There are numerous middle-market companies across the country that have the need for, and would benefit from, having a quality general counsel on staff. Senior management at many of these companies recognize this need, but cannot justify paying the $250K to $350K base salary requirement for a full-time, highly-qualified general counsel. That is why we offer a fractional model to companies.
Many businessmen are now cognizant of a fractional ownership model for certain business assets – the most common being fractional ownership of corporate jets. They recognize that there are real business benefits to fractional ownership – notably, paying less than they normally would for full ownership of an asset that is only used on a part-time basis and having part ownership/access to a level of asset that they would not otherwise be able to afford.
We bring this model to the in-house general counsel market. For a fraction of the annual cost of a full-time general counsel, a company can have available a highly-qualified general counsel that is always available and that will organize and perform a company’s routine legal tasks, fill the role of corporate secretary, select and cost-contain outside legal counsel as required, etc. – all for a fixed monthly/annual fee for a menu of routine legal matters that are the ambit of the typical general counsel.
For example: compliance, reporting and regulatory issues, subsidiary corporate governance, administrative issues, policies and procedures, director and officer reporting obligations, stock and securities registries. What are these things? Simply put, they are some of the things that fall through the cracks in active organizations that are focused on growing their core business, growing their portfolio of companies and engaging in all those things that bring an immediate return on investment. We repeatedly see the same issues get pushed to the side, because “we have to focus on getting this deal closed” and “they are just details; we’ll get to those things sometime down the road.”
But how wise is that? Often management will recognize that these things need to be done, but they get shunted aside to deal with the next immediate deadline first. And yet, they still linger the back of management’s (typically the CFO) minds … a nagging suspicion that bad things will happen if these mundane matters are not dealt with. This suspicion is, unfortunately, well founded.
Those responsible for this work at any organization know that failing to handle these matters carefully can have dramatically adverse results. Many ruefully think to themselves after the fact: “if only we had been more careful” about these sorts of things “we wouldn’t be in the trouble that we are in today!” This is the type of work that, if done and maintained properly, allows an organization to consistently stay in compliance, pull historical records of company ownership and governance at a moment’s notice, prevent inadvertent wrongdoing and omissions by organization personnel, and accurately track ownership, stock certificates and other important records. And if not done correctly and in a timely matter, these are the things that lead, at best, to cases where outside counsel has to spend inordinate legal resources – sometimes years after the fact – trying to recreate records and bring entities into compliance and, at worst, lead to contractual disputes, loss of limited liability and expensive litigation. The moral of the story is that it is far more cost-effective to take care of the “details” now.
Recognizing that many of our clients are quite busy and simply cannot allocate adequate personnel and resources to this task, we serve as outside general counsel to assist our clients in handling the day-to-day work of running this part of their businesses. Our services include assisting clients with their needs relating to compliance, reporting and regulatory issues, subsidiary corporate governance, administrative issues, policies and procedures, director and officer reporting obligations, stock and securities registries, and many other tasks that should be done to keep our clients’ organizations functioning smoothly and efficiently from a compliance, record-keeping and transactional support basis.
What Work is Encompassed
The work we do is, quite simply, anything a GC or a CFO is tasked with doing.
For organizations that do not have an in-house legal capacity, we function as the “virtual” general counsel for the CFO and management by taking care of all the matters that an internal GC would be responsible for. For large organizations, we function as a seamless extension of the GC’s office, allowing the GC to focus on high level or immediate-need transactional and litigation matters while we come in the wake and make sure everything is in compliance, up-to-date and properly accounted for.
We have had extensive experience in this area, ranging from small start-up clients to large clients doing business in U.S. and non-U.S. jurisdictions.
Part of the reason we recognized a need for the Group and understand the support needs of our clients is because, at various points in their careers, many of the members of the Group served as in-house counsel in fast-moving organizations. They understand first-hand how GCs and CFOs have to function in high pressure “instant answer” environments where every day brings a new priority that must be dealt with immediately. They know what typically falls through the cracks – often for very good and understandable reasons – and they know what needs to be done. In essence, the we are there to help the CEO, CFO, or GC build the fundamental foundation of compliance, corporate governance and record keeping that allows an organization to grow without faltering.
International and U.S. Capabilities
One of the trickiest problems for a GC or CFO is that which occurs when a U.S.-based company seeks to do business for the first time in a non-U.S. jurisdiction. As many have found out the hard way, it is not as simple as just calling up a law firm in another country and seeing what happens. There are numerous cross-border tax, regulatory, employment and other issues that make opening a non-U.S. office fraught with administrative and policy perils.
We have navigated these waters in many non-U.S. jurisdictions and are well acquainted with how to safely engineer a client’s opening of an office in a non-U.S. jurisdiction.
Clients Who May Find these Services Useful
The services outlined herein are of especial use for the following organizations:
- A start-up company.
- A rapidly growing small company without a general counsel capability whose growth has outstripped its ability to manage the compliance and regulatory functions of its business.
- A small or mid-sized company with a GC who is inundated with compliance and regulatory tasks and cannot get it all done; or, who faces the Hobson’s choice of either handling these essential responsibilities or paying attention to the critically important advisory part of her job.
- A mid-sized or even large company that wants to out-source part of the general counsel function, either for cost efficiency or because it is too time-consuming internally. Perhaps, the GC wants to focus on more mission-critical matters but does not want to neglect these smaller matters and there is not enough time in a day. For example, any such company, with hundreds of entities that are formed for individual deals, would save both costs and “internal” time, by outsourcing to our Group for handling the numerous filings, annual minutes and other necessary maintenance.
Turn-key or A-la-carte Provision of Services
We are able to provide services either:
- On a turn-key basis – where we effectively just take over responsibility for significant portions of the work under the direction of the CEO, COO, CFO, or GC. In this capacity, we handle all facets of our client’s business’ compliance and regulatory needs, including, most critically, figuring out what must be taken care of and is not being taken care of.
- On an a-la-carte basis – where our client’s executive team either is overworked or seeking further cost efficiency, we assist in handling selected individual areas of concern.
Why We Cannot be Everything to Everyone … And Why We Can Be
No law firm can handle everything – and we are no exception. The essence of a “general” counsel is that the GC will figure out what has to be done and either do it herself or find someone (at another law firm or another service provider) who can do it competently and cost-effectively. If we cannot handle a particular matter ourselves – within our Group or with the assistance of other members of our Firm – then part of our role in providing these virtual general counsel services is to locate the right party for the job.
Of possibly even greater importance, however, is our Group’s contribution as a preventive troubleshooter. In the performance of these services, our Group has discovered and “fixed” a lot of things which were “going wrong.” We take particular pride in identifying possible problems before they occur, and then determining how to address them quickly and cost-effectively. A few examples of such issues include:
- Has an expert been retained to figure out what kinds of insurance should be obtained and whether such insurance is in place?
- Has someone investigated whether there has been compliance with state-level requirements?
- Are there policies in place to make sure that only authorized persons can bind credit entities within the company?
- Are there careful cash-management controls in place?
- In non-U.S. jurisdictions, has someone thought through the implications and risks of the Foreign Corrupt Practices Act and ensured that non-U.S. employees are well aware of the rules that must be followed?
Leaders of the Group
The Group is co-chaired by Constantine Potamianos and Jerome Fogel.
Constantine, who also is Chair of the Corporate Practice Group, has served as the outside general counsel for numerous clients and is an experienced business lawyer who has assisted public and private companies with a broad range of corporate and securities matters. One of his first early assignments as a young lawyer was to “clean house” for a major international outdoor advertising company with respect to its numerous U.S. subsidiaries – a precursor to the Group’s current capabilities – and was much appreciated by the client’s U.S. GC for taking charge of the subsidiaries’ corporate governance issues, bringing them all into compliance and maintaining them on an ongoing basis.
Jerome, along with being part of the Corporate Practice Group, previously served in executive operations and business development roles within organizations. He has lead internal teams and managed critical legal, finance, operations, HR and business development initiatives. This provides him a broad business and operational perspective when advising clients. He strives to assist clients to think, plan, and act strategically rather than spontaneously and emotionally in response to challenges and opportunities.
The Group draws on the Firm’s other attorneys on an as-needed basis. Typically, a senior associate or partner is assigned to handle the client (the “Point Person”). The Point Person is tasked with learning everything possible about the client’s business to be of as much assistance as possible. When legal work is required, if the Firm has the expertise in-house then the Firm provides same; if not, the Point Person assists in locating other counsel of sufficient competence and at reasonable cost so that the work is properly performed.
Although a subtle point to get across, the Group can function in a manner so that the task at hand is completely handled by the Firm and simply taken off management’s desk, or the Group can assist in small tasks, such as locating and diligencing proper counsel for a project and turning the matter back to management. To be blunt, we are not proud and do not have “egos;” we see our role as helping management with their jobs in whatever manner is sought. We expect other law firms to be involved representing the client and are content to work with these other law firms in whatever capacity management seeks us to do without “competing” for the work with these other law firms.
Special Nature of Our Services as the Client’s Legal “Partner”
When a client engages Fogel & Potamianos to handle its compliance, reporting and other administrative responsibilities, it can indeed sleep well knowing that our Firm is not only representing its legal interests – as all lawyers are supposed to do – but that we also consider ourselves the client’s legal “partner” and that we always approach our work from this perspective. This approach makes us unique and requires us to deeply understand our clients’ business goals. What better way for us to do this than to provide these services and truly assist our clients in handling their internal needs.
The Theory Behind Our Providing this (Unique) Practice
Creating the Group was not a part of our initial Firm strategy. However, we realized by happenstance that our approach of treating our clients like our partners made it very logical for our clients to think of us as an extension of their company and, accordingly, as their in-house counsel (even though – of course – we are not in fact in-house with our clients).
Many successful organizations and individuals suffer what is sometimes called “time-poverty.” Time poverty often occurs when an individual or organization is undergoing rapid expansion (whether it is a start-up organization or an established company moving beyond its original mandate or a U.S. company seeking to do business in a non-U.S. jurisdiction). In these situations, oftentimes the parties become victims of their own success and put aside many tasks which on their face are mundane, but which over time, if not addressed properly, can cause increased risk to the business. A few examples of these tasks are:
- creation of policies and procedures for appointing directors and officers,
- creation of policies governing employees (or customers),
- observance of corporate formalities,
- compliance with tax, ERISA, PATRIOT Act, and other statutory or regulatory requirements,
- compliance with investor or fund requirements or restrictions, and
- if the client is conducting business in non-U.S. jurisdictions, creation of tax efficient structures, implementation of policies regarding permanent establishment, substance, and transfer pricing, compliance with FCPA and other multi-jurisdictional statutes and regulations, and creation of operational policies for cross-border governance.
Many of these matters (some of which seem “annoying” or “trivial” by nature), if not attended to by an overworked GC or CFO, can cause a host of problems (and in some circumstances, large monetary losses). In some cases, what was simple for a single transaction becomes a huge organizational challenge if there are hundreds of matters or multiple employees and/or third parties that have to be involved in implementation.
In many companies these services and tasks are effectively “dumped” on the GC (if there is one) or “dumped” on junior and untrained lawyers at outside law firms (or more frequently, “dumped” on an employee who is unaware of the underlying compliance or regulatory issues). The situation can become dire if there is no single person to put together centralized policies and procedures in a fast-growing business with numerous outside law firms each reporting to different personnel at the client and each setting up single purpose vehicles for the same company’s business but on different forms with different directors and officers.
Outside law firms tend to be oriented on transactions and not compliance – there is no glory in compliance work. Plus, most organizations would not pay major law firm fees to do such work.
Only a law firm that truly partners with its clients would be a logical choice not only to take on tasks of this nature, but also to treat them seriously and with the care that they deserve. Consistent with our view that our clients are our partners and our role is to look out for them, we instinctively think about how to assist our clients in getting these sorts of matters under control. Accordingly, we have developed and formalized a specific practice area pursuant to which clients, whether or not they have in-house legal staff, can use our services to look out for their compliance, structuring and other issues.
Fogel & Potamianos’ General Counsel Group provides general counsel or portions of the general counsel functions for an organization on a turn-key basis These include:
- Overall business structure,
- Corporate formalities,
- Corporate compliance,
- Establishment of foreign offices,
- Director and officer management,
- Guarantees and credit parties,
- Employment agreements,
- Filing procedures,
- Incentive plans,
- Litigation practices,
- Securities registry and tracking,
- Selecting law firms,
- Negotiation of office leases,
- Insurance coverages,
- Foreign Corrupt Practices Act,
- Securities transfer opinions,
- Non-disclosure agreements,
- Restricted list, information barriers and similar procedures,
- Corporate forms,
- Review of intellectual property policies and protections, and
- Employment matters
There is no specific delineation of a-la-carte services in that these services are generally “whatever needs to get done.” Below are services we have performed for clients in the past that have been of material assistance. It is important to note that we do not necessarily have the expertise in-house to handle all the matters described below – no law firm could have that in one place – however, if we do not have the expertise, we are able (in true general counsel fashion) to source and obtain the expertise:
Overall business structure: It is critical for any business to set itself up properly from a legal perspective. There are various entities – corporations, partnerships, limited liability companies, for example – and other types of entities in foreign jurisdictions. In addition, there are numerous other considerations, including (to name just a few) shielding credit parties from liabilities, confidentiality, different entities for different transactions and different lines of business, cost-effectiveness, permitting others (e.g. employees) to receive ownership as a reward for services. The Group will provide analysis and suggestions as to appropriate corporate structures and, once same is decided upon, implement these structures.
Corporate formalities: Once a corporate structure is determined, entities must be formed correctly, and there are various considerations in doing so – the right parties must be appointed to the right boards, the right officers must be appointed (this can be especially tricky when entities have special slates of officers/directors and care must be taken to insure that authorized parties are executing documents), correct by-laws must be adopted, share certificates must be issued. And then, of greater difficulty, procedures must be put in place for forward-looking monitoring (e.g. annual meetings, removal as directors or officers of any employees who leave the company, adding new parties, keeping track if there are multiple entities). The Group has sophisticated tracking and other procedures in place to handle these matters.
Corporate compliance: Once an entity is formed, and especially if there are multiple entities for a business, there will be a number of issues to track for each entity (annual filings, payment of franchise and other taxes in formation and all qualification jurisdictions), whether an entity should be qualified in any other jurisdictions, maintaining an entity’s good standing in the formation jurisdiction and all qualification jurisdictions). We have advised our clients in setting up procedures for centralizing legal and compliance issues in one area or one law firm (including centralizing billings for corporate compliance costs).
Establishment of foreign offices: It is particularly difficult for a client that has only done business in the United States to start doing business in a new non-U.S. jurisdiction. Everything is different and often there is a language barrier. It is not a simple matter of calling up a law firm in the new jurisdiction and asking what to do. There are different laws (of course) and pretty much every one of the matters has to be re-examined in a new light and with new third parties. To make matters more complex, there are cross-border tax issues (often generally referred to under the rubric of “permanent establishment” issues) that need to be thought through and properly structured or a great deal of the client’s potential profits will disappear in taxes. This can be handling all matters attendant to setting up “from scratch” an office in a non-U.S. jurisdiction, to handling and administering policies and procedures for non-U.S. offices of our clients, to advising on permanent establishment and related issues.
Director and officer management: Particularly for public SEC reporting companies, periodic tracking of purchases and sales of company securities by directors and officers, followed by the requisite Section 16 SEC filings as necessary is an important but often overlooked aspect of corporate management. While the onus may be on the individual officer or director to make filings as required, quite often it falls on the company to track and make such filings, and it behooves the company to be proactive in this respect, often in the form of gathering and reviewing periodic reports provided by the officers and directors with respect to any sales made, stock options received, etc. We have experience in both preparing policies and procedures to educate officers and directors on their responsibilities, as well as in tracking such matters on behalf of clients and making the requisite SEC filings when needed in a timely manner.
Guarantees and credit parties: A sometimes overlooked area is having careful procedures in place to make sure that only very senior or specially designated parties have signing authority to put “credit parties” on the hook. The downside of this going wrong can of course be dramatic as potentially the entire company’s net worth can be on the hook for breach of a small agreement (like an NDA – see below). We advocate extremely careful policies and procedures for handling these matters – effectively acting as gatekeeper – and have great expertise in setting up procedures to protect our clients from this type of concern.
Employment agreements: Obviously these agreements are critical for any company, especially as they pertain to key personnel. We have drafted and negotiated numerous employment agreements for our clients and are quite skilled in this critical area.
Filing procedures: This can easily get out of hand if there is a large volume of complex documentation to store. Also, there are issues of concern pertaining to inadvertent destruction (e.g. by fire), misplacement or theft. We have set up policies and procedures for filing for our clients.
Incentive plans: Many companies desire to or have established incentive compensation plans to motivate and reward employees and others. These can range from simple stock option plans to more complex incentive compensation plans encompassing various award types and available to employees, officers, directors and consultants to a company. We can set up such plans, drafted forms for various awards under such plans, and managed and tracked awards under the plans. For companies that are also public SEC reporting companies, we have also registered for resale the shares available under various incentive compensation plans for the benefit of awardees under the plans.
Litigation practices: Litigation is never planned, of course; however, it happens. All companies need proper policies as to where service of process should be delivered (typically the general counsel’s office). Also, some litigation matters are covered by insurance; however, there is a risk that the insurance will be voided if proper claim is not made on a timely basis. Additionally, litigation should be monitored and reported in a centralized manner to the general counsel’s office or other party overseeing litigation matters. Accordingly, procedures should be set for handling litigation and this can be more difficult than it appears, especially in a company with multiple offices or lines of business. We can set up these policies and procedures for our clients.
Securities registry and tracking: Creation and updating of proper stock and other securities registries is vitally important in companies ranging from start-up status to well-established public SEC reporting companies. Sometimes a company will act as its own transfer agent for all issued securities, especially in the earlier stages of its existence. Many public companies will have a third-party – focusing exclusively on this business – act as their transfer agent for some of their issued securities and not for others (e.g. the public company transfer agent handles the company’s publicly-traded common stock, but the company acts as its own agent for preferred stock or warrant issuances). In all cases, it is important to have accurate stock and warrant registries, to make sure securities are issued with the proper restrictive legends if necessary, and to make sure that the information on file for the individual holders is accurate and up-to-date. We regularly take care of such responsibilities for our clients.
Selecting law firms: Consider a client that has a very small matter that needs to be handled sensitively in North Dakota – in Tokyo – in New York City. How is counsel to be selected? Depending on the circumstances, it can be time-consuming to try to find the right counsel to handle the job, i.e. counsel that is both competent and will be attentive to a small matter. We have handled this function for our clients.
Negotiation of office leases: Almost all businesses need a location in which to do business, which usually involves an office lease. There are many issues involved in negotiating a lease that are tied into the company’s business purposes and goals, i.e. ability to terminate if the business goes too poorly or too well, which company entity is liable for the rent, and many more issues. Although many law firms handle leases, we have found that having a deep understanding of our client’s business goals (through our performing the functions described herein) gives us, and our clients, a large advantage for us to handle these types of matters.
Insurance coverages: Having proper insurance in place is critical to any business. However, many times this slips through the cracks, especially such areas as fidelity bonds for employees, key man insurance, buy/sell insurance and D&O insurance. These issues become even more complex if a company operates in the international arena. We regularly work with outside insurance consultants to make sure that a proper insurance program is in place for our clients.
Foreign Corrupt Practices Act: If a client is doing business in a non-U.S. jurisdiction it is critical to have a policy pertaining to the FCPA. Behavior that is “the same as what everyone else does” could, if scrutinized under the FCPA, be disastrous for obvious reasons. We can establish FCPA policies and procedures for our clients and can advise in this area.
Securities transfer opinions: Quite often, publicly-traded companies also have restricted securities that have been issued in the past. Rule 144 and other registration exemption provisions allow holders of restricted company securities to sell them in the open market if a requisite holding period and other requirements have been met. We can review such requests to ensure they meet the prerequisite for the applicable exemption and then, if required, issue an opinion to the transfer agent allowing for the sale of such securities.
Non-disclosure agreements: In the current world having careful policies and procedures for handling information given by third parties – and, conversely, restricting information given to third parties – is a whole area of concern. Non-disclosure or confidentiality agreements (known loosely as “NDA’s”) are a recipe for serious trouble if not handled properly. This is because they look so innocuous; however, they often contain non-solicitation, non-circumvention, non-compete clauses and other potential time bombs. Imagine a large company without a centralized plan for NDA’s – there is serious risk of a violation by one part of the company inadvertently restricting another part of the company. Our Group has extensive experience handling these matters.
Restricted list, information barriers and similar procedures: An outgrowth of handling NDA’s leads into this area of setting up policies and procedures for handling material non-public information that our clients may obtain and arranging for proper procedures. The downside of not handling this properly is all too obvious.
Corporate forms: Every company needs forms for the way it does business or there is obvious risk. These range from equipment leases, engagement letters with third party service providers, and forms for billings and collections. Little things like proper venue, waiver of jury trial, non-prevailing party pays legal fees and other “boilerplate” that “no-one looks at” can be critical should a dispute develop. Something as simple as having these provisions on invoices, in engagement letters, etc. can be of critical import when things go wrong. Sometimes a little innocuous agreement for “peanuts” that no one is looking at contains an “indemnity” for damages caused by employees which could of course be dramatic. We have developed many forms for our clients and can easily handle this process quite well and, with the more we know about the client’s business, the more effective and useful the forms will be.
Review of intellectual property policies and protections: We can develop policies and procedures for our clients so that their commercial practices and trade secrets are protected (e.g., through trademarks and patents).
Employment matters: We do not hold ourselves out as employment lawyers; however, we have had extensive experience overseeing these areas, including, hiring and termination procedures, employee handbooks, office manuals, payroll services and compliance, new-hire paperwork, background checks, employment agreements and separation policies. Notably these matters vary from jurisdiction to jurisdiction, yet policies and procedures are as best as possible intended to be uniform across the company. We have experience in handling these matters for our clients in U.S. and non-U.S. jurisdictions.