Legal Audit & Compliance

Corporate Structuring, Legal Audit, Compliance, Policy Monitoring

Legal Audit

Enhancing Legal Audit & Compliance

An entity operates under various legislations or codes that have been passed internally or externally through different well-established bodies entrusted with such a mandate. These laws cut across various business operations that, in certain instances, are likely to be overlooked by the entity’s administration. The ignoring of the applicable laws results in multiple limitations in the operation of a given entity and attracting unimaginable liabilities that cost the entity in the long run. Hence, the relevance of legal audit and compliance measures to be considered.

The leadership in organized entities always appreciates the need to be abreast of the laws that affect their business and to what extent or whether new executive decisions need to be made to protect the entity’s interest. In that regard, an entity is subjected to a periodic legal audit and compliance process in two essential folds: internal and external legal audit and compliance.

Internal legal audit and compliance processes are more advantageous to big organisations that have an in-house counsel or an in-house legal department that enables them to have a yearly legal audit. Entities using the internal model are likely to be exposed to possible rampant changes in the law that happen when the parliamentary bodies pass legislation, which is then assented by the president or when government agencies/ authorities exercise their statutory powers to pass various regulations through Gazette Notices.

An external legal audit is effected in two folds. In big organisations, regardless of having an in-house legal department/ team that conducts legal audit and compliance, there is always the need to allow a third-party (external lawyers’) to perform the legal audit. Ideally, the big organisation will always secure external counsel to conduct legal audits and compliance in a two- or three-year cycle. The other external legal audit model is effected directly by external lawyers; this is whereby the organisation does secure the external lawyers to conduct a yearly or once every two years legal audit on the operations of the organisation.

The legal audit process initiates by understanding the operations of the company. It is essential to understand the various dimensions in terms of the past, current – experiences/ operations – and future of the entity; for instance, companies registered under the repealed Companies Act, CAP 486 had precise objectives unlike some under the Companies Act, 2015 – however, even some companies registered under the Companies Act, 2015 have precise objectives depending on the industry targets such as Insurance, Banking Sector, any product under the Capital Markets Authority, Energy, among others. Therefore, if a company’s operations seem to be broad and with many subsidiaries, it is essential to be briefed by the management about its businesses and objectives.

The process of conducting legal audit and compliance entails focusing on all laws that affect a business, which includes various categories such companies’ laws, land and environment laws, intellectual property laws, tax laws, capital markets laws, employment laws, immigration laws, sector-specific laws, among other laws. The outcome is always a detailed Initial Report with a Matrix Report that will guide the organisation on how to move on and comply with the law.

A legal audit is beneficial to the shareholders as it reduces unnecessary liabilities that result in costs that affect profit margins, the executives since it streamlines operations and knows how to maneuver effortlessly as they structure the direction and goals of the organisations, smooth interactions with government agencies or bodies, and boost a positive reputation across the market.