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16 September 2015 |
Commercial lawyers are expected to identify, anticipate and solve problems and disputes, mitigate risk and explain substantive, complex information to clients in a concise, easily digestible manner. On a day-to-day basis, this may involve providing legal or commercial advice, contributing to meetings and conference calls, researching, drafting and proof-reading documents, negotiating with other parties, devising ways in which to mitigate risk, structuring deals, managing transactions and conducting due diligence. Candidates are usually required to know the key practice areas and the work that each practice area typically undertakes. The way in which firms organise and label their practice areas varies and some firms have practice areas that others do not. This is a basic guide to some of the primary functions of the most fundamental practice areas.
Focuses on deal execution for clients. Work handled includes share sales, mergers, acquisitions and joint ventures. Corporate lawyers typically liaise with internal departments, sourcing specialist expertise to facilitate transactions. The Corporate department produces key documentation necessary to execute transactions; advises bidders and targets on public takeover offers, vendors and purchasers on private acquisitions and disposals, and individuals on potential equity purchases; and offers general corporate advice concerning, for instance, contractual rights and logistics.
Advises clients on finance-related matters, such as accessing capital to finance transactions. Work can include: acquisition financing (to help one company purchase another); general corporate lending (if a company requires capital); project financing (e.g. for building a wind farm); infrastructure financing (e.g. for building an airport or high speed rail network); asset financing (e.g. for building a large commercial property); restructuring and insolvency work (if a business encounters financial difficulties or is declared bankrupt); and deals relating to the capital markets (for instance bond issuances).
Finance lawyers produce the documentation required for a client to, for instance: issue debt (e.g. bonds) via the debt capital markets; list on a stock exchange; and secure large loans from a lender or syndicate (group) of lenders. Lawyers may also conduct due diligence to: determine whether a borrower is likely to default on a loan; ascertain whether security can be taken over an asset to support a loan; and ensure financial transactions comply with relevant regulations.
Engages in or challenges disputes for clients; pre-empts and attempts to prevent conflicts arising; develops contingency plans; and undertakes due diligence to ascertain whether a potential acquisition target has any outstanding litigation that may result in liabilities transferring to the buyer. Disputes lawyers may work on cases involving regulatory compliance, product or personal liability, the media (defamation claims for instance), insurance or commercial fraud. Cases occasionally reach trial, which may involve taking witness statements, bundling, appealing, negotiating a settlement, and at times advocacy.
However, litigation can be costly, time consuming, distracting and damaging for a company"s reputation (if negative press attention is garnered). Accordingly, clients may prefer to pursue alternate dispute resolution (ADR) methods such as arbitration and mediation as these are private and can be more flexible, quicker and cheaper to pursue than litigation (which involves the courts).
Almost every transaction will have tax implications. Tax lawyers may help to determine the way in which transactions should be structured (for instance whether clients should pursue share or asset sales) and the methods of financing that should be used for a transaction (cash reserves, debt or equity). Tax lawyers also liaise with HM Revenue & Customs and advise on tax disputes and investigations. This may involve consideration of whether tax schemes are illegal or abusive through analysing the many different statutes, rules and regulations that apply to tax, for instance the General Anti-Abuse Rule.
Examples of ways in which firms can minimise their tax bill include: borrowing money from subsidiaries in more tax efficient jurisdictions and paying high interest rates in return; paying large franchise fees to franchisors based in more tax efficient jurisdictions; or paying inflated prices when acquiring goods from subsidiaries along the supply chain in more tax efficient jurisdictions. These strategies effectively enable companies to reallocate (or reroute) profits from subsidiaries (or other companies within the same group) in jurisdictions with high corporate tax rates to other subsidiaries (or companies within the same group) that exist (and thus pay tax) in jurisdictions offering more favourable tax rates. Consequently, there would be less profit available for taxation in jurisdictions with high tax rates.
Advises on the construction, acquisition, sale, transfer and financing of tangible assets such as ships, planes, buildings and other infrastructure. In addition to drawing up the relevant contracts, Real Estate lawyers may also work on: planning permission applications; large regeneration projects; leasing or licensing arrangements (usually of business premises); and property-related disputes. Real Estate lawyers often support the Corporate department on elements of deals that involve property.
As part of the due diligence process, Real Estate lawyers may for instance have to ascertain: which assets are actually included in a deal; who owns the assets and whether the seller has the legal right to sell the assets; whether the assets are subject to a lease owned by a third party that will expire soon; whether the assets are subject to any undisclosed charges (for instance a mortgage) or interests (for instance a right of usage granted to a third party); whether the assets are in a satisfactory condition; and whether restrictions exist that, for instance, prohibit development upon any land involved.
Advises on employment-related issues that arise in transactions such as mergers, takeovers, restructurings and insolvencies. In addition to drafting employment contracts, lawyers can advise on: remunerating or incentivising employees (for instance devising strategies relating to executive remuneration, such as offering shares to key employees); recruiting or retaining employees (for example, considering whether a key management team can leave if the company for which they work is acquired); disciplining or dismissing employees; sickness and maternity issues; and reorganisations. Employment lawyers may also engage in contentious employment-related disputes, concerning issues such as discrimination, unfair dismissal, or illegal soliciting of another company"s employees. Pensions lawyers can facilitate the transfer of pension schemes, or conduct due diligence to ascertain whether the pension scheme of a proposed target is in too great a deficit.
Advises clients on whether proposed transactions are likely to be classified as anti-competitive (for instance if they could create a monopoly). Work can involve analysis of allegedly anti-competitive agreements, mergers, state aid (where governments subsidise select companies) and cartels (an association of firms, manufacturers or suppliers engaged in a formal agreement to fix prices in particular territories and consequently restrict competition).
The work involves much analysis of regulation in different jurisdictions and can require competition lawyers to sell to regulators why a proposed transaction will not result in a substantial lessening of competition (SLC). To do this, when analysing the companies and products involved competition lawyers must take into account many factors, including: the principle activities of companies involved; customer perceptions of the company (including its brand and marketing); the use or purpose of a product or service; the design or composition of a product; the ingredients or materials from which a product is derived; the price; whether the product is a substitute or complement; and the retail location of the product or service.
Helps clients secure and protect intellectual property (IP) rights such as copyright, patents and trademarks to prevent others profiting from their ideas, inventions and brands, or causing reputational damage. Exclusive rights over intellectual property can afford clients a dominant market position and in the context of an acquisition, purchasers will typically want to ensure that the seller"s IP rights are included in the sale. The seller could otherwise simply start up another similar business soon afterwards and compete with the purchaser.
IP lawyers may advise on whether proposed actions could breach any existing intellectual property rights. Work may include applying for patents, initiating litigation against infringers of clients" IP rights, or helping to license intellectual property rights to other parties in return for a royalty. The work involved at times requires a technical understanding of the product and consequently some IP lawyers come from Science or Maths backgrounds.
This article is from the City Career Series: Commercial Law Handbook, which provides a basic grounding in the essential knowledge required for commercial law interviews and internships.