Neglecting legal issues can cause a company fatal damage down the road, but legal advice is pricey and often not the priority for startups and small companies with tight budgets. How do these companies handle the legal aspect of the business?

Hiring an in-house counsel is the goto solution for early-stage companies fortunate enough to have sufficient funding. While hiring a lawyer is not cheap, it could be a cost-saving measure for the company in the long term. However, setting up a legal department from scratch or depending on one person to solve all legal matters comes with a host of unique challenges.

“The main challenge is that there is no other legal counsel. Because the business is at a very early stage, there is absolutely no guidance or support for the in-house counsel,” says Shweta Swaroop, legal counsel at Manulife (Singapore). Before working at Manulife, Swaroop was the only in-house counsel for Allocated Bullion Solutions, a financial startup in Singapore.

“I did most of the work, which was of a wide variety. We could not outsource legal matters because of budget constraints – legal matters are considered a cost centre rather than a revenue-generating activity, so investors and shareholders would rather invest in things like marketing to get traction in the market. So most legal activities were expected of me, and there were times when I had to be able to give quick answers to many questions,” she adds.

In these situations, in-house counsel can only rely on previous experience and must be able to learn quickly and be constantly on their toes. This is very different from the experience of lawyers working in large teams at much larger corporations like Manulife. Swaroop shares that while her current job is still stressful, she can turn to her lawyer colleagues or manager anytime to ask questions. “It’s a different kind of stress. At a startup, you’re not sure if you’re always getting the right answers mostly due to [its] newness,” she points out. “It’s definitely not suited for everyone.”

A PARTICULAR TYPE

According to Gavin Ingram, Asia Pacific general counsel at Global Blue, a tourism shopping tax refund  company headquartered in Nyon, Switzerland, working for startups requires a “particular type” of lawyer who is not only good at legal matters but at time management.

“You have to be extremely adaptable, resourceful and flexible, as there is usually a large time commitment, maybe the need to travel, and high adrenaline with exposure to a huge number of matters simultaneously,” says Ingram, who has worn multiple hats, including being the legal advisor in his own startup before joining Global Blue.

Ingram notes that lawyers who are attracted to startups tend to be inherently entrepreneurial and thrive in high-risk, high-reward environments. These factors are crucial as the pay for in-house counsels are relatively low in the early stages of a new company. And the pay is not proportional to the pressure; the legal person often has to deal with finance, operations and a range of other things as well, so he or she must be comfortable with taking on different roles in a fastpaced, dollar-driven environment.

“The focus is on the absolute essentials to get products to market. From a legal point of view, you’re working on a very fine line to make sure you do things right but not waste dollars on inessentials. You have to have a very good understanding of the trade-off with compliance and do just what is needed, not less and not more,” explains Ingram.

He continues: “You have to be very competent and have good judgment and ability to prioritise. You deal with multiple stakeholders. Issues come very quickly and are often multi-jurisdictional, depending on the type of business. There is no time to train and supervise and review – the lawyer must be able to hit the ground [running].”

In-house counsel, however, may not always get the priorities right. This is why issues that wouldn’t normally appear in bigger teams tend to pop up in startups and small companies. Larger legal teams can review things more carefully and enable lawyers to specialise. On the other hand, large teams are often reluctant to find external help as they already run on a high cost. Smaller or one-person legal teams tend to be much more costefficient and, if budgets allow, may seek external counsel.

“That’s very important because you can’t be an expert in everything,” observes Ingram. Swaroop agrees. “While I had to be mindful of the budget, I also had to think, ‘Could there be any legal repercussions if I don’t seek external advice?’”

“The ideal set-up is one that involves a mixture of in-house and external lawyers to provide pointed or local expertise,” says Weng Yip, general counsel at Hooq, a joint venture between Singtel, Sony Pictures and Warner Brothers that delivers Hollywood and local content in emerging markets such as the Philippines, Thailand and India.

“We find that having a blend helps us to control costs. When you have a blend of both, your reliance on [outside firms] is a lot less. An in-house lawyer can act as a bridge, one that can save a fair amount of money. Especially with negotiations, when there are a lot of twists and turns you don’t need an outside lawyer to twist and turn with you,” shares Yip.

POLISHING SKILLS

According to Swaroop, working in such a unique space can definitely help lawyers polish their skills very quickly, making much more confident and equipping them with know-how in many business-related legal areas instead of just one.

In-house counsel also tend to feel more responsibility as they are likely a key member of the business. In addition, communication is easier within a smaller team because it is much more intimate, explains Ingram. “A lot of companies are doing more with less. They are far more efficient because there is absolutely no room for slack. Small companies tend to be more productive, less bureaucratic and able to manage time better because they have to.”

“It is definitely good for [lawyers] in terms of development and learning because it gives [them] a broader role and a chance to be on all issues,” he adds.

That said, in-house counsels at startups tend to be very experienced due to the demands and nature of the job. For Swaroop, it was a “very challenging career path” but also a “very interesting journey”.

Networking and having business savvy is essential to succeed in this role. Technology has made the task more feasible. With quick access to resources and information, companies are able to do more with less. In-house counsel can also tap into other networks if necessary and establish a flexible legal workforce if tasked with the job of building up a legal department from scratch.

However, not many startups or small companies in Asia hire in-house counsel. Despite the importance of having such a professional on board, the trend has not taken off, mostly because of tight budgets and a general business attitude that puts legal matters at a low priority. Swaroop finds this very alarming.

“It is very important for startups to hire an in-house counsel when turning a business idea into reality. Even something as basic as an employment contract should be reviewed by a lawyer – you may not know the gravity of a decision at the time you make it; you may not foresee a lot of problems,” she stresses.

Swaroop expounds: “When you’re forming a team, right from the incorporation of the company, you should have someone with legal knowledge and expertise. An experienced legal counsel is a great asset to a startup, especially in places like Singapore, which is so highly regulated. The in-house counsel understands the business well, is always with the team, and can help immediately.”

“A startup goes through a whole spectrum of changes. It changes over time,” Yip says. “When you first start, it’s useful to have an in-house legal team.”