Confidentiality agreements, SHAs, put, call, tag, drag, liquidation preference, ratchets, collars, owner’s flex. Ok, I made the last one up. But as you no doubt understand, as an entrepreneur doing any business, it is important to get the hang of lawyer jargon and sound intelligent to everyone around you. It can get a bit tough, and finding a good corporate lawyer can definitely ease out your trouble. That raises another problem – how do you find a reliable, trustworthy lawyer who knows his/her stuff, but is not astronomically expensive? There is no step-by-step guide, but if you follow these 7 tips, we think your life will definitely be a lot easier.
- No, your uncle is not a corporate lawyer: Well, he might be, but it’s likely that he is not. Most lawyers in India are of the traditional variety: they go to courts, wear the black gowns, and argue complex civil or criminal matters. These lawyers are not corporate lawyers i.e. lawyers who specialize in advising companies on structuring of transactions or drafting of contracts (where the legal technicalities matter less than the “market practice”). So make sure that the lawyer you are hiring for your company is a corporate lawyer, otherwise it would be like hiring a Java guy for a PHP job (to use tech lingo!).
- You get what you pay for: Once you start finding out about lawyers, asking for references etc., you might end up wishing you were a corporate lawyer yourself, given the fees they charge. Well, the thing is: it is all a matter of demand and supply. There are a limited number of corporate lawyers in India, and the best ones are prohibitively expensive. Self-help of the “it’s English, after all” variety, or cheap medicine is usually not worth the time or the money (albeit little) spent upon it. What is the point of having a document which is not enforceable (i.e. has no real effect in the eyes of law)?
- Act as if you don’t know: While it helps to be prepared a bit (do a bit of Google searching to find out stuff), it may be best to pick up the phone and talk to your corporate lawyer, and act dumb. Ask him to explain the basics, listen as much as you can, ask questions, and just try to learn. You’ll learn a lot this way, and quickly. Don’t overdo this too much though, or make a habit of it.
- Always fix the fees and scope beforehand: Corporate lawyers usually charge by the hour (rates can vary from Rs.1000 to 20,000 per hour: yeah sorry, but the range is actually that wide). If you are a small business/startup, it might make more sense to negotiate a fixed fee – it gives you a clear visibility of the fees. If you think you will need advice on a regular basis, a retainer may also be a good idea. Also, spend an extra 15 minutes discussing and writing down a clear scope of work. Many corporate lawyers may exclude advice on tax aspects, filing of documents, fees, taxes etc., from their scope of work/fees.
- Ask the lawyer for advice: Seems obvious, but some entrepreneurs tend to have preconceived notions of what they want and want the lawyer to just get the documentation done. While a well-drafted contract is definitely required, a good corporate lawyer can add real value by giving you tactical business advice as well, for instance in terms of negotiating positions. A good ratio of value add from your lawyer would be 75% advice and 25% documentation.
- Build a long term relationship: A growing business needs frequent advice from a corporate lawyer. The cost of establishing a new relationship and building trust is usually high – therefore make sure that your actions, and the actions of the lawyer, are geared towards building a long term relationship. For example, don’t set insane deadlines (if your lawyer is any good, he should have plenty of other work too); don’t keep changing lawyers for every assignment based on fees quoted etc.
- Ask for references: Twitter, Facebook, mailing lists like Headstart, Open Coffee Club etc. are great if you want to ask fellow entrepreneurs for recommendations. If you are approaching the corporate lawyer directly (i.e. without any personal references/recommendations) it is okay to ask the corporate lawyer for contacts of existing clients (though lawyers may not share their complete list of clients, they are usually happy to name one or two clients you could speak with). It is always helpful to talk to an existing client about the competence and skills of the lawyers to get a good picture of what the lawyer can do for you.
Photo credit – http://www.flickr.com/photos/dbraaten/185896106/