Since the beginning of the trade war between the United States and China, Chinese businesses have faced various legal disputes, and the number of disputes continues to grow. Due to China's unique Cultural background, there are significant differences between China and the U.S. regarding the political and judicial system, social structure, market environment, public relations, language, and norms. Because of these differences, Chinese businesses that migrate to the U.S. face a complex and unfamiliar market environment, and the accompanying problems and risks are also rapidly increasing. Each company has its unique risk factors; the structural difference stems from conditions, development concepts, size, and how comprehensive its internal management is. To help Chinese businesses have a more in-depth understanding of the American corporate culture and compliance system to prevent related legal risks, MOSAIC Paradigm Law Group has put forward the following suggestions on "how to apply legal compliance to reduce risks of litigation and breach of contract for Chinese business operating in the United States," aiming to help Chinese business embark on a steady path of compliance development:
1. Familiarize with the laws and regulations of the state/region where the company is located:
As a Chinese company executive, it is essential to clearly understand your industry's and company's legal requirements, including but not limited to environmental, labor, antitrust, or other industry-specific regulations. The business must comply with applicable laws and regulations during its operation. Through familiarization of legal requirements and compliance with such legal effects, the company can reduce the risk of litigation or fines and penalty fees.
2. Establish a corporate legal compliance system:
It is necessary to establish comprehensive legal compliance procedures within your company, to ensure that employees and management are familiar with and comply with these laws and regulations. Systems must include a legal training plan for all employees, an internal audit, a risk assessment, and a compliance reporting mechanism. Reasonable allocation of human resources, financial management of funds, and equipment maintenance can reduce costs and improve efficiency. Corporate Compliance management and implementation can effectively reduce unnecessary expenses and potential risks.
3. Regular review and update:
Regularly reviewing the corporate's compliance policies can ensure the procedures are current with the latest legal developments. Due to the unpredictable nature of market environments and constant changes in US federal and state laws, it is crucial to regularly update compliance. Businesses should promptly correct existing compliance issues, by helping the company identify potential compliance and default risks.
4. The risk of breaching Labor Laws and Employment Contract:
Employer breach of contract refers to a company's failure to comply with the conditions promised in the employment contract. Such instances include failure to follow the applicable labor law. Company or Employer’s failure to follow the applicable labor laws can lead to legal litigation. Such disputes can be costly and hurt the Company’s reputation.
5. Strengthen financial management and intellectual property protection:
A sound internal regulatory process is essential to ensure the corporation complies with laws and industry-related regulations. This includes providing timely and accurate financial reports, preventing fraudulent behavior, and protecting intellectual property rights. At the same time, it is recommended to use modern software technology to improve efficiency in tracking compliance issues and generating reports.
Intellectual property refers to patents, trademarks, copyright, and trade secrets that are considered valuable assets of the company. . If a company fails to protect its intellectual property or fails to use the intellectual property of others in accordance with an agreement, it may face intellectual property infringement litigation and compensation liability; Such lawsuits often involve large amounts of money.
6. Collaborate with professional lawyers and accountants:
It's advised to have lawyers as legal advisors and accountants as financial advisors in the corporation; this would facilitate timely communication and provide a valuable professional opinion to ensure that the company's overall operation meets the requirements of laws and regulations. At the same time, they can also offer risk assessment and compliance recommendations based on the company's current status and future goals to prevent potential risks.
7. Risk control and commercial insurance:
The corporation should have perennial legal advisors that will customize risk management plans to reduce legal risks. This includes identifying potential legal risks and taking appropriate preventive measures. Purchasing corresponding commercial liability insurance is recommended to cover foreseeable and unforeseeable risks. Commercial insurance is a preventative measure that offers compensation for legal fees and litigation risk management, which is also one of the effective ways to reduce the cost of legal claims.
As mentioned above, reducing the operation and management costs for Chinese companies while maintaining legal compliance is possible. But remember, legal compliance is only one aspect of reducing costs, and other factors need to be considered comprehensively, such as business models, market competition, and management efficiency. When your company encounters legal compliance and other related issues, it is recommended to consult a professional lawyer before taking any legal action to avoid further legal complications. MOSAIC Paradigm Law Group's corporate legal consultation hotline: 281-805-7169; 713-818-8866.
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