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Establishing a Legal Department – An Executive’s Roadmap‎

general counsel establishmentRemember the time when your company’s legal affairs were handled by one law firm, and by lawyers you knew and met? For many fast-growing companies this is nothing but a distant memory, having grown to the point of hiring several law firms and tens of lawyers to handle their diverse legal affairs

With ever-rising legal expenses and outside legal counsel often seeming as too big to manage, many executives in these companies face the inevitable question – should I establish a legal department in my company

General Counsel – a historical perspective

It was not long ago that the primary reason an Israeli company established a legal department was to save law firm legal fees. Twenty years ago there were only a handful of Israeli companies with legal departments. Today there are over a hundred

This meteoric growth resulted from the realization that companies could hire lawyers in-house at wholesale rates instead of paying retail to law firms providing the same services. However, for the most part, law firms still were in control of the legal affairs of companies

Today, Israel boasts over having more companies on Wall Street than any other country in the world, besides Canada. All of this activity takes a lot of expensive legal horsepower

In addition, the worldwide surge in complex business legislation and regulation (e.g., Sarbanes-Oxley, anti-corruption, WEEE, ROHS, conflict mineral restrictions, employment laws, etc.) combined with increased litigation and intellectual property issues, has made the task of managing a company’s day-to-day legal affairs more daunting. Needless to say, this is happening while law firms and legal expenses keep growing

Considerations for establishing a legal department

general counsel oppurtunitySo, at what point does it make sense to establish a legal department? This depends on your company’s type of business, industry regulation, whether you are publically traded or planning on going public, the number of employees, and where you do business

It is no longer just a matter of reducing fees by buying lawyers wholesale. Today, every company must establish a functional legal strategy, which includes the proper management of its legal affairs

Or in other words: If you’re going to buy wholesale, you’re going to have to manage the warehouse.

Every company operates differently and has varying needs. The questions that need to be considered should focus on identifying the legal needs of the company from a business perspective, among others

a) What laws and regulations need to be complied with

b) What policies and procedures is the company required to implement

c) What type and of what volume are the contracts the company deals with on an ongoing basis

d) Who should handle and manage all of this activity

e) Who is doing it now, and can it be done more efficiently

Opportunity knocks

Indeed, the question of whether a legal department is required needs to be determined on a case-by-case basis. But, just like in any other business, what is viewed by some executives as hardships, is considered by others as an opportunity

For example, certain legal matters can actually be handled by properly-trained business and administrative personnel, not lawyers. Other cases need to be handled by selectively-chosen outside lawyers. And for some companies, the solution lies in establishing a tailor-made legal department, based upon a strict scrutiny of the company’s legal environment

In conclusion, whether regulation, rapid growth or legal developments are to blame, the fact of the matter is that successful companies without a legal department find it increasingly difficult to manage their outside legal counsel

One thing is certain – when adopting a legal strategy, there is no “one size fits all”. But for those who choose the right size and model of their company’s legal suit, gains are sure to be immediate and well-rewarding

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Bill Weisel* Adv. William Weisel heads the division of Strategy & Consulting for Legal Departments and Companies at Robus

* William served as GC and member of senior management of four publicly-traded, multinational, hi-tech companies over the past two decades, and he is a lecturer at the Haifa University Graduate School of Management and teaches a course entitled – Business and Law Convergence

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