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Common Legal Issues Faced by SMEs

Owning a Small and Medium Enterprise (SME) in Singapore can be a very rewarding experience. Singapore is known to be one of the best business environment for SMEs and other businesses to operate in, and has been ranked by the World Bank as the world’s number one country for ease of doing business.

However, SME owners should take note that the smooth running of SMEs can be hindered by legal hurdles if one is unprepared.

This article sets out below some of the common legal issues that SMEs face in Singapore.

Employment contracts

SMEs are expected to have legally binding employment contracts. However, there is no one-size-fits-all approach to employment contracts, as there are different types of employees such as casual, part-time, and full-time workers. As such, SMEs should come up with different employment contracts for these different types of employees. In particular, the contracts should clearly state factors such as rights and responsibilities, expected employee behaviour, payment, and a termination clause. This will allow SME owners to take action if there is a violation of the terms of contract. The need for a properly drafted employment contract cannot be understated, for an employment contract protects the SME from any errant employee and can bring about certainty while minimising costs incurred in the event of an employment dispute..

Customer satisfaction

Customer satisfaction is a very crucial factor in the success of an enterprise. Some customers do not take dissatisfaction lightly and will file a lawsuit or complaint against an SME. While listening to your customers’ concerns, speaking to them and finding a solution will help one avoid serious legal battles, SMEs should consider having proper terms and conditions governing the transaction as well.

Issues relating to intellectual property

The importance of protecting one’s intellectual property cannot be understated. SMEs might face with intellectual property related issues because of the misconception that intellectual property is a concern of the big companies. However, a  profitable idea or invention can be stolen and used by another business if it is not protected, resulting in an impact on the SME’s business, perhaps even threatening its survival.

Accordingly, SMEs should be aware of how one can better protect one’s own intellectual property.


SMEs should not risk its own survival by failing afoul of legal obstacles. It is therefore important that a business considers such issues and seek legal advice in such matters to ensure a smooth running of the SME.

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