even receive damages.
To cope with the increased popularity of the Internet, small business owners need to begin launching or relaunching their reputation management campaign as soon as possible. Also, use reputation management software to keep track of your brand interactions and quickly mitigate any negative with prompt legal action.
4. Examine Your Intellectual Property
The most important intellectual property asset to protect in starting a digital business is your brand name. You safeguard your brand name via trademark registration. You may also be able to secure the algorithms in your code, your design notes, text and images through copyright. Your inventions and designs are protected using patents and design rights/copyright. I have written several articles on trademarks, including explaining the trademark regime and DIY trademark registration. I have also written several copyright-related articles, including Website Copyright Infringement - How to Bring a Case? which you can refer to for more information about digital-related copyright.
5. Establish Robust Security
I cannot overstate the importance of Internet security. Data security is a massive issue for small business. As well as taking out insurance policies, it would help if you put in place strong Service Level Agreements or Data Security Agreements with web services businesses.
6. Invest in a good lawyer
The Coronavirus pandemic has provided an excellent opportunity for the digital entrepreneur. Consumer behaviour indicates an even more significant shift to online services.
It would help if your business were highly visible online to increase your chances of success. Forced to stay at home people are seeking jobs, entertainment, news, good and services online. But you must be present and active online to maintain visibility. But also, with a massive volume of traffic and success comes legal issues. It would help if you were ready for the inevitable problems that will arise with a visible and successful small business or start-up.
It would be better to invest in a specialist lawyer to assist you than lose thousands in potential new customers, lawsuits or regulatory fines.
Conclusion
These six tips will help you avoid some costly mistakes made by entrepreneurs in launching a start-up.
Typical problems including paying a minimum of £10,000.00 to a disgruntled employee for wrongful dismissal, or your business partner wants to take 50% of the business to go and set up a rival company, or that a freelancer is claiming ownership of the copyright to critical published content on your website.
No contract alone will 100% resolve these challenges you will face. However, by paying a skilled lawyer, you should be able to avoid or better manage your legal problems, no matter what the website or e-commerce business.
To obtain an accurate, opinion from me about your case or matter please contact me on (020) 7305-7491 or at peter@pailsolicitors.co.uk we would be delighted to assist you. The writer is an Internet and digital technologies + entertainment law specialist, owner and principal solicitor at PAIL® Solicitors. Peter Adediran's specialist niche areas of practice are digital media business SMEs and IP, both contentious and non-contentious. (Charge rates may vary)