Meetu Bajaj – Region General Counsel APAC & Company Secretary at Software One India
Legal profession is as old as the very existence of business or trade in the economy. Although it has never been considered as a mainstream business line in a corporate setting, its contribution to the mainstream business cannot be negated.
It is a common notion that lawyers are averse to taking risks, however, it’s a myth and it is high time that this myth is broken to clarify that lawyers are a community of people qualified and trained to foresee the potential risks which entrepreneurs’ or business teams fail to see.
It is a brutal reality that for every business transaction, profit and loss, opportunities and risks exist as two sides of the same coin. No pain – no gain. Since no business transactions can be undertaken without inherent risks therein, it is pertinent to preempt such risks and plan the preventive steps to mitigate the same.
With the change in time, role of legal counsels especially those who support corporates as inhouse counsel for managing their day-to-day operations has evolved over these years. It is no more limited to reviewing any activity post facto and merely recording it. Rather, counsels are expected to shoulder the responsibility starting from deal structuring till the end of sales cycle, which is collection of full and final payments for the said sales transactions. The role has thus become proactive rather than reactive.
The contribution of inhouse counsel at the initial stage of any transaction and related documentation for definitive contracts is to guide business teams to structure the deals in least risky manner. The journey from historic role to the current or rather future role has been very challenging with the complete facelift of the profession. Following are few challenges and the mitigating suggestions to manage the same as an inhouse counsel:
· It has been invariably noticed that at the time of submission of a document for review with inhouse counsel, the internal clients/colleagues refrain to give complete details of the proposed engagement. They tend to be secretive and do not want to share more than what is absolutely required – the remedial measure to the same is to ask for complete details while sending an acknowledgment for the receipt of request.
Further, the required inputs should be asked to be furnished in a written manner instead of a verbal exchange. No one takes ownership of their averments unless they are recorded in writing. On the other hand, any formal/informal advice that a counsel may provide on the basis of such oral information will be held against the counsel, should things go wrong. Success has several claimants, failure is an orphan, goes the saying.
In case the internal clients are reluctant to share as advised, the verbal discussion should be documented by the counsel, thereby seeking a validation for the same from the concerned quarters. This shall ensure correct flow of information to review the document as well as it creates a caveat for future misperceptions or any further communication gaps.
Conscious effort should be made to ensure that language of any contract is such that it can be easily understood not only by the parties, but even a layman. It is to be composed of short and direct sentences clearly replicating the true intent of the commercial engagement of the parties in a straightforward manner.
To the extent possible, all the provisions should be definitive and precise in nature and subjectivity is to be precluded, especially related to service level and deliverables. Specific is terrific!
All potential liabilities should be clearly defined, should be as limited in nature as possible (particularly if you are a service provider) and representations as well as warranties must be clearly laid out.
Billing currency, applicable taxes, specifically withholding taxes, are to be specifically defined in case of cross border transactions. This shall ensure clarity specifically when tax regimes of different countries are involved. The obligations to withhold tax, deposit such tax, provide satisfactory documentation to the payee, etc. should be clearly demarcated.
The contacts should encapsulate and define clear matrix for periodic review, escalations, dispute resolution, jurisdiction besides the change request procedure.
Before finalising the contract, preliminary drafts should be reviewed by respective business personnel to ensure that their discussions with the customers have been reflected correctly and changes, if any should be discussed.
Being an inhouse counsel, while supporting a business, one must balance between corporate policies, laws of land as well as business ethics while maintaining personal integrity. At times, one has to choose between the rightful way of achieving targets against providing business with short cut solutions. However, out of the two, one should always choose the correct/ethical way of doing business which may seem longer but that proves itself in the long run to yield results being compliant manner of doing business.
The need of the hour is to assess inherent risks, propose mitigating measures and ensure the same gets implemented too. To quote a simple example: If a Vendor is required to submit an updated Vendor registration form every year, it may so happen that the Vendor’s employees may not bother updating the form and submit it at the proverbial eleventh hour without changing the outdated details (say, the earlier Single Point of Contact mentioned in the form, has resigned and / or is no more in charge of this relationship). In such a situation, it becomes the incounsel’s duty to validate (with required help of respective functions) and submit only the correct current data points and not succumb to undue pressure from the sales colleagues.
For example: in case if a subset / part of any contractual engagement under a given project needs to be outsourced to fulfil the business requirement, then the client (particularly if it is a government entity), must be informed well in advance about the compelling need for such outsourcing and its prior approval must be sought. Any third party should be engaged only after due diligence and by executing a subcontract agreement whereby not only the scope, delivery, timeline but the liability also has to be clearly stated. Also, it is to be ensured that the third party so engaged is not a related party of any of the director nor any other employee of the company.
Besides supporting business in house counsel also needs to ensure that various other business functions in the company follow all the compliances as required in the respective core areas. For example, human resource department must ensure compliances with labour laws, conflict of interest, etc. The finance and tax department should ensure compliance to the respective accounting laws, tax laws, etc.
While managing different roles and responsibilities to ensure corporate policies are adhered to along with the local law of land, one must ensure to create an audit trail of the decisions that are recommended to respective business functions, whether to act or not to act for any business transaction; to defend in future especially when a dispute arises and other functional leaders tend to forget the basis of which the legal opinion was sought at the initial stage.
