Fund lawyers provide wide-ranging assistance, from fund formation to financial services regulation compliance. Getting the right legal advice can help a fledgling fund navigate complicated securities laws and build essential corporate governance systems. For first time managers in particular, selecting the right lawyer or law firm is crucial for early stage funds.
You can find plenty of tips by scanning the web. Some of these include:
- Knowing the type of business lawyer suited to your needs
- Asking local business organizations which lawyers they prefer and why
- Avoiding counsel that advise shortcuts or ways to circumvent a law
Generally, you will go through three phases while selecting counsel: Referrals, Research and Recruiting. Based on some of the excellent tips provided in the resources above and our own experience with Capria and Unitus Ventures (formerly Unitus Seed Fund), we’ve distilled a couple of key points to remember when selecting and working with legal counsel.
- Referrals: This is still the best and most tried and tested method for selecting good attorneys with whom you will likely build a long term relationship. Some ways to go about it (alongside tapping into the Capria Network for referrals if you are selected to join a future Cohort) are:
- Attend conferences which other fund managers or specialist securities law counsel are likely to attend.
- Ask other impact fund managers in the same country / region for referrals.
- Web resources: Although it can be hard to filter through the noise, a couple of places to search are:
- LinkedIn search: LinkedIn has an advanced search feature that allows you to search by location and keywords (eg. Corporate Securities Attorney), as well as a number of other indicators through an upgraded account, considerably narrowing down possible candidates for you.
- Certain specialist lawyers regularly contribute to online legal publications (Lexology, Mondaq, Financier Worldwide, International Law Office, etc.). Some write columns for local newspapers / magazines, giving you insights into their clarity of communication and their expertise in a field of law.
- Before contacting shortlisted candidates, it may be helpful to:
- Seek out a former or existing client in cases where the candidate has not been referred to you. LinkedIn recommendations could be used to find references who can be contacted informally prior to reaching out to the lawyer. However bear in mind that references that have worked with the lawyer recently or regularly use their services are preferable.
- Look for a professional website, a detailed biography and publications by the firm which will give you a sense of their lawyers and allow you to tailor your introduction before calling or e-mailing them.
- Check with state bar councils, local courts or securities regulators for records of any disciplinary action taken against the lawyer in the past.
- Call the law firm first and check for prompt communications (i.e. even if they were busy at the time, did they give you a time to call back?). During the initial call, outline your brief and (i) ask if they have advised clients in similar cases and a list of such cases, and (ii) ask for any relevant references. You could also field a question on a likely problem area and observe whether the lawyer is able to simplify complex laws, see the bigger picture, communicate issues clearly and recall similar situations they have seen.
- By now, you should have identified the legal issues on which you will require assistance. However expect to keep that list flexible as your conversations with potential candidates progress. A good candidate should be able to explain in a clear and logical fashion the issues that are most relevant to your case as well as point out any issues that you may not have previously considered.
- As a follow-up to the initial call, you could set up a meeting with the final two or three candidates you are considering. Prior to the meeting or call, request fee quotes by e-mail, and ask that they also clearly indicate (i) all the attorneys who will work with you, (ii) whether a flat fee applies, and (iii) the circumstances in which an hourly rate may be charged. Also check for any potential conflicts of interest (for eg. any competitors being represented by other partners in the firm).
- After selecting a candidate based on your comfort level, set up a final conversation and decide whether you want to sign a retainer agreement or hire the lawyer on a case-to-case basis. You should negotiate when you begin paying fees and to the extent possible, have them waved until you reach your first close. Since hiring counsel on a retainer basis can at times be more expensive, it is important to be clear upfront about the aspects of your business that will require specialist legal advice. Carefully define the scope of work being entrusted to the lawyer.
- Once the fee has been negotiated, make sure you request an official fee letter outlining all that was agreed to, which is signed by the partner-in-charge for your records. Pay attention to what constitutes out-of-pocket charges and make sure that rates are defined where possible. Any expenditure (beyond the agreed fees) exceeding the minimum printing charges should require your prior consent.
- Although attorney privilege laws may cover most concerns, you may require the lawyer to include a non-disclosure agreement in their fee letter. They should request your prior consent for disclosing details of your deal for promotional purposes or otherwise.
Working with Counsel
- Always retain a copy of any papers handed to the lawyer, and maintain acknowledgements for all paper documents given or received by you.
- Before seeking a legal opinion from the counsel, check that the counsel is licensed to practice law in the jurisdiction(s) whose laws are the subject matter of the opinion. Once the draft opinion is submitted for your review, make sure (by informally checking with your business contacts or lawyer friends) that the opinion is in standard form and does not contain unnecessary qualifications / assumptions. Check who you can share the opinion with (and ensure this is clearly captured in the opinion itself), especially if you are seeking the opinion at the request of your investors or your accounting firm. Retain a hard copy of the signed opinion for your records.
- If the lawyer needs to hire a third party for conducting a search on another entity, ensure that the fees being charged by the consultant is market rate.
At the end of the day, finding the right counsel, while a time consuming process, is the beginning of a relationship; a relationship that will ensure that your needs are serviced by competent advisors. Drop us a line or tweet at us @CapriaVC if you’re currently looking to set up an impact fund to tell us about your experience with selecting fund counsel or the tips we provided!