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How to successfully implement legal tech into in-house legal teams

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The emergence of Legal Tech, or LawTech, represents a significant shift in the legal profession, mirroring the impact of FinTech on the financial industry.

Improving technology remains a top priority for legal firms, particularly in-house legal teams. This deep dive addresses questions about Legal Tech and its implementation.

Legal tech, not to be confused with legal for tech, refers to a suite of technologies designed to support, supplement, or outright replace traditional methods for delivering legal services and improving operational efficiency.

The Solicitors Regulation Authority (SRA) has recognised legal tech potential to revolutionise the legal landscape, offering parallels to the FinTech revolution in finance.

With the market already worth an estimated $28 billion in 2022 and expected to grow, legal tech’s scope for expansion and innovation is vast.

The integration of legal tech offers many benefits to the legal industry.

Efficiency gains

One of the most significant advantages of legal tech is its ability to streamline operations. It automates routine tasks such as searching for contract terms or generating timelines, reduces the administrative burden on legal professionals, and frees up their time to focus on more complex and strategic activities.

Zegal, for instance, provides comprehensive solutions that encapsulate this efficiency through its platform, making legal processes more manageable and less time-consuming.

Enhancing transparency

The legal sector has historically been perceived as opaque, relying on complex jargon and processes.

Legal tech, however, is at the forefront of shifting this perception by offering user-friendly solutions that demystify legal processes. Platforms like Zegal play a pivotal role in this transformation, providing tools that promote clarity and understanding, thereby improving the overall quality of legal services.

Certainty and risk mitigation

Digitising legal processes through tech solutions significantly reduces the risk of human error and the loss of critical documents. Automated contract management systems will ensure that every piece of due diligence is accounted for, safeguarding against potential oversights.

Security enhancements

Data breaches are a constant threat, but legal tech offers robust security solutions, such as digital signatures and encrypted data rooms. These technologies secure sensitive legal documents and build trust with clients.

Despite its advantages, the adoption of legal tech is challenging. Initial barriers often include:

Funding constraints

One of the primary obstacles to legal tech adoption is the initial investment required. Legal technologies, especially sophisticated solutions like AI-powered contract analysis tools or comprehensive case management systems, can be expensive.

Strategies for overcoming funding constraints:

  • Cost-benefit analysis: Conduct a thorough cost-benefit analysis to understand the long-term savings and efficiency gains against the upfront costs. Demonstrating a clear ROI can help in securing budget approval.
  • Phased implementation: Consider a phased approach to adopting legal tech, starting with more affordable solutions to demonstrate value before investing in more expensive technologies.
  • Seek external funding: Explore options for external financing, such as grants, legal innovation funds, or partnerships with legal tech providers, which may offer favourable terms for new adopters.

A lack of tech literacy

The successful adoption of legal tech also hinges on the tech literacy of the legal team. A lack of familiarity with new technologies can slow down or even halt integration.

Strategies for enhancing tech literacy:

  • Tailored training programs: Implement comprehensive training programs designed to bring staff up to speed on the new systems. Consider leveraging the training modules provided by tech vendors.
  • Hiring tech-savvy staff: Enrich your team with professionals who can champion legal tech adoption and support their colleagues through the transition.
  • Encourage continuous learning: Foster an organisational culture that values continuous learning and innovation. Provide opportunities for staff to engage with new technologies through workshops, seminars, and conferences.

Resistance to change within organisations

Resistance to change is a natural human instinct, especially in traditional professions such as the legal industry. Concerns over job security, a preference for established ways of working, and scepticism about the effectiveness of new tools can all contribute to resistance.

Strategies for managing resistance to change:

  • Communicate benefits clearly: Ensure that the benefits of legal tech are communicated to all stakeholders. Highlight how it can alleviate burdensome tasks, allowing legal professionals to focus on higher-value work.
  • Involve teams in the selection process: Engage potential users in decision-making. Allowing them to have a say in selecting legal tech tools increases buy-in and reduces resistance.
  • Success stories and pilot programs: Share success stories and case studies from other organisations that have successfully adopted legal tech. Consider running a pilot program to demonstrate the technology’s practical benefits before a full rollout.

Overcoming these obstacles requires comprehensive planning, prioritisation, and the proper support to ensure legal teams can effectively integrate legal tech into their workflows.

Selecting the right tools

The selection process is crucial to overcoming potential resistance to new technologies. Involving employees at all levels in choosing the right tools ensures buy-in and identifies solutions that address the most pressing needs.

Effective implementation

Beyond selection, successful implementation hinges on thorough training and engagement. Custom-built tools and platforms require a deep understanding to be used to their full potential, underscoring the importance of comprehensive onboarding processes.

Ongoing support and evolution

The fast-paced nature of technology means that legal tech solutions require regular updates and feedback to remain effective. Engaging with service providers like Zegal ensures that legal teams have continuous support and access to the latest advancements in legal tech.

Legal templates, from NDA templates to shareholder agreements, are among the most transformative tools available to in-house legal teams. They serve as a foundational element for swiftly creating consistent, compliant, and professionally structured documents.

By starting with a template, legal professionals can significantly reduce the time and effort involved in drafting documents from scratch and ensure that all necessary legal and regulatory provisions are included.

  • Efficiency and time savings: Legal templates streamline document creation, allowing legal teams to produce necessary documents much faster than traditional methods. This efficiency frees up time for legal professionals to focus on more strategic tasks.
  • Consistency and compliance: Templates provide a standardised format that ensures consistency across all documents. Moreover, because templates can be updated to reflect the latest legal requirements, they help maintain compliance with current laws and regulations.
  • Reduced risk of errors: Using a pre-vetted legal template minimises the risk of omitting crucial clauses or incorporating outdated legal language, reducing the likelihood of contractual disputes or compliance issues.
  • Accessibility for non-legal professionals: Legal templates demystify the document creation process for individuals without legal training, making it easier for other departments to draft preliminary documents without immediate legal input.

Customisation and flexibility

While templates offer a solid starting point, customisation is vital to ensuring that each document accurately reflects the specific needs and circumstances of the transaction or matter at hand.

Zegal grants users access to various legal templates and customises them to suit their unique requirements. This flexibility allows for creating legally sound documents that are perfectly tailored to the specific context in which they will be used.

Integrating legal templates into the daily operations of an in-house legal team involves several steps:

  1. Template selection: Begin by identifying the most commonly used documents within your organisation and selecting templates for these documents as your starting point.
  2. Customisation process: Use platforms like Zegal to customise these templates, ensuring they align with your organisation’s legal and operational requirements.
  3. Review and approval: Establish a review process for customised templates to ensure they meet legal standards and receive approval from senior legal team members.
  4. Training and access: Provide training for the legal team and relevant non-legal staff on accessing and using these templates. Ensure everyone understands the importance of sticking to approved templates to maintain consistency and compliance.
  5. Ongoing updates: Review and update the templates regularly to reflect any changes in law, regulation, or company policy, maintaining a cycle of continuous improvement.

The role of Zegal

Platforms like Zegal play a crucial role in this process, providing a repository of legal templates and a comprehensive legal document management environment.

With features that support customisation, collaboration, and electronic signature, Zegal offers a holistic solution for leveraging legal templates effectively within in-house legal teams.

The platform facilitates the drafting and customisation of documents, their execution, and storage, creating a streamlined workflow from start to finish.

Contract automation

Contract automation stands out as a transformative solution for in-house legal teams. This technology harnesses the power of legal tech to simplify and accelerate the contract lifecycle, from initial drafting to final approval and execution.

Integrating contract automation into legal departments’ processes can achieve unparalleled efficiency, accuracy, and operational agility. 

Understanding contract automation

Contract automation involves using software to automate legal contract creation, negotiation, approval, and management. This technology leverages pre-defined templates and rules to generate contracts, streamlines the review and editing process through collaborative tools, and often includes digital signing capabilities to expedite execution.

The ultimate goal of contract automation is to minimise manual tasks, reduce the risk of human error, and shorten contract cycles.

Key benefits of contract automation

  • Increased efficiency: Automating repetitive tasks and utilising templates for standard agreements drastically reduces the time required to produce contracts. This efficiency allows legal teams to focus on more strategic aspects of their roles, such as risk management and compliance.
  • Enhanced accuracy: By standardising contract creation, automation reduces the likelihood of errors and inconsistencies. This ensures all contracts comply with current laws and company policies, mitigating legal risks.
  • Improved collaboration: Contract automation platforms often feature tools that enable real-time editing, commenting, and version control. This fosters better communication between legal teams, stakeholders, and external parties, facilitating smoother negotiations and faster consensus.
  • Streamlined approval processes: Automated workflows can route contracts to the appropriate parties for review and approval, ensuring that no time is wasted and all necessary checks are in place before a contract is executed.
  • Easier contract management and retrieval: Storing contracts in a centralised digital repository makes managing and retrieving documents more accessible. Advanced search capabilities and tagging mean users can quickly find specific contracts or clauses as needed.

Implementing contract automation with Zegal

Zegal is at the forefront of contract automation, offering robust solutions designed to integrate seamlessly with the workflows of in-house legal teams. Here’s how organisations can leverage Zegal for effective contract automation:

  1. Template customisation: Customise legal templates within Zegal for your most frequently used agreements. This ensures that your automated contracts align with legal and business requirements.
  2. Workflow design: Utilise Zegal’s workflow design features to establish automated processes for contract review, approval, and execution. This includes setting up notifications and reminders to keep contracts moving efficiently through the pipeline.
  3. Collaboration and negotiation: Use Zegal’s collaborative tools to negotiate contract terms directly within the platform. This speeds up the negotiation process and maintains a clear audit trail of changes and discussions.
  4. Digital execution: Leverage Zegal’s electronic signature capabilities to enable parties to sign contracts digitally, further reducing turnaround times and facilitating remote transactions.
  5. Contract management: Finally, use Zegal to store and manage completed contracts. The platform’s robust search and management features make it easy to keep track of contractual obligations, renewal dates, and compliance requirements.

The impact of contract automation

The impact of contract automation on in-house legal teams cannot be overstated. Freeing legal professionals from time-consuming administrative tasks allows them to devote more energy to strategic decision-making, risk assessment, and proactive legal counselling. 

Moreover, contract automation’s enhanced speed and agility enable businesses to respond more quickly to market changes, secure deals faster, and maintain a competitive edge.

Speeding up contract execution with bulk e-signing

Bulk e-signing is a groundbreaking feature of modern legal technology, redefining the efficiency and scalability of executing contracts and legal documents.

As businesses grow and the volume of contracts increases, a streamlined, secure, and time-saving document signing becomes paramount. 

The essence of e-signing

Bulk e-signing allows multiple documents to be signed electronically by one or more signatories in a single action. This technology bypasses the traditional, cumbersome process of signing legal documents individually, offering a seamless and expedited path to document execution.

By integrating bulk e-signing into their workflows, legal teams and businesses can significantly accelerate the contract execution phase, ensuring legal agreements are finalised promptly and efficiently.

Advantages of bulk e-signing

  • Enhanced efficiency: Bulk e-signing reduces the time and effort involved in the signing process. Legal teams can send out dozens or even hundreds of documents for signature in the time it would take to manually process just a few, freeing up valuable time for other tasks.
  • Improved accuracy and compliance: By automating the signing process, bulk e-signing minimises the risk of human error, such as missed signatures or misplaced documents. It ensures that every document is signed correctly and complies with legal requirements, reducing the risk of disputes or compliance issues.
  • Scalability: As organisations grow, so does the volume of contracts and legal documents requiring signatures. Bulk e-signing scales effortlessly to meet increasing demands, making it an ideal solution for businesses of all sizes.
  • Cost reduction: Bulk e-signing eliminates the need for physical document handling, including printing, mailing, and storing paper documents. This reduces direct costs and contributes to environmental sustainability by decreasing paper use.
  • Enhanced security: Digital signatures used in bulk e-signing are encrypted, providing higher security than traditional signatures. They also include a tamper-evident seal and an audit trail, ensuring the integrity and authenticity of signed documents.

Implementing bulk e-signing with Zegal

Zegal’s platform offers robust bulk e-signing capabilities designed to integrate seamlessly with the needs of modern businesses and legal teams. Here’s how to leverage Zegal for efficient bulk e-signing:

  1. Document preparation: Start by preparing the documents that require signatures, using Zegal’s template library and customisation tools to ensure they meet your specific needs.
  2. Signatory identification: Identify the parties required to sign each document. Zegal allows for flexible signatory assignments, accommodating various signing scenarios and hierarchies.
  3. Bulk sending: Upload and send multiple documents for signature in a single batch. Zegal’s intuitive interface simplifies this process, guiding users through each step.
  4. Tracking and management: Use Zegal’s tracking features to monitor each document’s status in real-time. Receive notifications as documents are signed and easily follow up on outstanding signatures.
  5. Secure storage: After signing documents, they are automatically stored in Zegal’s secure, cloud-based repository. This facilitates easy access and management of executed contracts.

Bulk e-signing is not just a feature; it’s a strategic tool that propels businesses into the future of digital contract execution. Its adoption signifies a commitment to operational excellence, leveraging technology to streamline processes, enhance compliance, and drive business growth. 

As legal tech advances, bulk e-signing stands out as a critical enabler of efficiency and scalability in the digital age.

The integration of legal tech represents a forward-thinking approach to legal practice, offering unparalleled benefits in efficiency, security, and accessibility.

While the path to full integration may present challenges, the strategic application of resources, careful planning, and support

Platforms like Zegal play a crucial role in this process, providing a repository of legal templates and a comprehensive legal document management environment.

With features that support customisation, collaboration, and electronic signature, Zegal offers a holistic solution for leveraging legal templates effectively within in-house legal teams. 

How does Share Vesting work?

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Share vesting is when a company gives its equity to its employees or consultants to keep them with the company and incentivize them to reach established performance goals.

You will likely find your share options in your Employment Contract, and they are often used when a senior employee or an important advisor or consultant comes on board.

What are vesting shares?

Share vesting means the company gives its shares to an individual upfront, and the shares are subject to the company’s right to repurchase them.

These shares are known as unvested shares. The buyback right extinguishes over time (or upon fulfilment of certain conditions).

Shares released from this buyback right are known as vested shares. This mechanism is sometimes known as reverse vesting, as opposed to the grant of a share option, which is forward vesting.

Share vesting enables a senior employee or an advisor to have equity immediately upon coming on board. However, the company still retains control over those shares by way of a right to buy back, and, in this way, the company keeps the employee or advisor on board until the end of the vesting period. 

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How share vesting works

Step 1: Check your company’s Articles of Association/Constitution

Check if the company’s constitutional document restricts the buyback of its shares.

If it does, you may build in some appropriate mechanisms in your Share Vesting Agreement or consider another form of rewarding your team (for example, a Share Option Plan).

Step 2: Create a Share Vesting Agreement

Create and sign the Share Vesting Agreement. After signing, the following will take place:

  1. The employee/consultant pays for the shares on the “Purchase Date” that you set in the agreement;
  2. On the Purchase Date, the company secretary issues share certificates in the name of the employee/consultant, and he then becomes a company shareholder. The number of the share certificates and the number of shares covered by each certificate should match the vesting schedule;
  3. The employee/consultant signs a document known as a “Share Power” and delivers this document to the company secretary;
  4. The company secretary keeps the share certificates in the name of the employee/consultant and the Share Power in escrow; and
  5. When shares are vested (i.e. released from the company’s right to buy back) according to the terms of the Share Vesting Agreement, the share certificate in respect of that part of the shares will be delivered by the company secretary to the employee/consultant.

Step 3: The share recipient pays for the shares and signs the Share Power Agreement

The employee/consultant pays for the shares on the “Purchase Date” you set in the agreement.

In addition, the employee/consultant signs a “Share Power” and delivers this document to the company secretary.

Step 4: The company secretary issues and holds on to the share certificates

On the Purchase Date, the company secretary issues share certificates in the name of the employee/consultant, who then becomes a company shareholder.

The number of share certificates and shares covered by each certificate should match the vesting schedule.

The company secretary keeps the share certificates in the name of the employee/consultant and the Share Power in escrow.

Optional: Exercise of the buyback right

If the employee/consultant leaves the company, any unvested shares will be subject to the company’s right to buyback.

The company may exercise its buyback right for three months after the employee/consultant leaves. The buyback right is deemed to be automatically exercised by the company upon the expiry of the three months.

This is unless the company notifies the employee/consultant that it does not intend to exercise the buyback right.

If and when the company exercises the buyback right, the company needs to pay the buyback price for the shares (the same price that the employee/consultant paid for the shares in the first place) to the employee/consultant.

Following this, the company secretary takes the necessary steps to make the transfer effective.

After the buyback, under Hong Kong and Singapore law, those shares will be regarded as cancelled. Ensure the company secretary files with the Companies Registry/ACRA within the applicable statutory timeframe after the share buyback.

Optional: Exercise of the call option

When creating the Share Vesting Agreement, you may opt for a “call option” to be put in place. This call option enables the company to do one of two things:

  1. Buyback all vested shares at fair value; or
  2. Convert all vested shares to non-voting shares (i.e. the employee/consultant, being the holder of the vested shares, can still receive dividends from the company but has no say in the company’s decision-making).

The company may exercise the call option for six months after the employee/consultant leaves the company.

Share Options vs Share Vesting

In a nutshell:

  1. 1st Step: A company’s board of directors will grant share options to key employees (beneficiaries of an Employee Share Option Plan or ESOP).
  2. 2nd Step – The exercise of those share options is conditional upon completing pre-set conditions.
  3. 3rd Step—Share vesting occurs upon the completion of all pre-set conditions: new shares are allotted, or existing shares are transferred to the beneficiaries.

In detail:

Share options are meant to create incentives for the key/senior employees or executives (directors) to stay in the company and increase profitability. Employees holding share options will be motivated to increase the value of their shares and will eventually enable long-term value creation.

A share option plan ultimately aligns the interests of the employees with those of the shareholders and the management, creating a shared stake in the company’s results. It represents a significant step toward a company’s better corporate governance.

A clear understanding of the basic option terms is essential for drafting the detailed terms of a share option plan.

The summary below will provide some guidance towards the mechanisms of a share option scheme, where share grant options limit a private company.

Share options

A share option gives an employee the right to access the company’s share capital in the future. When an employee owns a share option, it is crucial to remember that he/she does not yet own any share in the company. 

The mechanism of a share option is similar to that of a call option as it gives its holder the right to buy shares at a pre-determined price only if certain conditions are met.

An option is a right and not an obligation, meaning the employee cannot be forced to purchase the shares. On the other hand, by granting share options to an employee, the company undertakes to issue the said shares upon satisfaction of the pre-determined conditions and exercise of the options by the employee.

What does a company grant when granting share options? A share option gives conditional access to one or several share(s) of the company. A share option does not grant the employee any of the rights attached to shares, which means that the employee is only entitled to participate in general meetings or to receive dividends once the shares are effectively allotted.

Share options are generally granted for free and cannot be transferred nor sold to other persons by the grantee.

Share vesting

As a share option plan is generally conditional upon the employee satisfying several pre-set conditions or upon the occurrence of pre-set events, the share vesting is the acquisition of the actual right to exercise the options.

Cutomer Story: Minerra, Analytics Solutions

Written by

1-10 Employees

Managing Consultant, Edgar Kautzner

Discover how Minerra has overhauled their contracts using Zegal to create a streamlined system that takes minutes to execute.  

Minerra Melbourne

Minerra is an analytics solution that uses data to help companies make better decisions. Based out of Australia, Minerra’s analytics provides an organisational capability that combines people, culture and the best technology to enable businesses to succeed.

What Minerra Does

Managing Consultant, Edgar Kautzner of Minerra says, “We do data, training and consulting. Everything we do is to help people use data more effectively —that could be running training courses to improve data literacy or helping people use various types of tools to analyze data, but it could also take the form of consultation. So, data strategy, different types of analytics consulting, and building dashboard data integration.”

A professional and streamlined system for legals

Edgar says, “We have two directors running the business and we’ve started scaling up and employing more people recently, but for a period of time, it was just the two of us. That meant we needed to be really efficient in the way that we go about our agreements. 

Generally, for us, the first step after the initial discussion is to get an NDA in place so we can start discussing their situation in more detail. When we were doing it manually, it was cumbersome and awkward. We started using Zegal and we found two main benefits, one is around the mechanics of it:

It’s really easy to shoot out an NDA to somebody, get it signed, and then you can see when everyone’s countersigned the document. It’s all in one place, which is nice and neat.  We have a decent amount of contracts that go through the system, and we’re no longer storing the emails on our shared drive somewhere. 

And then the other side is around the templates. Because we often have different types of agreements that we need to put together, doing those from scratch is a lot of effort. To have templates to start with makes things a lot easier for us. And it’s really flexible with the ability to use a document for different purposes. 

Sometimes we have a partner with who we’re looking at doing a venture that’s a little bit different to the core business. The fact that there are shareholders agreements and agreements for the initial stages of a startup, all those things are really useful to have so we’re not sorting through the minefield of Google. The fact that it’s all there on Zegal, we find it really useful.

Problem-free operations across different jurisdictions

Another reason Minerra decided on Zegal for their legals, Edgar explains, “One of the considerations, when we chose Zegal, was that we’re operating in different jurisdictions. So it needed to need to apply across different jurisdictions, which is the case with Zegal. And in terms of the legal prose being sound and solid. Also, the ability to make changes to the documents —because we often have scenarios where we need to go in and edit things— and then we can keep reusing existing contracts that we’ve done. There’s also the ability to upload a document that we’ve created and put them into the system.

I like the document builder on Zegal because it allows me to get a contract out so quickly. Recently we’ve had three different contractors that we’ve used and it’s important for us to get them to sign an NDA and I was able to get those done, I would say within five minutes on Zegal. I do not want to be spending half an hour, or an hour, of my time, putting a contract together —it’s just not a good use of my time.”

Compliance made quick and easy

Edgar says, “We’re now compliant with our own processes. An NDA or supplies of supply of services agreement can be in place for every engagement. Before Zegal, we may have had an NDA signed down the track a little bit, and that’s not really good practice. Now we’re quite rigid on the initial call that we do the NDA, and that we have the supply of services agreement all e-signed, as opposed to just doing work without having an official agreement in place, which we used to do quite a bit.

With Zegal, it shows that we’re professional and we use a proper document management system. I think many companies our size might just do things the manual way, but we prefer to work smarter rather than harder. We might be a smaller company, but it gives us the operational efficiencies that I think we get back many times over.

The only reason we didn’t do it, to begin with, was that it was hard work, and now it’s not hard work. It’s much easier to get those agreements in place really quickly. It would take me much longer before. And even the sort of the facilitation of multiple signatures, it’s just easy because it’s all handled on the platform. And a pretty serious benefit of the written agreements is knowing how much we’re going to be paid, and we all know what the scope of work is. That peace of mind is really important.”

Visit Minerra here.

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

ZEGAL SEES HUGE CUSTOMER GROWTH IN THE UK

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small business

Zegal, the end-to-end legal platform for small businesses, launched in Australasia, sees tremendous growth in the UK. 

LONDON, UK, 20 June, 2021 —Increasing small business demand for online end-to-end legal services in the UK has Zegal rapidly expanding its team and product range. 

Small businesses in the UK, well-versed in using cloud accounting services like Xero with their accountants, are demanding the same and more from their legal advisors.  Enter Zegal.  The Zegal platform, which is used across Australia and Asia by more than 20,000 smaller companies and their legal advisors, has seen tremendous growth in the UK as businesses adapt to work-from-home offices.

Zegal is designed to be end-to-end—enabling companies to do legal work that is more complex. Zegal’s sophisticated software is the core of the experience, providing the technology for businesses to work alone; or together with good old fashioned real-life lawyers, working virtually through the platform, whenever needed.  The result is streamlined and affordable legals.

As a global Software as a Service (SaaS) company, Zegal was built for the cloud and is an example of how technology companies are providing significant opportunities to small businesses the world over by leveraging the benefits of scale and leveling the playing field.  Zegal recently announced a collaboration with British leading virtual law firm 360 Business Law, selected by Zegal to deliver legal advice to its UK clients. Clients using Zegal’s contract management application can now access a free 30-minute consultation with a lawyer at 360 Business Law.

Daniel Walker, Zegal Founder says, ‘The transition we’ve seen from office to remote working has driven a huge demand in the UK market for virtual legal counsel and platform solutions. We are seeing the strongest demand within the mid-market space, which is a very exciting opportunity.’  

For more information and/or interview requests please contact Alicia Walker at alicia.walker@zegal.com 

 

Linkedin | Facebook | www.zegal.com 

ABOUT ZEGAL

Zegal is the end-to-end platform for the legals smaller companies need. 

Our story

Zegal was founded in 2014 by lawyer friends Daniel Walker and Jake Fisch. Having been a part of the system that preserves quality legal advice only for those that can afford it, the two were determined to build a model that delivers the ‘corporate law firm’ experience to small business.

Today Zegal is the world’s only end-to-end platform for smaller companies to create, negotiate, and sign both the simple, and complex contracts they need to run their business, with expert legal advice, 100% online every step of the way. Since our launch, we have helped more than 20,000 companies close commercial contracts, run leaner HR teams, and enter new markets. You can use Zegal for your company in the UK, Australia and across Asia. Make your legals simple.

 

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

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READ MORE: UK Startups: Essential Legal Documents

READ MORE: New April 2020 tax rules in UK and how to comply with IR35

Pitfalls of Setting Up Business in Australia

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australia ayers rock

There are always pitfalls to any location you may be considering for your business. Australia has some downsides to look at before you decide to set up shop. 

For business owners looking to start their business on the shores of Australia, the country does have many incentives that make it attractive. Australia ranks 3rd in overall business competitiveness within the Asia Pacific region. However, for every ying, there must be a yang.  A commissioned survey by the Australian Chamber of Commerce and Industry (ACCI) concluded that 4 out of 5 businesses are concerned about taxes. It is always good to take note and be prepared for business challenges. Thus, here are some of the main challenges that businesses face in Australia. 

Construction Permits 

Under Australian laws, businesses that require construction services are required to complete 11 different procedures pertaining to construction permits. The procedures also include local authorities’ approval and inspections wherever required. These procedures might seem daunting and tedious at first glance. Essentially, taking a total of 112 days from start to end before the permits required are obtained. However, in comparison to other OECD countries, Australia’s process is rather streamlined and cost-efficient.

For businesses requiring construction permits, it is highly advisable to plan in advance. To start,  allocate the necessary documentation, resources, time, and costs for a smooth application process. 

Utilities Access 

When setting up a physical business address in Australia, not only do you have to apply for construction permits, you are required to apply for utilities usage. 

There are a number of procedures under Australian laws that must be adhered to before utilities are workable. These procedures should be done and processed at the stage of incorporation.

Similarly, business owners need to plan properly to account for the estimated 75 days needed to get the paperwork completed for utilities access. 

Taxation Procedures

Taxation procedures are important for every business, regardless of the country of operation. It is important to make sure all your taxation processes and systems are set up. Necessarily, you should put these in place at the initial stage to facilitate a smooth payment process. 

For first time Australian business owners, your business must be registered with the Australian Taxation Office at the stage of incorporation. Additionally, the superannuation levy is important to take note of. Business owners should familiarise themselves with the process and payment procedure with regards to the superannuation levy. 

The superannuation levy is the money paid by the employer for his employees’ retirement. This levy is imposed on every income above AUD$450 (before taxes) that is payable by the employer to his employees. This levy is applicable to income payments for full-time, part-time and casual employees. The minimum levy payable, also known as super guarantee (SG), is at 9.5% of the employee’s base earnings. To read more about superannuation levy, you can visit the Australian Taxation Office (ATO) here.

waterfall australia
Pitfalls and waterfalls

Importing and Exporting in Australia

Globalisation opens up a plethora of opportunities for businesses to trade, export and import. However, before doing so, Australian businesses are required to have the necessary documentation, approved by the Australian government. Although there is a sizable amount of paperwork to be done, the process takes place for a short period of time. Thus, making it an easy and time-efficient process if the business has already prepared all its necessary documentation. 

For importation documentation, there is no requirement for importers to have in possession an import license to import goods into Australia. However, for certain types of goods, importers might need to obtain permits to clear customs for their imported goods. There is also a list of fees and charges imposed on import entry. Further in-depth information can be found here.

For exportation documentation, the types and nature of goods being exported from Australian businesses determine the type of documentation required. Permission must be sought from the official Australian authorities, the Australian Border Force (ABF). To finish, more information can be found here.

Culture

Australia is known for its international presence, having multiple transnational companies setting up shop in the land. Therefore, with regard to work culture and ethics, it is rather easy to assimilate into Australian culture due to the globalisation the business environment has experienced. 

sydney opera house

Process of Incorporating a Business  

Being a developed country with a capable government, Australia’s business incorporation process is highly efficient and streamlined. A study by the World Bank and International Finance Corporation (IFC) ranked Australia 2nd globally with regard to the ease of setting up a business. For more information on incorporating a business in Australia, you can read on here.

In a nutshell, Australia has a robust and efficient business incorporation system in place. In order to make your business incorporation and operations smoother, having all necessary documentation ready will make application for permits and licenses a breeze. Australia’s government websites also provide a slew of information that answers many questions, increasing transparency of their processes. To sum up, there aren’t many pitfalls to setting up shop in Australia. Generally, The Lucky Country makes it pretty easy if you know what you’re in for. 

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

READ MORE: A Guide to Singapore’s Taxation System

FURTHER READING: A Guide to Australia’s Taxation System

E-sign Laws: Australia

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Part 13: Signing in to the digital age

E-signatures are used around the globe and Australia is no different. With a resilient economy and fast urbanisation of infrastructure, Australia is an attractive country to conduct business in. It has also been ranked 18th in the 2018 World Economic Forum’s Global Competitiveness Report, proving the competency of Australia’s economic landscape.

Australia’s uninterrupted strong Gross Domestic Product growth in the past two decades indicates the potential for increasing growth, enticing international businesses to enter the Australian market.

E-signatures Australia

With international business activities, there is a demand for convenience which entails electronic signatures as part and parcel of business transactions. Therefore, it is important to keep yourself updated with Australia’s regulations with regards to e-signatures. 

The Electronic Transactions Act was introduced in 1999 and adopts an open legal framework.

Read on to learn more about the legal compliance for electronic signatures in Australia specifically and watch out for more in this series on Southeast Asia, Hong Kong, China, New Zealand, Australia, UK, Cayman Islands, and BVI.

The Rules on e-signatures in Australia

Requirement for signature

(1)  If, under a law of the Commonwealth, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if:

(a)  in all cases—a method is used to identify the person and to indicate the person’s intention in respect of the information communicated; and

 (b)  in all cases—the method used was either:

(i)  as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or

(ii)  proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence; 

Applicability of an Electronic Signature 

(i)  as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or

(ii)  proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence; and

(c)  if the signature is required to be given to a Commonwealth entity, or to a person acting on behalf of a Commonwealth entity, and the entity requires that the method used as mentioned in paragraph (a) be in accordance with particular information technology requirements—the entity’s requirement has been met; and

(d)  if the signature is required to be given to a person who is neither a Commonwealth entity nor a person acting on behalf of a Commonwealth entity—the person to whom the signature is required to be given consents to that requirement being met by way of the use of the method mentioned in paragraph (a).

With the international landscape, it is of more importance to understand the legal implications that come along with convenience. Here are some examples of when e-signatures are applicable in Australia:

Use Cases for E-sign

Instances where electronic signatures are generally considered appropriate:

  • HR documents, such as new employee onboarding processes including employment contracts, non-disclosure agreements, employee invention agreements, privacy notices, and benefits paperwork 
  • licenses for intellectual property
  • commercial agreements between corporate entities, including non-disclosure agreements, invoices, purchase orders, sales agreements and service agreements
  • consumer agreements
  • residential and commercial lease agreements

Use Cases Requiring Physical Signature

There are some cases where a handwritten signature will be necessary. These include:

  • official Commonwealth documents such as passports
  • statutory declarations requiring a witness (excluded from ETA)
  • powers of attorney in certain States/Territories (Powers of Attorney Act 2014 (Vic) s 33)
  • wills, codicils and other testamentary instruments (excluded from ETA and notarization required by Succession Act 2006 (NSW))
  • bills of exchange
  • the signature, lodgement, service and filing of documents in connection with legal proceedings in certain States/Territories
  • certain documents under legislation relating to health insurance, life insurance and general insurance
  • certain documents, notices, and consents used in connection with the provision of credit related services under the National Consumer Credit Protection Act 2009 (Cth)
  • transfers of intangible property, such as intellectual property

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

More from the E-Signature Series:
Part 7: Vietnam
Part 6: Indonesia
Part 5: Macau
Part 4: China
Part 3: Japan
Part 2: Singapore
Part 1: Hong Kong

READ MORE: Is e-signing legally binding? 

A Guide to Australia’s Taxation System

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australia taxation system

Australia’s taxation system has been recently revised. Overseen by the Australian Tax Office (ATO), before doing business in Australia, it is important to know the general business and personal tax rates in order to ensure a smooth financial process for you and your business.

Read on to find out the types of taxes and Australia’s taxation system.

For the filing of personal and corporate income taxes, Australia’s system follows the financial year calendar, beginning on 1st July and ending on 30th June the following year. Additionally, corporations can choose to follow the classic calendar year from 1st January to 31st December instead. The taxation rates under the Australian tax systems are applicable for both Australians and foreign residents working in Australia. 

Corporate Tax Rates 

CORPORATE INCOME RANGE

TAX RATE

All Australian Companies*

Federal tax rate of 30%

*Small Business Companies (with an annual turnover below AUD 50 million) 

27.5%

 

Personal Income Tax Rates

PERSONAL INCOME RANGE

TAX RATE

Up to AUD 18,200

0%

AUD 18,200 to AUD 37,000

19%

AUD 37,001 to AUD 90,000

32.5%

AUD 90,001 to AUD 180,000

37%

AUD 180,001 and above

45%

Medicare levy and surcharge

Most people pay a Medicare levy, which is 2% of your taxable income. The levy is charged as part of your yearly income tax assessment. If you’re on a lower income, this may be reduced, or you may not have to pay it at all. If you’re on a high income, you may have also to pay a  surcharge of between 1.0 and 1.5% of your taxable income. This depends on your level of private health insurance and how much you earn.

Taxable income

Your taxable income is the income you need to pay tax on, minus your tax deductions and offsets.

Income that is taxable

Income that you must pay tax on includes money from:

  • employment
  • pensions and annuities
  • most government payments
  • investments
  • capital gains
  • income from trusts, partnerships or businesses
  • foreign income

Non-taxable Income 

You do not have to pay tax on:

  • lottery winnings and other prizes
  • small gifts or birthday presents
  • some government payments
  • child support
  • the tax-free portion of your redundancy payment
  • government super co-contributions

Tax deductions

Tax deductions reduce your taxable income.

Common tax deductions include:

  • work-related expenses
  • self-education expenses
  • charitable donations
  • accountant fees

Tax offsets

Also known as rebates, tax offsets directly reduce the amount of tax payable. They are applied after the tax has been calculated.

Common tax offsets include offsets for:

  • low-income and middle-income earners
  • taxpayers with a invalid relative
  • pensioners and senior Australians
  • the taxable portion of a superannuation income stream

Salary packaging

Salary packaging is when you ‘package’ your income into salary and benefits. For example, you may arrange to receive less salary in exchange for superannuation or car payments.

If you package  your salary, you can reduce your taxable income.

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

READ MORE: A Guide to Singapore’s Taxation System

FURTHER READING: E-sign laws Singapore

Australian Corporations Act: What are Replaceable Rules?

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Photo by Holger Link on Unsplash

When incorporating a company in Australia, the Australian Corporations Act contains a section that allows companies to choose to adopt replaceable rules for their internal governance structure.

Now, we’ll tell you just what they are:

What are replaceable rules?

Section 141 of the Act consists of the replaceable rules that act as a basic guide to help company owners better manage their company. 

There are a total of 39 replaceable rules in the Act encompassing issues concerning directors, conduct of board meetings, company secretary, and shares and dividends. It is important to note that some rules are specific to either a public or private company.

The main difference between a company constitution and replaceable rules is that with replaceable rules, minority shareholders are able to protect their interests against decisions that negatively impact them. 

In-depth information can be found on the Australian Securities & Investments Commission website here.

When do replaceable rules apply?

Both public and private companies are able to apply replaceable rules. However, such rules cannot be applied to one-person companies where the sole director is also the sole shareholder. 

Replaceable rules can be easily applied for all companies registered after 1st July 1998. However, for companies that registered before that, the replaceable rules are only applicable if:

  • The company had a constitution and it was repealed before 1st July 1998
    *If it was not repealed, the additional replaceable rules can still be applied alongside the old Corporations Law
  • The company does not possess a constitution 

How do replaceable rules work?

The replaceable rules applied to a company’s internal governance structure, serve as a contract between the company and each member/director/company secretary as well as between one company member and another company member. 

A breach of the replaceable rules does not mean a breach of the Corporations Act. But, the shareholders of the company are required to comply with any replaceable rules implemented into the company’s internal governance structure. This is because the Court allows members to seek compensation or compliance to the replaceable rules, otherwise, the Court will seek other means of remedies outside of breach of Corporations Act. 

Benefits of applying replaceable rules

  • Time & Cost Efficient: in the early stages of starting your business, funds and time might not be on your side. Therefore, applying the replaceable rules is an easy and basic framework that helps you establish the basics of a company in the short run. 
  • Easy switch to a Company Constitution: in the event that your business decides to adopt a company constitution, it is a rather easy process and requires only a special resolution to be passed. There must be 28 days of notice for public companies and 21 days of notice for private companies. 

 

Pitfalls of applying replaceable rules

  • Difficult to navigate: unlike the company constitution, replaceable rules are not published and thus, might be difficult for shareholders and members to locate for reference. 
  • Lack of comprehension: replaceable rules are unable to cover as many issues concerning running a company as compared to a company constitution. A company constitution is best suited for the company individually as it is easily customisable to the needs of the company specifically. 
  • In general, a company constitution is able to cover more in-depth and consistent rules and guidelines of the company and allows the company to have increased control over its share capital.

In a nutshell, replaceable rules are good to have in the short run, especially when you are first starting your business in Australia. However, it is good to constantly revise the need for replaceable rules in comparison to a company’s constitution over the long run. 

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

READ MORE: Company Incorporation Step by Step: Australia

Company Incorporation Step by Step: Australia

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Photo by Dan Freeman on Unsplash

 

This article covers what you need to know in order to get your new business registered  in Australia. Read on for details on Australia’s requirements, procedures, and the estimated timeline to register a company. 

Minimum Setup Requirements to Register a Company in Australia

For a proprietary company:

  • Director (must reside in Australia) – 1
  • Shareholders (crowd-sourced funded, majority must reside in Australia) – 2 

For a public company:

  • Director (majority must reside in Australia) – 3 
  • Company Secretary (must reside in Australia) – 1 

A company director is able to appoint someone else to act as an ‘alternate director’ for a fixed period of time. The ‘alternate director’ may have the full rights or selected rights of a director, he/she can also act as the ‘alternate director’ for more than one director.

Get Started: Company Incorporation Documents

Registration Process 

The Australian Securities and Investment Commission (ASIC) oversees the business incorporation process in compliance with the Australian Government. The Business Registration Service has streamlined and simplified the  incorporation process so it’s a breeze to do online here. 

*Every registered company in Australia must have an Australian Business Number (ABN) – a unique 11 digit number that is the official and legal identification for your business to the public. (See more below)

The Business Registration Services is a one-stop platform for anybody keen on starting their own business in Australia. The following are the required documents that must be applied and approved in order for the company to be registered.

  • Australian Business Number (ABN)
  • Business Name
  • Tax Registration
  • Licences and Permits
  • Company Governance Structure 

Step 1: Decide on your business structure 

The first step after deciding to start your own business is to decide and declare the type of business structure that is the best fit for your business. The most common types of business structures are:

  • Sole Trader
  • Partnership
  • Joint venture
  • Trust
  • Company

More information on the different types of business structure in Australia can be found here.

Step 2: Establish internal governance structure 

Having a good and strong internal governance structure helps to minimise the risks and streamline the process for making business decisions. However, proprietary companies consisting of only one director and shareholder need not establish an internal governance structure. 

The internal governance structure must encompass the following processes:

  • Procedures for director and member meetings
  • Share structure & transfers 
  • Director appointment and removal 

The business can be governed by either replaceable rules or its own constitution. It can also be a mixture of both.

Replaceable rules are a basic set of rules that can be found in the Corporations Act and is an easier method to govern your business.

A written constitution works hand in hand with a shareholders agreement.

Step 3: Appointment of key officeholders 

Officeholders must be made aware of their legal responsibilities and duties when being appointed officially into their roles. Therefore, it is important to obtain written consent from the parties that have been appointed to office positions. Although the consent is not officially required as a document by ASIC, it is important to have it in the company’s records. 

Step 4: Registering your business with the ASIC

Registering the company will entail submission of a completed ASIC Form 201 Application and the payment of a registration fee (dependent on the type of business structure) of between AUD$408 – AUD$495.

Once the application has been approved, ASIC will issue the ABN and a certificate of registration which must be displayed at all times at the place of business.

The most important identity for a company in Australia is the Australian Business Number (ABN). Having an ABN makes your business identifiable on its own and is used for official and legal purposes as well. Application for an ABN is free for everyone, but not all are entitled to an ABN.

A company requires an ABN if:

  • The company is conducting/ starting a business in Australia 
  • Producing supplies connected with Australia’s indirect tax zone 
  • A Corporations Act company
Reserving a business name 

The business name for the company must follow a fixed set of requirements in order for it to qualify as a company name. You can check if the business name intended has been registered already by searching it on the Australian Securities & Investments Commission (ASIC) website. The cost of registering a business name is AUD$36 (for 1 year) or AUD$85 (for 3 years). The online application process takes roughly 12 minutes to complete, and the approval, if successful, happens within 2-5 working days. 

*Note: it is optional to reserve and select a business name. Businesses in Australia are officially identified by their Australian Business Number (ABN).

Step 5: Tax registration and compliance

Businesses must also make sure they are fully compliant with the Australian taxation payment system. Therefore, the business must have the required tax registrations like a Tax File Number and the required exemption documents (if needed). 

Registering a foreign company in Australia

According to the Corporations Act, a company is listed as a ‘foreign company’ when it is a company registered outside of Australia. In this case, the company must be registered with ASIC in order to practice business in Australia. 

The steps to register are generally the same as for a local company. However, there are additional documents for registration. 

Documents required:

  • Form 402 Application 
  • Present certified copy of entity’s certificate of incorporation/registration
  • Present certified copy of the entity’s constitution
  • Memorandum of appointment of the local agent or power of attorney (in favour of the local agent) – Form 418 
  • Memorandum stating the powers and rights of certain directors 
Accounting

All transactions relating to the business’s tax and superannuation issues, as well as tax returns and reports, must be kept in the company’s records. For companies with more than AUD$10 million annual turnover, all accounts and returns must be submitted by 15th January after the tax year ends. For companies with less than AUD$10 million annual turnover, all accounts and returns must be submitted by 28th February after the tax year ends.

Annual General Meeting

All companies must convene its annual general meeting within 18 months of initial incorporation and subsequently, within five months of the end of every financial year. 

Corporate Tax

All “small business” companies are required to pay a corporate tax rate of 27.5%, unless their annual turnover does not hit the minimum of AUD$50 million. All other companies are subjected to the full 30% on their taxable income.

Annual filing

All businesses operating in Australia must submit financial reports with ASIC and this is done usually towards the end of the financial year. Annual financial reports must be submitted for auditing as well. 

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

Start managing your legal needs with Zegal today

MORE IN THIS SERIES: Company Incorporation: Hong Kong, Singapore, Japan, New Zealand, Australia,Taiwan, Macau, China, Philippines, BVI, Vietnam,Thailand, Indonesia, Cayman Islands, United Kingdom

READ MORE: Documents required when incorporating your business

FURTHER READING: Company Incorporation Step by Step: Singapore

 

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