Many attorneys dream about joining a growth-based startup venture. The non-conventional environment keeps everyone engaged and motivated to make the company a success. Attorneys have a number of skills that can generally be valuable to the startup. If you truly wish to be part of a startup, it is wise to sharpen the skies that are most relevant and will provide the greatest value to the business.
In this article, we discuss the primary responsibilities of general counsel for a startup and the types of transactions and negotiations that can hone the attorney’s expertise.
What Areas of Law Are Relevant for a Startup General Counsel
A general counsel at a startup will generally need to be proficient in the following areas of legal practice:
- Corporate Governance – The general counsel will advise on federal and state governance procedures. Corporate governance matters concern the disclosure and reporting requirements of state and federal agencies.
- Regulations – All businesses are subject to state and federal regulations. Of course, the general counsel will become proficient in general and specific regulations affecting the business. Her primary responsibility will be making certain the company remains in compliance.
- Securities Law – Most startups will seek outside equity investors. Selling equity in the company implicates state and federal securities laws.
- Employment Law – All businesses are subject to both state and federal employment laws. This is particularly true for employment activity that could result in a claim of discrimination. The general counsel will be tasked with making certain these activities are undertaken in accordance with the law. Further, the general counsel will advise on the numerous disclosure or notice requirements.
- Litigation – A general counsel is charged with managing any litigation affecting the company. She will generally not represent the company in court; but, she will work with outside counsel to strategize and develop a legal strategy.
- Contract Law – All businesses enter into contracts as a part of operations or sales. As such, it is important for a startup general counsel to be very familiar with contract law.
- Intellectual Property – Often, the most valuable assets that a company owns are its intellectual property. This is particularly true for technology companies. The general counsel will need to be thoroughly familiar with patent, trademark, trade secret, and copyright law. Further, it will help if she has experience with intellectual property licensing.
Transactions and Negotiations to Build the Expertise of the General Counsel
Startups, particularly technology startups, undertake numerous transactions throughout the business lifecycle. Each stage of growth entails additional responsibilities and competencies. Below are some transactions and negotiations that pertain to the areas of general counsel expertise.
Business Entities and Governance – A startup counsel must be extremely familiar with the formation and structure of business entities. The startup will likely transition between business entities throughout its lifecycle. Also, the startup will restate its articles of incorporation during each round of equity investment. The general counsel should have experience forming business entities, drafting articles of incorporation, drafting bylaws, and shareholder agreements for a startup. This generally requires an understanding of preferred share rights, vesting schedules, equity and equity-like business interests, etc.
Contract Drafting and Negotiations – Perhaps the single most common task for a general counsel is being part of contract drafting and review. In many instances, the general counsel will be involved in the contract negotiation process. Having a strong understanding of contract principles is imperative. As such, an attorney will a wealth of experience in contract negotiations and drafting has the potential to add extensive value in the startup.
Financing Transactions – The general counsel will manage much of the procedural aspects of financing transactions. As such, having negotiated term sheets, gone through the due diligence process, and drafted investment agreements are all very important.
Securities Laws – Selling equity in the company requires either registration with the Securities and Exchange Commission (as well as state regulators) or exemption from the registration process. A startup general counsel should understand the securities registration process and the process for seeking a registration exemptions. Also, if the general counsel has experience with the initial public offering process it is very helpful.
Litigation and Collections – The attorney should understand the trial process and have connections with competent plaintiff’s counsel and defense counsel. The majority of litigation-based activity for a company is collection efforts. The general counsel may be personally involved in collection efforts. Having some experience in fair debt collection practices and small claims litigation can be useful.
Intellectual Property – The general counsel of a technology startup must have experience filing utility patents. It is best to have experience specifically filing utility patents for technology products or software. Further, the attorney should understand the process for licensing intellectual property rights.
Being a part of these types of transactions prior to becoming a startup general counsel will increase the competence and make the attorney a far better prospective employee.
Being the general counsel of a technology startup is a demanding position. It requires knowledge and expertise in a number of legal fields. The legal professionals at LawTrades can provide you with all of the advice and guidance you need to find an effective general counsel or to become an effective general counsel.