Myth Buster- Corporate Law only about Drafting Agreements

The general perception of corporate law is that it involves drafting various legal agreements such as joint venture agreements, shareholders agreements, licensing agreements and government contracts.  Since this work depicts a major portion of the practice of corporate law, it leads one to think that this is what corporate lawyers must be doing. This assertion is partly correct and partly incorrect. It is true that drafting agreements is part of corporate law, however it is not just restricted to it.  It is an entire field of law that governs corporations and ensures that they run their business smoothly. This article highlights other aspects that come under corporate law and puts forward the case that the work of a corporate lawyer goes beyond merely drafting agreements. CORPORATE LAW- AN OVERVIEW   In a general sense, corporate law governs the working of corporations and their businesses. Corporate lawyers deal in a host of areas such as setting up a corporation, organizing its structure, ensuring compliance with relevant laws and regulations, raising capital, restructuring liabilities and protecting intellectual property. In addition to this, they also advise their clients about their business operations and corporate governance practices. Different practice areas that fall under corporate law include:
  1. Mergers and Acquisitions (M&A)
  2. Private Equity (PE)
  3. Capital Markets
  4. Banking and Finance.
What does a corporate lawyer do? The various responsibilities of a corporate lawyer include:
  1. Rendering advice to new and running businesses.
  2. Negotiations in a contract.
  3. Drafting documents on behalf of the company
Rendering Advice: Since corporate law deals with businesses, the advisory role of lawyers plays a vital role to ensure that these businesses run without any problems. Corporate lawyers advise their clients on their business structure, listing of securities, restructuring financial assets and compliance with different laws such as employment and labor laws and laws dealing with taxation. Compliance under various laws also includes following the norms prescribed by the respective regulating authority. For example, listing of securities of a company will be governed by regulations prescribed by the Securities and Exchange Board of India (SEBI). A corporate lawyer practicing in the field of capital markets will have to ensure that the company abides by all the relevant rules and regulations. Similarly, a lawyer in the banking and finance team of a law firm has to ensure that the company complies with the regulations laid down by the Reserve Bank of India (RBI) and any other relevant authority. Non-compliance with established norms can result in litigation or hefty fines. Corporate lawyers also advise their clients if their proposed business ideas fall in line with the laws of the land. They advise start-ups on various matters ranging from the kind of company it should be incorporated into, its structure, byelaws and intellectual property to inter se arrangement between co-founders and also help in raising finance from venture capitalists and investors. Negotiation: Before signing a commercial contract, a series of negotiations takes place. One of the important roles of a corporate lawyer is to successfully negotiate favorable terms for her client. For example, in case of an acquisition, lawyers of both the target company and the acquirer company will negotiate to get the best deal for their respective parties. Similarly, in case of private equity, the lawyer will negotiate the terms of investment in a manner that is in the best interests of her client. In order to have a fruitful negotiation, it is important to conduct a thorough due diligence into the transaction and gauge its feasibility, both practical and legal. The exercise of negotiation is common across almost all types of commercial agreements (except standard contracts offered on a take-it-or-leave-it basis). When negotiating contracts, lawyers have to ensure that their client has adequate rights and remedies and there is no provision that has the potential to adversely affect the client’s business. In order to achieve this, it is important that lawyers have sufficient knowledge of the relevant industry and the regulatory framework of laws in the country. Drafting: It can be stated that drafting constitutes a major portion of corporate law practice. Commercial agreements form a major chunk of the work. However, it is not limited to only agreements. A Corporate lawyer is also involved in drafting memos and opinions for clients. These are short opinions sought by a client-company on a point of law relevant to its business. In-house legal counsels are also involved in drafting notices pertaining to internal matters of the company. Some lawyers also aid in drafting the company’s policies on corporate governance that help in effective functioning of the business. Thus, drafting plays a significant role in a company’s operations. Whether it is commercial agreements or internal matters, clear and precise drafting helps to avoid ambiguity and ensure that all the stakeholders involved are on the same page. An example encompassing all the above three aspects is that of a typical M&A transaction. Step 1: After negotiating with the client, a letter of intent is prepared that contains the basic terms of the transaction and serves as the foundation for drafting the final agreement. Step 2: The lawyers then undertake due diligence where they review different areas of the target company as well as its compliance with relevant laws and regulations. Step 3: They advise their clients along the negotiation process. Step 4: They then draft all the agreements and documents pertaining to the transaction. CONCLUSION While corporate law mostly involves drafting, it is not limited to merely drafting legal agreements. As discussed above, there are other important aspects of corporate law which carry equal importance. An agreement cannot be drafted without first successfully negotiating the terms. The advisory aspect of corporate law is equally important to take a call on business decisions and future plans. Thus, it is not completely accurate to say that corporate law is only about drafting agreements.

Free Consultation

Law is complicated matter. It can cause you a big problem
if you ignore it. Let us help you!