If you watch too much television, you might believe that lawyers negotiate deals one day and head to the courtroom for high-profile litigation the next. This is highly unusual in the real practice of law. While both litigators and corporate lawyers deal with corporations, they do so in very different ways. One of the basic divisions in the practice of law is between litigation and corporate, or transactional, law, and almost every attorney will decide between these two areas either while they are in law school or very early in their career. Most people understand what litigators do (although they may overestimate how much time they spend in an actual courtroom), but corporate law is less understood.
Many aspiring lawyers would prefer helping to create a business venture to suing one.Attorneys who facilitate transactions in the fields of corporate or tax law, intellectual property or employee benefits are considered transactional lawyers. In the world of business, transactional lawyers try to set up deals in ways that avoid litigation, and make clear the rights and responsibilities of all parties in the event that something does go wrong.
The difference between corporate law and commercial litigation is simple.Corporate lawyers craft transactions or deals, and litigators step in when those transactions go wrong.Litigators resolve disputes through the judicial system or through alternative methods, such as mediation or arbitration.
So, what are corporate lawyers? Basically, they advise businesses on their legal obligations, rights and responsibilities. Attorneys who call themselves corporate lawyers are usually corporate generalists, lawyers who advise businesses on their legal obligations, rights and responsibilities, provide advice on business structures and evaluate ventures. In order to serve the sophisticated needs of their clients, corporate lawyers also coordinate with fellow transactional lawyers in such specialties as tax, ERISA and real estate.
Many firms use the terms “transactional” and “corporate” interchangeably when describing areas of practice. Corporate lawyers structure transactions, draft documents, negotiate deals, attend meetings and make calls toward those ends. A corporate lawyer works to ensure that the provisions of an agreement are clear, unambiguous and won’t cause problems for their client in the future. (Or are ambiguous in such a way that the client’s interests are served.) Corporate attorneys also advise on the duties and responsibilities of corporate officers, directors and insiders. Not all firms categorize the varieties of corporate practice in the same way. For example, some firms might have separate practice groups for antitrust or mergers and acquisitions, while others include them within their corporate department. The following list, while not exhaustive, outlines some of the areas in which corporate attorneys might spend their time.
Corporate formation, governance and operation
A corporation is a legal entity created through the laws of its state of incorporation. Individual states make laws relating to the creation, organization and dissolution of corporations. The law treats a corporation as a legal “person” that has the standing to sue and be sued, and is distinct from its stockholders. The legal independence of a corporation prevents shareholders from being personally liable for corporate debts. The legal person status of corporations gives the business perpetual life; the death (or, in today’s climate, discrediting) of an official or a major stockholder does not alter the corporation’s structure, even if it affects the stock price.
A corporate lawyer can help a client create, organize or dissolve a business entity. To form a corporation, attorneys draft articles of incorporation, which document the creation of the company and specify the management of internal affairs. Most states require a corporation to have bylaws defining the roles of officers of the company. Corporate lawyers also deal with business entities in the forms of partnerships, limited liability companies, limited liability partnerships and business trusts; and each form has its own set of legal rights and responsibilities, organizational structure and tax burdens. Attorneys help their clients decide which of these legal forms is best suited for the business they want to run and the relationships the principals want to build with each other. A corporate lawyer who helps a client form a company might later be called upon for other legal advice related to the startup or management of the business, like reviewing a lease for office space or equipment, or drafting employment contracts, nondisclosure and non-compete agreements. Corporate lawyers might research aspects of employment law or environmental law, or consult with another attorney who specializes in that field. Business executives also seek advice from corporate attorneys on the rights and responsibilities of corporate directors and officers.
Mergers and acquisitions
One major corporate practice area is mergers and acquisitions (M&A). Through acquiring (buying) or merging with another company, a business might add property, production facilities or a brand name. A merger or acquisition might also work to neutralize a competitor in the same field. M&A attorneys provide legal counsel about proposed transactions. Typically, to evaluate a proposed venture, a team of corporate lawyers reviews all of the company’s key assets and liabilities, such as financial statements, employment agreements, real estate holdings, intellectual property holdings and any current, pending or likely litigation. This is called due diligence. The lawyer(s) can then assess the situation and raise specific issues with the client—for example, who’s responsible for the Environmental Protection Agency investigation of that piece of property the company owns? What happens to the employees of the target company or to the stock options of the company’s directors? M&A lawyers consult with their clients on these questions, and together attorney and client determine which parties should accept current or potential liabilities. The lawyers then draft the merger or acquisition agreement and negotiate in detail the terms of each party’s rights, responsibilities and liabilities.
In a venture capital practice, a lawyer works on private and public financings and day-to-day counseling. This means that he or she helps new businesses find money for their ventures, organizes their operations, and maintains their legal and business structures after formation. In venture capital, as in any corporate law position dealing with emerging companies, lawyers help build and expand businesses. Their responsibilities can include general corporate work, like drafting articles of incorporation and other documents, as well as technology licensing, financing, and mergers and acquisitions. Some lawyers find this type of work less confrontational than M&A practice because the client is working with other parties toward a common goal. Sometimes, in mergers and acquisitions, the parties see the process as a zero-sum game in which each must get the best deal no matter how it may affect future relations with the other company. This is especially the case in hostile takeovers.
The development and construction of power plants, oil refineries, industrial plants, pipelines, mines, telecommunications networks and facilities, and transportation systems involve the cooperation of many different entities, many different lawyers and extremely large sums of money. Project finance attorneys specialize in these deals. They form a project entity, a corporation, partnership or other legal entity that will exist for the term of the project, and they draft power purchase agreements and construction contracts, and negotiate financial terms with lenders and investors.
Some corporate lawyers specialize in securities law. On a federal level, the Securities Act of 1933 requires companies that sell securities to the public to register with the federal government. Corporations must follow certain protocols regarding the disclosure of information to shareholders and investors depending on the size of the corporation and the type of investor. If shares of a company’s stock are traded on a public stock exchange, the company has to file detailed reports with the Securities and Exchange Commission and distribute parts of those reports (the prospectus) to shareholders. The Securities Act of 1934 addresses the obligations of companies traded on a national stock exchange. To ensure the companies remain in accordance with these laws, corporate attorneys prepare reports for initial public offerings, yearly and quarterly disclosures, and special disclosures whenever something happens that might affect the price of the stock, like impending litigation, government investigation or disappointing financial results. Even if you don’t specialize in corporate securities law, the issuance of stock and the creation and distribution of the reports are subject to a whole host of rules with which corporate lawyers must be familiar.
The above was adapted from the Vault Guide to Law.
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