Top Tips for Startups Seeking Legal Advice21Aug2020
Meeting lawyers can be intimidating. They seem to speak a different language. Sometimes, you’re none the wiser after the meeting. Then, the bill arrives. It doesn’t have to be that way. Forewarned is forearmed, and planning is everything. Tara Chan from the Corporate and Commercial practice group of Tanner De Wit reviews tips for startups when seeking legal advice.
- Plan your meeting: Law firms may agree to meet or call to understand the background information of the business and the legal issue at hand. This initial meeting allows founders to raise issues or concerns. The meeting is to determine what work needs to be done, not to give legal advice. Founders should come prepared with these talking points to maximise the value of the meeting:
- A brief background of the business, including:
- the business model.
- the corporate structure (place of incorporation, the shareholders, directors, share classes, shares issued).
- details of existing agreements.
- stage of growth.
- The legal issue or advice needed.
- The most important issue the founders want addressed.
- The best case outcome from the advice.
Also, once the law firm has completed its internal conflict check, founders should send all relevant documents before the meeting. If in doubt, send it. The lawyers may not review the documents at this stage. However, it is better for them to have information to hand so that the lack of information does not become an obstacle to helping.
- A brief background of the business, including:
- Conduct during the meeting: Remain candid, truthful and direct. It is very difficult for a lawyer to help, if he does not receive clear answers to his questions, or have a complete picture of the situation. Don’t hold back points that are embarrassing or unfavourable. Don’t present a version of facts to manipulate the advice you hope to get.
- Take notes: Arrive to the meeting with the necessary materials to take notes. Usually, lawyers will decline to have the meeting recorded. So notes are important. Also, if there are points you fail to understand, ask for further clarification or ask your lawyer to explain it in a different manner until you understand. If notes are not taken, the meeting or call may need to be followed with a written summary of the meeting. We often have to answer the same question a number of times. This is all money and time that could be saved if proper notes were taken.
- Ask for a fixed fee proposal: Startups have limited budgets for legal advice. So, founders should be assertive and ask for a fee proposal with detailed work scopes, timelines and fixed fees. Then, founders can assess the actual costs and can budget accordingly. Review the fixed fee proposal carefully and examine the work scope properly—is it for one draft of the document or two? Inspect the assumptions, comments and particularly the exclusions.
Work outside the agreed work scope will usually be charged according to time spent. You must be vigilant and be aware when the agreed work scope is concluded. You should ask your lawyer to inform you before he starts work outside the agreed work scope. However, this is something that is ultimately the founder’s responsibility, and you will wish to avoid surprises when the bill comes.
- Time is a limited resource: Startups should be mindful of their own limited budgets and treat time as an expensive resource. Your goal is to minimise the time your lawyer must spend advising the business. Time saved is money saved. Each communication or meeting with legal counsel should be according to an agenda, concise and structured. Don’t send ten emails each with one question; consolidate questions to one email that can be answered once.
- Seek legal advice early: Legal advice can fall down the priority chain in the early stages of a startup, budgets are tight, and the business is pre-revenue. Still, founders should coldly assess the need for legal advice even at early stages. This can help the startup create a proper framework and avoid unnecessary issues in the future. It is better to know early on that a law or regulation make your business model impossible, rather than find out a year later. Also, a lawyer who is experienced with startups will prioritise legal work using lean business principles, and postpone legal issues that can be addressed later.
Founders often refer to their startup as their baby. So, founders should treat their legal advisers as paediatricians. Seek help in the early stages to ensure the business has the best foundation for growth and success.
If you would like to discuss any of the matters raised in this article, please contact:
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.