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Why you need legal advice

In this article we discuss the importance of engaging legal professionals to provide you and your business with legal advice.
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© RMIT 2022

From Hollywood movies we know that “You have the right to remain silent. You have to right to an attorney… If you cannot afford one, one will be provided for you at no cost to you…”.

But aside from being arrested, there are many other contexts that should prompt individuals to seek legal advice. Sure you can always Google the answer. But at the end of 2019, the US Code of Federal Regulations was 185,984 pages long. That doesn’t include US State codes and, of course, laws of other jurisdictions that might apply. When it comes down to it, getting legal advice is a make-or-buy decision: your business can have its own internal legal department, or it can engage external counsel.

The law icon In this step we will discuss the importance of engaging legal professionals to provide you and your business with legal advice, how to find an appropriate lawyer, and end on a commonly encountered ethical issue.

Legal advice is sometimes viewed as a ‘luxury good’ that only long-established businesses or large corporations can afford. Thinking commercially, however, quality legal advice at the appropriate time can be a productivity enhancing input — bringing a measure of certainty to uncertain operating environments and potentially saving costs.

Business Structures

As we saw earlier this week, there are a range of potential business structures. In the case of companies, there is also a menu of options.

  • Should I incorporate an LLC, a C-Corp or something else?
  • Which state or jurisdiction should you incorporate in?
  • What are the registration requirements?
  • What are the ongoing compliance requirements?
  • What are the tax implications?

Getting it right at the start will avoid costly headaches down the track.

Contracts

Businesses engage in all sorts of contracts with employees, customers and suppliers. There can be a tendency to make informal agreements. However having contracts properly drafted, signed and stored is essential to protecting your legal rights, preventing legal disputes from arising and, where they do arise, ensuring contracts are legally binding and enforceable.

Identifying, Triaging and Managing Risk

There are many legal risks in any business operating environment including contractual, tortious (e.g. negligence) and regulatory. Legal advice will help you identify the sources of risk, evaluate their importance and put in place legal strategies to limit your exposure.

Dealing with Corporate Regulators

Corporate regulators can have extraordinary powers of investigation including the use of surveillance devices, powers to compel the production of documents or seize documents and devices and powers to compel witnesses to answer questions.

Seeking legal advice is important to ensure that the requests are lawful and that you are not handing over confidential or private information without a proper basis. Depending on who you engage, lawyers may have previous experience in dealing with that regulator and will have insight into how they operate, how they are likely to approach issues, and may be able to leverage professional relationships.

Professional Advocate

US President Abraham Lincoln is reported to have once remarked: “he who represents himself has a fool for a client”.

In the context of a legal dispute, the other side (whether a customer, commercial entity or a regulator) is likely to be legally represented. In the context of a formal litigation, courts will expect that parties are legally represented. In these situations, engaging a professional advocate ensures you are on an even playing field with the services of someone that has experience in drafting formal correspondence, negotiating and appearing before the court as required. Also, sometimes disputes can get heated, so it helps to retain someone independent to give objective advice and manage the process on your behalf.

Where to look for a Web3/crypto lawyer

There is some disagreement in the industry as to whether Web3 businesses should find a lawyer with established expertise in a particular field (e.g. a securities lawyer to deal with a dispute with a regulator or an employment lawyer to negotiate with a former employee) or a lawyer that specialises in “Web3” or “Crypto” work.

Screen shot of tweet from wassielawyer that reads 'I don’t understand why web3 startups seek advice from expensive regulatory lawyers, securities lawyers and “crypto” lawyers. What you really need is a criminal lawyer, an extradition lawyer, a Swiss bank account and a friendly network of Chinese restaurants and shisha joints.' A tweet response from wassielawyer reads 'Absolutely not legal advice.'

Source: wassielawyer on Twitter

Ideally, you should seek out someone with both domain expertise and Web3 knowledge — otherwise you may spend more time (and money) educating your lawyer.

The following places are good starting points:

  • Web3 networks (e.g. law firms or lawyers that are active members of national blockchain associations, speakers/panellists at Web3/crypto conferences)
  • Professional legal associations (e.g. Law Institutes and Bar Associations exist in every jurisdiction — they often have registers of members and there may have been previous publications or events on Web3/crypto)
  • Ask your advisors (e.g. you may have a board of advisors or an accountant or other professional that may work regularly with lawyers, you may be a part of an accelerator/incubator that has a lawyer on standby)
  • Ask your wider network (e.g. a public call for recommendations on LinkedIn or asking around your office or co-working space)

Don’t be afraid to ask for an initial conversation with multiple lawyers or to get a second opinion, or even ditch a lawyer if they are not providing the service you expect.

What to do before you meet with your lawyer

Once you’ve found a lawyer, it is time to prepare for your initial consultation. The following are some points to consider:

  • Think about your objectives. What do you see as the best case scenario you’d like to achieve? What do you see as the worst case scenario you’d like to avoid? Are you trying to be proactive or are you being reactive to a situation?
  • Zoom out. What is the wider context of the current problem? What else is coming down the pipeline that could make the problem better or worse?
  • Get organised. What documents are relevant? (lawyers will not want to review everything initially — consider what is most important).
  • Get a cost disclosure. Will the lawyers provide advice on a fixed-fee or an hourly basis? Are there stages of work? Are you required to pay funds upfront?

Who is the client?

It is important to be clear about who the client is. Lawyers are bound by obligations of confidentiality and loyalty. These obligations remain even after the lawyers stop acting for a client. This means that if a lawyer has acted for a party they are generally unable to act against that party at a later stage as there will be a conflict between maintaining confidentiality of the previous client and having to act in the best interests of the new client.

These legal and ethical professional obligations also mean that individuals may need their own lawyers.

The following situation commonly arises in a partnership or corporate context:

  • A CEO of a company regularly engages a law firm to provide the company with legal advice
  • The board of directors has recently met and decided to terminate the CEO’s contract
  • The CEO approaches the law firm for advice

In this scenario, the company is the client and the law firm could not provide the CEO with advice.

It is good practice, therefore, to have a number of professionals that can be called on in the case of a conflict.

© RMIT 2022
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