Founders often refer to their start-up as their baby, so they should treat their legal advisers as paediatricians, involving them from the early stages, advises Tim Drew – Partner, Head of Corporate and Commercial at Tanner De Witt
Legal advice can fall down the priority chain in the early stages of a start-up, when budgets are tight, and the business is pre-revenue. However, seeking help in the early stages will ensure the business has the best foundation for growth and success. For instance, it is better to know early on that a law or regulation makes your business model impossible. Know too that a lawyer, who is experienced with start-ups, will prioritise legal work using lean business principles, and postpone legal issues that can be addressed later.
Prior to a meeting, once the law firm has completed its internal conflict check, you should send them all relevant documents. If in doubt, send it. The lawyers may not review the documents at this stage but it is better for them to have information to hand from the get-go.
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. But it doesn’t have to be that way. Forewarned is forearmed, and planning is everything.
Law firms may agree to an initial meeting to understand the background information of the business and the legal issue at hand. The meeting is to determine what work needs to be done, not to give legal advice, and it allows founders to raise issues or concerns. To maximise the value of the meeting, you should come prepared to present a brief background of the business, including the business model and corporate structure (place of incorporation, the shareholders, directors, share classes, shares issued), plus details about existing agreements and stage of growth. You need to be clear about both the legal advice and best-case outcome sought, and ready to discuss the most important issue you want addressed.
Conduct during the meeting is all-important; 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.
Be mindful to arrive at 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.
TIME SAVED IS MONEY SAVED
Start-ups have limited budgets for legal advice. So, you should be assertive and ask for a fee proposal with detailed work scopes, timelines and fixed fees. Then, you can assess the actual costs and 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 is usually charged according to time spent. You should ask your lawyer to inform you before he starts work outside the agreed work scope. However, this is something that is ultimately your responsibility, so you need to be aware when the agreed work scope is concluded. Start-ups 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. Each communication or meeting with legal counsel should be according to an agenda – concise and structured. Don’t send 10 emails each with one question; consolidate your questions into one email that can be answered once. Remember, time saved is money saved.
Tags: legal advice, start-ups
Tanner De Witt was established in 1999 and now has a team of over 100, including more than 50 Hong Kong lawyers. The firm’s Corporate and Commercial team can provide legal advice for businesses of all sizes, from start-ups to large corporations. For more information, visit www.tannerdewitt.com.