Solicitors are no longer required to confine themselves to giving purely legal advice. The message the profession is receiving from its clients is that solicitors are expected to take a commercial approach to their work, in some instances offering commercial advice and always having a clear understanding of clients' commercial goals.
This includes the developing role played by solicitors involved in banking, project and asset finance transactions and the ways in which they have become increasingly involved in their clients' businesses.
Regulatory work is a booming area and EC law developments never stop. International and domestic tax law is constantly changing – old loopholes being closed and new ones being sought.
The success of a banking, project or asset finance transaction may depend on the structure utilised and security available. Solicitors are ideally placed to advise on these aspects. Although most banks have their own in-house legal departments, early independent advice on a major transaction may be a necessity.
These trends mean that solicitors need to become involved in projects at an earlier stage and they are increasingly working as part of a team with their clients and other advisers. This is reflected by the increasing number of secondments from firms of solicitors to clients.
Where a banking, project or asset finance transaction involves a foreign jurisdiction, solicitors may need to obtain legal advice on foreign law from their foreign correspondents.
At the outset of any potential transaction, the lawyer's input can be significant. Entrepreneurial clients may have excellent business ideas, but they may lack the skills or support that is needed to implement them successfully. A carefully drafted business plan or transaction proposal may make the difference between having finance approved and being shown the door.
Although for a long time firms have produced standard precedents for their banking clients, it is now incumbent on firms to regularly review such documents and to monitor legal developments, advising clients of any potential problems affecting such documentation.
One way that solicitors can demonstrate a commercial approach is to be pro-active in drawing their clients' attention to potential deals, introducing the client to other clients or contacts, or to sources of finance.
The main advantage to solicitors' firms in effecting introductions is obvious: they can usually pick up the resulting legal work. In addition, taking a pro-active interest in their clients' business increases the feel-good factor to the client and if all goes well with the transaction this may translate directly into repeat business.
Banks and financial institutions may be particularly receptive where there is tough competition in the lending market for high quality transactions. The law firm that can point a financier in the direction of top quality projects will secure goodwill.
However, in the rush to take this pro-active approach and offer clients more than just traditional legal services, there may be a risk that some basic principles of professional practice may be overlooked, such as conflicts of interest.
Clients also expect their solicitors to utilise modern technology in the provision of legal services. IT permits law firms and clients to create document, data and e-mail exchanges, increasing the speed of legal services.
Post-completion management of major transactions has, in some cases, been another area where solicitors have become more active in their clients' business.
It is standard practice to prepare a “bible” of transaction documents and to produce a summary of the transaction which can draw attention to important clauses and include a schedule of key dates such as repayment dates, rollover dates, insurance renewal dates etc.
In complex transactions, more post-completion assistance is needed from lawyers. This should be borne in mind at an early stage because, while borrowers invariably pay the lenders' legal costs for preparing and completing a transaction, unless there is a provision for the lender to be indemnified for necessary post-completion costs, the lender may face problems in recovering such costs.
Austen Hall is a partner in Brecher & Co's banking and asset finance department.