This article is written by Komal Shah, Content Head, iPleaders.
We were taught that having a business and profession are two different things. Therefore, having knowledge of the law and at the same time carrying out a business, seemed like opposing traits. In fact, lawyers are banned from doing any other businesses by bar council rule except as a sleeping partner or inactive shareholder.
Also, legal sense is strictly governed by the word of the law which is confined to the rules and regulations. What appeases the legal sense, might not make business sense at all. So one would wonder what business businessmen had, learning the law, if at all.
When a lawyer turns into an entrepreneur, and uses his skill-sets for business, the legal acumen would give him/her a massive competitive advantage.
But how about an engineering business, or an investment consultancy, or a pathology lab, and so on?
Of course, learning law would have its own advantages like one will avoid many common pitfalls and ride rather easily over some death traps. Example?
A lawyer will most likely not start an amazing startup without putting a solid co-founder agreement in place, therefore simultaneously reducing the chance of co-founder conflict, a major startup killer, and increasing the possibility of surviving one should one still take place despite a well drafted contract.
A lawyer founder is less likely to get into trouble over compliances, and more likely to survive in business as he may have better chance of recovering money from dishonest customers and vendors, fight back unfair litigation aimed at weakening the company, successfully protect the intellectual property from being infringed, and even be better able to predict government policy, thereby making superior business decisions.
But is that the only purpose? Is it not possible to delegate the liability and penalty avoiding job, to a lawyer you have engaged and get to focus on increasing business and revenue? Can learning law give you an edge over your competitors, even if you are not in a business directly dealing with legal knowledge? I have a feeling that it would. How?
Let’s see the following examples.
In whatever business you are, legal knowledge can give you massive competitive advantage.
Do you recall Ajay Devgan in the movie Drishyam? He advised the elderly couple, to use the writ of habeas corpus. He uses his knowledge of police processes thoroughly to his advantage. Your knowledge of government procurement systems can help you bag a valuable contract. Your knowledge of intellectual property infringement can empower you to take on a far stronger competitor, and more or less oust them from the market (see here).
Your knowledge of law and functioning of regulators might even help you devise a strategy or a business transaction with a competitor in such a manner so that a regulator would give you it’s blessing, though this might not seem to be prima facie possible (see here).
It can save you from spending a bomb
If you look at the level of expenses some organisations have to incur for legal costs and lawsuits (see here), you will stop dismissing it as something you need not be bothered about. If these gigantic organisations capable of hiring the best lawyers, still have to worry about legal costs, consider how exposed you can be!
In order to have strategies to manage legal costs, you must have some basic knowledge of the law. Someone recently wrote about the fact that lawyers might make better CEOs!
The CEO or COO with legal knowledge, will choose strategies which makes an organisation less litigation prone. The same logic can be applied to explain why a non-lawyer CEO must think about gaining some legal knowledge, and getting a comprehensive idea of the legislations their businesses attract.
Your competitors have lawyers too!
And their lawyers may be advising them how to slow you down with legal processes. Business is war. I recall hearing a company lawyer telling his client – “There are 658 sections (erstwhile Companies Act, 1956). If you ask me to trap someone somewhere, it’s easy. It’s the ‘get me out’ which is difficult to deal with.”
Your lawyer, however great he is, is not going to follow you everywhere to save you from falling into a trap. And he wouldn’t mind charging you a decent amount when you let yourself fall into a trap, and ask him to get you out. A fair knowledge of law can help you seeing the trap, before you trip into it.
Advantages in case of functioning in more than one state or countries.
When we approach a doctor, we have no real option but to act as he asks us to, since we cannot be expected to have medical knowledge better than him. We do not want to take chances with our body, so we follow the expert advice. Something similar happens when an entity is looking to work in a different territory. Since law may not be uniform across locations, you would seek someone practising law in that territory, if you want to comply with local laws.
But, you can ask the right questions to your doctor, like – does this have any side effects, or, is there a generic version available, or, what is this medicine exactly intended to do, etc. Similarly, you can ask the right questions to your lawyer, if you have basic awareness about law and legal systems.
Common law countries i.e. those which were ruled by the British ages ago, and whose legal systems were influenced by the British do have many similarities. You might be able to ask for the equivalent mechanisms in those countries and the regulatory counterparts. If you do not have even basic knowledge, chances are you can be ripped off by people in that country who might be actually doing very little.
Conversely, knowledge of tax laws in different jurisdictions has given many companies significant competitive advantages in terms of structuring transactions, which would save them a lot of money in taxes. Within India, an entrepreneur can benefit from having knowledge of different local and state laws.
Any kind of knowledge is power. Legal knowledge can be a significant power not only in terms of saving costs, but also gaining business advantages as discussed above – it can be both a weapon and shield for entrepreneurs.
So to all the entrepreneurs out there- start learning today! Here is a list of our upcoming courses to choose from.
- Executive Certificate Course in Real Estate Laws | Fees: INR 10,000 | Course Duration: 3 months
- Executive Certificate Course in Arbitration: Strategy, Procedure and Drafting | Fees: INR 10,000 | Duration: 3 months
- Diploma in Companies Act, Corporate Governance and SEBI Regulations | Fees: INR 23,600 | Course Duration: 1 Year
- Diploma in Industrial and Labour Laws | Fees: INR 23,600 | Course Duration: 1 Year
- Executive Certificate Course in Companies Act | Fees: INR 10,000 | Course Duration: 3 months
- Executive Certificate Course in Advanced Criminal Litigation & Trial Advocacy | Fees: INR 10,000 | Course Duration: 3 months
- Diploma in Intellectual Property, Media and Entertainment Laws | Fees: INR 23,600 | Course Duration: 1 Year
- Diploma in Cyber Law, Fintech Regulations and Technology Contracts | Fees: INR 23,600 | Course Duration: 1 Year