Legal
Review
Why
To
reduce or eliminate the costs and disruptions caused by failures to comply with
applicable law or manage legal risks.
What
Examine
the business’s legal compliance programs and exposure to legal risks and how they are being managed.
Identify action steps required to remedy known problems like: employee stock program violations, ERISA
violations, lack of appropriate review of
material contracts before execution and other common problem areas.
Compliance programs are either strengthened or introduced.
The
Process
The
process starts with a meeting to discuss the scope of the work to be performed and
your expectations, then moves on to who will be interviewed, the material to be
reviewed and identification of any known concerns you have.
Next we enter into a client – lawyer relationship by signing a written
engagement agreement which documents the scope of my work, explains the fees and
defines the deliverables you will receive, either a written or verbal report and
recommendations.
The
review starts with general descriptive information about your business such as
offering memorandum, Form 10-K or business plan.
It proceeds to the entities founding documents (articles of
incorporation, bylaws, minutes), material contracts such as loan agreements,
stock purchase agreements, shareholder agreements, standard form contracts,
employee handbook and benefit plan documents (stock option plan, bonus plan,
other equity or incentive plans and their form agreements), hiring and firing
process, performance management process and other categories of documents
identified in the course of our interview or other work.
Interviews
are conducted with senior executives in each major area of responsibility such
as finance, human resources, manufacturing, sales, etc., and other managers in
specific functional areas are added if necessary.
Legal
invoices for the past two years are reviewed, as are litigation or claim files
for all currently pending and recent material litigation.
Final
fine choices of the people interviewed and materials reviewed are made,
and the information gathered is assimilated and a report prepared.
The
Outcome
The
review process typically results in the following:
1)
Identification of specific problems which need to be fixed.
Examples might be a serious issue like a failure to comply with state of
federal securities laws concerning stock option grants, or something as simple
as needing to qualify the business to “do business” in a jurisdiction where
it has actually been conducting its business for some time.
2)
Identification of business/legal process problems which can be changed to reduce
liability or reduce costs. An
example would be the company sending fairly standard contracts out for review by
outside counsel when an adequately trained a staff person could handle most of
this routine work and refer only more technical or difficult issues to outside
lawyers, therefore reducing costs and increasing the time efficiency of contract
negotiation and formation. Another
example would be the failure to get patent assignment agreements with all
engineering or research and development employees so patentable inventions are
not pre-assigned to the company.
3)
Suggestions for introducing more cost effective dispute resolution processes
into business agreements, primarily the use of mediation and arbitration in
place of civil litigation.
The
legal review does not include the remediation of all problems identified in the
course of the review. Some problems, like those involving ERISA (Employee Retirement Income Security Act –
extremely complex pension
legislation) may require a technical expert to fix. Other problems, like managing the legal issues related to distribution channel agreements (sales
agent, distributor, franchisee, etc.), may take more management and legal
involvement to make appropriate choices and implement.
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