Being the chief financial officer of a growth-stage company means having a hand in nearly every operational function. In addition to running the finance department, the CFO works with other members of the management team on virtually all of the company’s key activities and decisions. When the company does not have an in-house general counsel, the CFO is typically asked to manage the company’s legal affairs, too.
The CFO’s Conundrum
While experienced CFOs are often adept at managing the day-to-day legal needs of a company, including reviewing and negotiating contracts, when the legal needs of a company become more frequent and more complex, the CFO has less time to devote to other mission-critical finance and operational functions. The seemingly obvious answer to this problem is to send legal work to outside counsel. However, when faced with traditional law firm rates, CFOs are reluctant to seek the assistance of legal counsel on operational legal matters like commercial contracts. Perhaps even more problematic, lawyers at traditional law firms are often unable to meet the deadlines demanded by a fast-paced growing company, causing CFOs to avoid sending out time-sensitive matters.
There is another option for the CFO, though. CFOs can turn to on-demand general counsel services to alleviate time constraints without worrying about high fees or inefficient turnaround times associated with large law firms. Using the on-demand GC model, the CFO can engage experienced commercial counsel when needed most, such as to help meet end-of-quarter deadlines. And, because on-demand general counsel fees are a fraction of those charged by traditional law firms, the CFO can rest assured that expenses will be appropriately managed.
5 ways on-demand general counsel can backstop the CFO
Take a closer look at 5 functions commonly quarterbacked by the CFO of a growth-stage company that on-demand legal counsel can support:
- Negotiating commercial contracts. Commercial contracts come in all shapes and sizes – some are straightforward templates with standard legal provisions, while others are more complex, customized documents. In either case, proper review is critical for evaluating potential risk in order to best protect the company’s interests. When the volume of these contracts increases, as is typical with a growth stage business, the CFO’s capacity to handle all of this work alone is often strained. Utilizing an on-demand GC with commercial contracts expertise relieves this burden from the CFO, allowing the company to complete transactions quickly and skillfully. This efficiency – buoyed by the industry-specific expertise of the on-demand GC - also helps to minimize legal fees.
- Handling day-to-day legal needs such as HR matters, leases and corporate governance. Operational issues like these are generally straightforward, and the CFO is more than capable of managing them. The real problem is the time legal oversight demands at the expense of a CFO’s other responsibilities. This common hassle can be easily, and affordably, solved with the help of on-demand in-house counsel. This function is the sweet spot for seasoned business attorneys who have served as in-house general counsel. They handle a wide range of day-to-day issues, including attending board meetings and drafting minutes, preparing offer letters and employment agreements, and drafting risk management policies and procedures.
- Protecting intellectual property. Intellectual property is often a key asset of a growth stage company, requiring strategic oversight and management in order to protect and optimize its value. In many cases, the CFO is tasked with managing the company’s IP portfolio, often in conjunction with the VP Engineering or CTO/CSO. An experienced general counsel is capable of adding significant value to the company by helping to align the company’s business strategy with its IP strategy, and by helping the CFO make proper cost-benefit decisions about how to utilize the company’s resources most efficiently to develop a valuable IP portfolio within the bounds of a growth stage company budget.
- Leading risk management and compliance. As the go-to person for legal affairs, the CFO will inevitably encounter unusual situations or questions from the executive team presenting potential risks for the company. Having an on-demand GC at the ready is more manageable than contacting a partner in a law firm, both in terms of availability and cost. This accessibility means the CFO is more likely to pick up the phone to consult on small problems before they turn into fire drills later on. Similarly, the CFO tends to bring the on-demand GC into deals sooner, allowing compliance issues to be identified earlier in the process. In addition, on-demand GCs are able to leverage their significant experience as former general counsels to provide practical, business-focused advice for handling risk management and compliance, an approach in stark contrast to the hyper-conservative style of traditional law firms.
- Serving as a liaison with external legal counsel on highly specialized matters such as large M&A work, litigation or complex corporate financing. As most CFOs have learned by surviving one themselves, an impending acquisition or lawsuit can bury the management team in due diligence, document review, and long hours in the office. Bringing a skilled advisor on board to coordinate with external counsel can save them hundreds of hours, streamlining the process internally so that business can proceed as usual.
For CFOs who have availed themselves of experienced, on-demand general counsel services, the benefits are clear. Beyond merely alleviating time constraints at an affordable price tag, the CFO gains a valuable partner who, by acquiring institutional knowledge and building trust relationships with key individuals, can skillfully manage the company’s legal affairs in the absence of an in-house general counsel.