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Why legal compliance audit might save your day

Business, LawNovember 23, 2023
Why legal compliance audit might save your day

What is a legal audit, to start with? A legal audit is an evaluation of a company’s operations with regard to its compliance with the laws and regulations that apply to it, or internal guidelines such as corporate bylaws, controls, and policies and procedures

What is a legal audit, to start with? A legal audit is an evaluation of a company’s operations with regard to its compliance with the laws and regulations that apply to it, or internal guidelines such as corporate bylaws, controls, and policies and procedures.

A legal audit should be able to identify areas of risk for noncompliance within the entity and make recommendations and/or report to management accordingly.           

It is important that a compliance check is performed regarding laws to which an entity must adhere on a more frequent basis in order to stay compliant with frequently changing laws and regulations.

An audit checklist guides a legal audit process and whereas a number of areas might be subject to legal oversight, the main areas a legal audit must cover are labour; environment, health and safety; corporate governance and data security.

Labour law requirements are arguably the main area of a compliance check in light of the fact that many laws relate to the protection of workers.

In Uganda, among the key labour laws are the Workers Compensation Act 2000, Minimum Wages Act 2000, Employment Act 2006, the Labour Union Arbitration & Settlement Act 2006 and the Occupational Safety Act 2006.

These labour laws have standard requirements against which things such as an entity’s human resources management practices, employee relations, collective bargaining, equal employment opportunity policies among others, should be developed.

A company is expected to comply with corporate governance regulations, and as well observe a moral and ethical code of conduct in the interests of transparency, accountability and sustainability.

The corporate governance practices that the checklist looks into include determining whether the registration of the entity was lawful, how is/was the appointment of directors and election of office bearers done, procurement and investment practices, shareholders’ meetings, tax remittances, decisions relating to profit distribution and performance of corporate social responsibilities.

In Uganda, the Companies Act 2010 provides a primary framework for governance of companies, alongside other laws like the Uganda Registration Services Bureau Act 1998, the Public Enterprises Reform & Divestiture (Amendment) Act 2002, The Leadership Code Act 2002, the Public Financial Accountabilities Act 2003, the Collection Investment Scheme Act 2003, the Financial Institutions (Corporate Governance) Regulations 2005 among others.

Best practices demand that entities ought to maintain proper, comprehensive and updated information about their operations and ensure that this data is not lost or corrupted.

Most companies use information communication technologies to generate, transmit and store their data. In Uganda, one needs to address their minds to the Data Protection & Privacy Act 2019, and Computer Misuse Act 2011, among other laws, which place an obligation on all entities in possession of client data to ensure that it remains private and confidential and is used for the right purposes.

While carrying out a legal audit, it is important to ask yourself whether an entity’s data use and security measures are up to standard.

Legal audits when completed should be able to provide recommendations for improvements or corrective actions and to prevent future deficiencies or nonconformities. Are legal audits worth the sweat? They might not seem as important in the short run but noncompliance with the necessary laws and regulatory guidelines may bring sanctions and penalties in the long run.

 

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