Managing Legal Risk with Software

Managing Legal Risk with Software
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The modern general counsel (GC) has a lot to worry about. In addition to providing legal guidance across a company’s pending litigation matters, today’s GC is charged with decisions that were once largely under the control of product, marketing or sales organizations. Tech company GCs must remain in constant dialogue with product leadership to ensure that applicable laws around privacy and data integrity are assiduously followed. But GCs also play a central role in selecting SaaS vendors for everything from sales management to HR to practice automation.

In the practice automation space, new companies are creating software that streamlines a wide range of legal tasks. From business formations to registered agent services to sophisticated compliance management tools, hungry startups are pushing the boundaries of what’s possible with one simple goal in mind: reducing risk at scale for the companies they serve.

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GCs face a tough choice. They can opt to use legacy practice automation services, services they have relied upon for decades. Alternatively, GCs can opt for the advanced, constantly evolving solutions that are now available. For example, Legalinc, a Dallas based SaaS company, provides a compliance suite ensuring that its clients have real-time visibility over state-based compliance challenges. Even so, for two key reasons these newer solutions face an uphill battle winning the mind-share of the modern general counsel.

The first reason relates to doubts about whether legal tech startups are subject to the same regulations as the larger, established incumbents. This misunderstanding is easy to clear up. Tech companies are subject to the exact same regulations as the existing players. But who enforces these regulations? The companies themselves, along with their astute investors. Every serious, fast-growing legal technology company in existence needs venture capital to grow, which means that shrewd investors will diligently pressure-test the compliance programs of these companies before checks are ever written and wired.

The second reason relates to the tendency of legal professionals in general to be reactive rather than proactive. While it is important to fight the battle that is at your doorstep, today the modern GC must think about proactively neutralizing future skirmishes. Think about it this way – assume that you manage 500 entities across the United States. Each of those entities has a particular risk profile based on what the entity does, how litigious its competitors are, and so on. If your compliance software provided a heat map of where litigation was occurring – starting with service of process (SOP) – it would be easier to (1) respond to each SOP quickly and (2) understand litigation patterns over time with your registered entities. A GC might discover that an unusually high percentage of its entities were targeted by aggressive regulators in state X. Discovering such a pattern could lead that GC to formulate a longer-term solution that drastically reduced litigation expenses, not to mention the high but hard to quantify PR costs associated with regulatory litigation.

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Would newer software companies necessarily help here? Absolutely. In fact, legal technology companies are always interested in planning for the future, so they tend to comply with best practices that are not yet legally required. For example, companies like Legalinc are keen to integrate the Model Registered Agents Act (MoRAA) because it represents a best practice even though its strictures are not required in every U.S. jurisdiction. Software advancement, in other words, happens more quickly than legal progress – a fact every GC should remember when weighing the bene fits of investing in cutting-edge software.

Technology companies have to play by the same rules as the incumbent business incorporation companies. Now, a GC might still be reluctant to take a chance on the best software provider. But let’s be honest, the jury has already returned a verdict on that issue. Companies who embrace technology wholeheartedly are more likely to grow, innovate and create larger returns for their investors. Steve Sowers

Lex Reception

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