Legal nuances facing the cottage industries

One of the risks cottage industry may face is legal action by residential area associations. PHOTO | SHUTTERSTOCK

Cottage industries are on the rise in Kenya especially after Covid-19 caused loss of jobs. A cottage industry is a small-scale labour-intensive, manufacturing business carried out from home.

It has been reported that cottage industries play a very key role in the economy as they enhance employment.

In this column, I will highlight strategies and legal issues for cottage industries to consider.

It’s always prudent to start a business in which you have skills or experience. As you start the business you may consider registering it as this gives your outfit a more professional look. If possible, consider registering a company due to its attractive features. The best feature being limited liability.

It’s important to get your business compliant with set rules. There are general compliance requirements, for example, business licences and sector-specific permits.

A cottage business is often carried out from home. You will need to consider if your residential area rules allow this to take place. If you have a residential lease, it may be important to consider the terms. Chances are commercial activities of any nature are not allowed.

Heavy cottage industries that require machinery may not be allowed in a residential area. Businesses in the light cottage industry such as baking and fashion can be conducted from a residential area. If you are in the heavy cottage industry it may be worthwhile to consider getting a non-residential business premises.

One of the risks cottage industry may face is legal action by residential area associations. Cottage industries ought to have contracts for their operations. It’s important to have contracts with suppliers, employees and customers.

The importance of having contracts is that they form evidence in the event of a dispute. Contracts also help clarify the roles and responsibilities of the parties while settling out their terms and conditions.

Cottage industries should ensure that their products and services adhere to regulatory standards. Ensure you have certification marks to ensure the products follow the required standard of safety and quality. It is an offence to sell sub-standard goods. It’s equally an offence to sell harmful goods.

A certification mark from the Kenya Bureau of Standards will reduce exposure risk.

It’s important to consider intellectual property rights issues. Some of the intellectual property rights issues include trademarks to protect the logo of the product. A trademark will protect your business from infringement by unscrupulous businesses. There can be no action for an unregistered trademark. An industrial design can be used to protect the shape of any containers or bottles if the same are in 3D shape.

While considering intellectual property issues, it is important to ensure you do not breach third party intellectual property rights. Therefore, avoid passing off, counterfeiting and other acts of infringement as this is illegal.

When selling and marketing your products, a number of legal issues will arise. If your sales are physically done then the Sale of Goods Act will apply. It’s important to enter into supplier contracts where you are supplying the products to a retailer like a supermarket.

The Consumer Act is also applicable where the supply is being made directly to consumers.

If you are selling virtually then consider cyber laws in your transactions. It is important to have virtual contracts. Data protection laws ought to be adhered to in safeguarding consumer’s privacy. Fiscal issues like tax should be considered.