Business is the backbone of the economy. Big, small, medium enterprises, are all contributors to the economy of the country. Right from the pakora walas to the jewellers, to the big pharma and technologies companies. They are all governed by various laws right from their inception to their dissolution.
I was thrust with the responsibility of helping out my mother in the family business for about three years. The challenges that a business of such small scale faces everyday, made me rethink everything I know as a lawyer. Any business, big or small are dependent on accountants and lawyers, as much as they are on their manufacturing, sales and other functions.
I learnt how a simple delay in filing complete IT returns, can cost the business multifold. How unpaid creditors are not just a concern for the business’ reputation, but can result in lawsuits. How an ill-maintained books of accounts could lead to income tax queries and possible penalties. How the delay in employees’ salaries and bonuses could not only halt the business functions, but also result in a labour law cases.
In my head I was comparing this to the MNC’s functions. They have multiple times more employees, creditors, manufacturing, sales, revenue, etc. If I found the tasks associated with a small business so monumental, what happens behind the walls of these industry giants?
They have to worry about more laws and regulations, audits and accountability to the shareholders and other stakeholders.
Here are the most rewarding business law skills you need to learn as a lawyer.
# Structuring a Business
The most important thing for a business is its structuring. How is it structured? Is a proprietorship more suited to a startup or an LLP? How do you incorporate an LLP? Is co-founder agreement necessary for a startup? What suits best for a family business – partnership or LLP? How do you draft the necessary protections and allocate the liabilities?
When do you incorporate holding companies and subsidiaries? Should your company be headquartered in another company? Would there be any tax or other advantages of setting up a company in Dubai or Singapore?
From simple to very complex, structuring can go a long way to minimize tax, protect from liabilities and organize businesses better.
These are the tricky questions a good lawyer must address with his clients on a day-to-day basis. Because in the foundation lies the laws and regulations which will impact the business in the long run. This has to be dealt with clarity in order to navigate the functions of the business.
Sometimes the best way to go is have a one man company. But what are the compliances that a lawyer needs to bear in mind and inform his clients? Are there any practical challenges that arise later? What if the business is growing and new investors want to come in? How does a lawyer best accommodate those investors while protecting the founders interest?
Restructuring can be big business for lawyers. Some law firms have employ entire teams that exclusively work on corporate restructuring exercises and deals.
Apart from structuring and restructuring businesses, there is the whole very profitable question on how to structure transactions. You can learn more about structuring such deals and compliances by learning the basics through business law courses available.
# Taxation, Basic Accounting & Import – Export
I had just started getting involved in the business functions, when I got a letter from the IT department asking for show cause on our IT returns. The instinct of being a lawyer was to appear before the department myself. But I had to allocate resources, oversee the printing and ten other things. So I simply hired a tax lawyer for the job. It was expensive compared to if I had gone, but I learnt that in business time is money, and my time was needed more in the other functions.
The GST is evolving and changing from time to time. How do you register your business for GST? Do you know the basics of indirect taxes, income taxes, tax deduction at source, etc. which is necessary for most organisations? You don’t have to be CA to advise and provide for your clients basic tax needs. What is equalisation levy and how does it function?
Do you as a lawyer know how to study and interpret the profit and loss accounts or the balance sheets for your clients? How does that impact the shareholders and accountability?
What about the appointment of auditors, their role and removal? Do you know what your client’s business needs and when? How do you advise without understanding the basic functioning and mandatory requirements under the law?
A lawyer needs to understand his clients business on any given day. He cannot advice competently without knowing how the business works or what it needs on a daily basis. It is not all about contracts and disputes. Your client may just need the basic advice about his taxes and systems to put in place before the audit. It is these basic things beyond the regular paradigm that makes a lawyer from ordinary to exceptional.
# Corporate Governance
An entrepreneur or CEO simply want to run his business without nagging hiccups. This is where the troubleshooting lawyer comes into the picture. They need to advise what their clients need to do in order to run smoother operations. There needs to be systems in places to ensure that any changes do not impact the larger picture.
From the appointment of directors, independent directors, holding meetings, remuneration, dividends, the lawyer must be in the know. Sure these are secretarial functions, but these days legal and secretarial functions are operated by CS-LLB who are adept in dual roles. Even otherwise, the expert input of a lawyer at the policy level is indispensable.
How does corporate governance help detect corporate fraud, or its investigation and punishment? What sort of corporate governance can protect shareholders from such predicament? The recent PNB scam was an eye-opener for the need of effective corporate governance. There are experts who are called to devise mechanisms and put processes in place to help weed out the possibility of such disasters. It can also help establish a more transparent and accountable organisation which is trusted by the stakeholders and investors alike.
Businesses cannot function without corporate governance, and a lawyer who gets it will always be in high demand. On the other hand, a lawyer who doesn’t get it will always be a pariah in the boardroom.
# Negotiation and Contract Drafting
This is the where the lawyers become very necessary. Contract drafting is the bread and butter of most commercial lawyers. How do giants of Silicon Valley negotiate contracts? How to negotiate commercial leases? How do you draft the most common 100 commercial contracts? Can you draft a watertight settlement agreement that defuses a criminal case against your client?
Contract drafting is essential to any organisation big or small. From agreements for vendors, shareholders agreements, non-disclosure agreements, to employment agreements and more, are part and parcel of the day to day life of lawyers.
Another very important and well paid job is to negotiate the terms and conditions, obligations, rights, etc. for the parties. This is where the excellent lawyers get to shine. They get to negotiate and get their clients the best possible deal out of the process of negotiation.
Every lawyer learns the basic and necessary elements of contracts in college. But what they don’t learn is the practical application of their knowledge. How do you ensure that clauses capture the essence of the instructions or requirements of the clients? How do you translate the needs of your client into the contracts while protecting their interests against the potential risks? These are the questions that can be answered by a learned lawyer only. What you don’t have in experience, you can learn by doing a contract drafting course.
# Arbitration and Dispute Resolution
Where there are parties coming together for business, there are potential disputes. Non-payment, delay in performance, defective products, breach of contractual obligations, etc. are all common disputes between parties to contract. The contract usually provide for a dispute resolution mechanism.
Traditionally litigation is a popular mode of dispute resolution. But it is expensive and very time consuming (some cases in some forums can go on for decades without any resolution in sight), which is usually not good for businesses. Therefore, more and more organisations are opting for alternate dispute resolution like arbitration, conciliation and mediation. These mechanisms are usually part of the contract. The parties agree to jointly or severally appoint an arbitrator or a mediator to resolve the disputes arising from the contract.
How to reduce the risk of litigation and minimise court intervention in an arbitration proceeding? What are the different types of arbitration? What is the procedure to challenge an arbitral award? When can a court intervene in an arbitration proceeding? What are process to be followed for negotiation, mediation and conciliation? A lawyer must be able to represent his client competently in such proceedings. Therefore he/she must know the procedures and the pitfalls well. She must be able to anticipate where opportunities will arise and time their attack. Winning a litigation or arbitration is often more about strategy than purely what is written in books of law. Lawyers also need to advise the clients as to when to go for litigation and when to opt for alternative dispute resolution mechanisms.
# Strong knowledge of the first principles of various other areas of business laws
By no means a lawyer’s expertise has to be limited to a few areas. People come to you for all sorts of queries and you have to be able to answer them. So that means having functioning knowledge about possible issues in information technology laws, intellectual property laws, foreign direct investments, mergers and acquisitions, labour laws,etc.
How and why to make a disclosure schedule in M&A transactions? How to draft a scheme of arrangement for mergers? What are the operational issues pertaining to FDI? How to outsource technology work to a third party developer? What are the liability of Intermediaries and Internet Service Providers? How to protect the intellectual property of the company? How to draft a franchising agreement? How to obtain a trade license in Bangalore? What is ESOP? What is the Insolvency Resolution Process For Corporates Under IBC?
People will come to you with all sorts of queries and how well you handle them can be the difference between having a mild reputation and a one that brings you great referrals every day.
These are innumerable pertinent questions that would arise during the functioning of a business. And clients will expect you to know.
So a well equipped lawyer must know how to navigate these questions and provide an optimal solution or advise. The clients are coming to an expert lawyer, and often expect the lawyer to be an one stop for all their problems. You may redirect them to an appropriate expert, but if you come across as clueless or uninformed, it will damage your reputation as a lawyer.
You can’t be an expert in every area of law, but you can learn the first principles. That is very much within the grasp!
Therefore, it is imperative for any lawyer to be equipped with at least rudimentary knowledge of all areas of business laws. It is not only good for the business houses, but also for the lawyer’s practise. It is a win-win situation for all involved!
We have a course that can help you to achieve a strong foundation in all important areas of business laws over one year. Here is the link.