Why Do Companies Use Outside Lawyers as General Counsel?
In the intricate world of business operations, the role of legal counsel is pivotal. A legal oversight can result in substantial financial loss, reputational damage, or both. While many corporations hire a full-time in-house general counsel to manage their legal affairs, others opt to use outside lawyers. But why would a company choose one over the other? Let’s delve into the reasons why some businesses prefer external attorneys to spearhead their legal matters.
1. Cost-Effective Strategy:
Maintaining a full-time general counsel is a substantial financial commitment. Beyond the salary, there are benefits, bonuses, and other overheads. For companies with sporadic or unpredictable legal needs, it’s more cost-effective to engage an external lawyer on a case-by-case basis.
2. Pool of Specialized Expertise:
Outside law firms typically house a variety of attorneys, each with their niche expertise. Whether it’s intellectual property, international law, or labor disputes, companies can tap into specialized knowledge, ensuring they get the best advice for their unique circumstances.
3. Flexibility is Key:
Not all companies have consistent legal needs. For those with fluctuating requirements, using an outside counsel offers the flexibility to scale up or down as needed, avoiding the commitment of a full-time position.
4. An Objective Perspective:
Being somewhat detached from the day-to-day operations of a company, an external lawyer can provide an unbiased, fresh viewpoint. This objectivity can be vital in making clear-headed decisions, especially in complex or sensitive matters.
5. Ideal for Startups:
Startups and small businesses often operate on tight budgets. With possibly sporadic legal needs, like fundraising or drafting terms of service, it’s more economical and sensible for them to engage outside counsel as and when required
6. Overhead Reduction:
Hiring a full-time GC involves additional overhead costs such as office space, administrative support, and more. Engaging an outside counsel neatly sidesteps these extra expenses.
7. Robust Risk Management:
Partnering with a reputable law firm can offer a sense of security. Such firms bring in- depth resources, diverse expertise, and a reputation that can be reassuring during significant legal challenges.
8. Filling the Gap:
If a company’s general counsel position becomes vacant suddenly, or if they’re in the midst of hiring, an external lawyer can serve as an interim solution, ensuring continuity in legal matters.
9. Global Reach:
For companies spread across different jurisdictions, it might not be feasible to have in- house expertise for every region. Relying on local outside counsel familiar with specific regional legal environments becomes a practical choice.
10. Project-Specific Engagement:
Occasionally, businesses undertake projects like mergers or acquisitions that demand intense legal involvement in a short span. Outside counsel can swiftly provide the necessary manpower and expertise without a prolonged commitment.
In Conclusion:
The choice between an in-house general counsel and an outside attorney isn’t black and white. It depends on a company’s specific needs, financial considerations, size, and long- term vision. However, the above reasons illustrate why many businesses find value in looking outside their walls for legal expertise. As always, the key is to find the right balance that aligns with the company’s goals and operational realities.
DISCLAIMER: This blog is intended solely for educational purposes and contains only general information. It should not be construed as legal advice and should not be treated as such. You must not rely on any information contained herein as an alternative to legal advice from your attorney or from other professional legal service providers. If you have any specific questions, you are welcomed to retain an attorney from Fortis LLP or seek legal advice from another attorney of your choosing.
