A lawyer specializing in corporate law explains the legal risks that managers may violate without their knowledge.

The most difficult part of running a business is that there are unpredictable risk factors scattered everywhere. This is why many businessmen visit law firms to review legal dispute elements and establish a preemptive prevention system to prevent problems in advance.

In reality, business operations are regulated by numerous laws, resulting in constant disputes. Therefore, it can be said that it is essential for management to understand related laws, ranging from management risks (Fair Trade Act, Commercial Act, Capital Markets Act) to labor risks (Labor Standards Act) and industrial site risks (Serious Accident Punishment Act).

In particular, we will take a closer look at five legal risks that can occur throughout company operations, as corporate legal risks can lead not only to financial losses but also to serious issues such as a decline in brand image, suspension of business, and criminal punishment for management personnel.

First, let's look at labor law violations. There are many cases where small businesses are complacent about drafting employment contracts, and it is not uncommon for workers to be caught violating the drafting of employment contracts by failing to include other working conditions in addition to essential items such as wages. In addition, failure to prepare or issue a labor contract is a representative example of a labor law violation, and caution is required as a fine of up to 5 million won may be imposed under Article 114 of the Labor Standards Act. Furthermore, you should be aware that non-compliance with the minimum wage may result in imprisonment for up to 3 years or a fine of up to 20 million won, and violation of the minimum wage law, such as non-payment of overtime pay, may result in imprisonment of up to 3 years or a fine of up to 30 million won.

The following is a violation of the Personal Information Protection Act. While running a business, you encounter personal information in many situations. Problems usually arise when collecting personal information of customers and employees, and legal consent must be obtained when collecting and storing personal information. If personal information is processed without considering legal aspects, penalties such as fines may be imposed. If information leaks occur, civil and criminal liability may arise, and under the Personal Information Protection Act, you may be subject to imprisonment for up to 5 years or a fine of up to 50 million won. In addition, we should not overlook the fact that it may result in a decline in corporate value and financial difficulties as a result.

The third thing to keep in mind is trademark and copyright infringement. When using a business name or brand trademark, legal disputes may arise if it is used without confirmation of existing trademark rights. In addition, using images, videos, music, etc. without permission and selling products that infringe on other companies' designs or patent rights are also considered copyright infringements and are highly likely to be involved in a lawsuit. If you are caught copying, displaying, distributing, or renting property rights protected under the Copyright Act, you may be subject to up to 5 years in prison or a fine of up to 50 million won. In addition, special caution is required as a separate lawsuit for damages may be filed by the victim (company).

Fourth, unfair trade practices are also an inevitable legal risk. Business operators have obligations under relevant laws such as the Subcontracting Act and the Fair Trade Act, and failure to comply with them may result in various legal sanctions. If you are running a franchise business, you cannot be free from problems such as signing contracts and commissions. This is because operating a franchise without signing a contract or collecting excessive fees is also a violation of the Franchise Business Act. If a franchise headquarters commits an act prohibited by law, such as providing false or exaggerated information about key information such as business performance or expected profit status, or concealing or reducing important facts, it may be subject to imprisonment for up to 5 years and a fine of up to 300 million won.

Lastly, we will look at legal issues related to holding general shareholder meetings and board meetings of corporations. If it is a stock company, it holds a regular general shareholders' meeting once a year, and in this case, it must follow commercial law procedures throughout the entire process from convening notice to decision-making. The most representative example is the omission of registration of changes after the appointment and resignation of directors and auditors. In this case, a fine of up to 5 million won may be imposed, so it is recommended that you apply within the deadline.

Effective risk management goes beyond problem prevention and can be a way to increase a company's sustainability and reliability. Legal risk management is a necessity, not an option, when running a business, and regular legal review and continuous education are the best ways to prepare for potential risks.
 

Small Business Team

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Legal risks that managers may violate without their knowledge as explained by a lawyer specializing in corporate law (Shortcut)