How Far Can a Company Go Before Needing a General Counsel?

A general counsel performs many very important roles in a company. While her function is primarily law-related, she will also performs other functions that facilitate company operations. The answer to the question, “at what point must a company get a general counsel?” depends upon the nature of the company and the legal needs it faces.

In this article, we discuss the role of the general counsel and the considerations for when it is time for the company to hire one.

 

Role of General Counsel

The general counsel will perform the primary functions within the company:

  • Advisor – The general counsel will provide legal advice or guidance regarding company operations directly to members of the company. This may include advising the executives or providing legal advice to the individuals actually undertaking an operational function that requires legal guidance. This means that the general counsel must be very versed in the areas of law affecting the company. She will need to be able to spot potential legal issues before they become an issue. Then, she will need to research those matters of law to adequately provide competent legal advice on how to proceed or deal with the situation.
  • Legal Project Manager – A general counsel will be the point of contact for all legal matters affecting the company. This includes third parties or company employees making legal claims against the company, company legal claims against third parties or company employees, and transactions that have a legal component. In most cases, the legal counsel does not actually represent the company in litigation. Further, she will not undertake the legal requirements of a transaction herself. Rather, she will identify a competent legal firm outside of the company and contract with them to represent the company. She will be a professional client for the company. She will keep track of the litigation, provide any information, coordinate access to records or persons, and sign documents on behalf of the company. She will keep the senior management of the company informed of the status of the litigation.
  • Legal Service Provider – The general counsel will also provide legal services to the company. The legal functions she provides internally will generally be part of the routine operations of the company. As such, the legal services will vary based upon the nature and legal needs of the company.

 

Common Areas of Legal Competency for a General Counsel

A general counsel will generally need to be competent in the following areas of law:

  • Corporate Governance – Corporate governance concerns all of the legal processes required to keep a company in compliance with the various state and federal regulatory agencies. First, the general counsel will need to be familiar with the business entity (usually corporate) laws in the state. These rules concern public reporting and the internal functions of company owners and managers. For example, the company must make annual filings with the state. It must comply with the procedural requirements for disclosures to shareholders, shareholder and director meetings and voting, etc.
  • Contracts – The general counsel will be called upon to review and draft contracts affecting the company. Companies that routinely enter into transactions (such as real estate companies) will require extensive contract services.
  • Employment Laws – All companies are subject to employment laws. Most notably, companies must monitor, avoid, and correct matters that could constitute employment discrimination. This is particularly true when hiring or firing employees.
  • Litigation – Most companies face litigation at some point in their existence. It may be small litigation resulting from company claims. Or, it may be major litigation resulting from personal injury, contract, corporate governance, or financial matters.

Areas of law that affect specific types of companies:

  • Securities Laws – Securities laws apply when a company is going to sell or issue company equity. Equity includes debt instruments or company stock (or stock equivalents). Companies seeking outside investment from equity investors must generally comply with state or federal securities laws. This includes issuances to early investors up to the point of going through an initial public offering.
  • Intellectual Property – Most companies have intellectual property considerations. Technology companies tend to deal extensively in utility patents. Design-related companies deal in design patents. Publishing companies deal with copyrights. All companies routinely deal with trademark and trade secret issues. Depending on the extent to which a company faces these legal issues, the general counsel will need to be familiar with each area of intellectual property law.
  • Company-Specific Regulations – If the company operates in an industry that is highly regulated, such as finance, energy, or medical industries, the general counsel will have to become very familiar with the regulatory requirements for remaining in compliance with state and federal law.

 

When to Hire a General Counsel

Making the decision of when to bring on a general counsel is a matter of operational need. At some point, it will be more cost and operationally efficient to hire a general counsel rather than work directly with outside counsel. Whenever the company reaches that point, it may be best to bring on a general counsel. Of course, the general counsel position will require many of the benefits associated with an employee that are not required for an independent contractor. As such, the decision comes down to a cost-benefit analysis.

 

LawTrades

If you are considering hiring a general counsel, LawTrades can help. We can provide you all of the advice and guidance you may need in identifying and hiring a counsel. With LawTrades Apex, we give legal departments and law firms access to a highly qualified pool of general counsel candidates. Everything from sourcing and vetting to time tracking and payments is built in, so you have more time to get the important work done.

Need help with a legal project?

Get started today to browse available attorneys, send messages and get instant quotes.

Let's Talk