As business owners, many of us get by without corporate lawyers. That is perfectly fine when the risk and the amount of money at stake are small. When your business grows and becomes more complex, however, figuring out your legal risks and issues on your own may not be the most efficient use of your time. At this stage, a savvy business owner will seek professional legal advice for agreements and disputes.
But many do not. The main reason for not seeking legal help is a fear of the costs involved. This fear is well-justified. A well-drafted, comprehensive corporate agreement or resolution of a dispute can easily run into the thousands of dollars. That said, it is important to note that at some point, legal expenses inevitably become a necessary business expense for well-run companies. The question then is, how do you hire a corporate lawyer at a reasonable cost?
Of course, one way is by making use of SingaporeLegalAdvice.com’s platform to look for corporate lawyers. Our affiliated lawyers are experienced in serving small and medium-sized businesses.
That’s not the whole story though. Even before contacting lawyers, you should understand the big picture regarding legal costs and how corporate lawyers charge so as to get optimal value for your business.
How Lawyers Charge
If you ask a seasoned corporate lawyer how he charges, he’ll probably quote you his hourly rate. This depends on the seniority of the lawyer and the size of the firm. Junior lawyers in mid-sized to large law firms can charge an hourly rate of at least $300/hr, while partners in such firms can charge at least $700/hr. Smaller law firms generally have lower hourly rates. Since you won’t be able to predict how long the lawyer will take to solve your problem, an hourly rate without any context is not very helpful for a business owner looking to estimate his costs in advance.
Alternatively, you could ask for a quotation for specific work to be done. The usual way of proceeding is to outline your budget and the scope of work to the lawyers as accurately as you can. The lawyer will usually have his or her own fee estimate for the amount of work, and will inform you that it cannot be taken as the final amount billed. Hence, you will both need to discuss and agree on a ‘starting price’ for the work.
You may be wondering, why is it so difficult for the lawyer to just give a fixed price? You might also think you’re getting ripped off. However, it is unlikely the lawyer is trying to rip you off. He’s just trying not to take on risk. To understand, lawyers base their cost analysis on these few questions:
- How much risk is there in doing the work?
- How much time will the work take?
How much risk is there in doing the work?
This type of risk usually relates to the nature of the transaction. The larger or more complex the transaction, the more difficult it is. Hence, the lawyer’s exposure to liability increases. Since all lawyers have to pay for professional indemnity insurance every year, this type of risk translates into a cost that must be adjusted down and included in the amount he or she charges for that piece of work.
This type of risk is a key reason small and medium-sized law firms can charge more affordable legal rates – smaller law firms have fewer resources, and hence prefer to take on smaller transactions that come with smaller risk.
How much time will the work take?
This is the main reason why corporate lawyers are wary when giving quotes, and why lawyers generally want to understand the matter in some detail before giving a fee estimate.
Let us take the example of drafting a corporate agreement. For such a piece of work, lawyers will want to know whether a standard agreement will suit your needs, or whether you need a heavily-customised contract. For instance, the oft-requested Shareholders Agreement could be a standard agreement that a lawyer can draft in a short time for you to approve, or an agreement with customised clauses that requires rounds of discussion.
Customised solutions take up more time than simple, standard contracts, as the lawyer needs to communicate regularly with the client about the customised parts and spend time drafting the agreement to achieve what the client wants. The lawyer may also need to research on whether there are any legal prohibitions with regard to the customised clauses that you want. At times, changes may occur in your business situation that require you to change your initial customisation. In short, while you may think that a customised agreement can be finalised quickly when you are sure of what you want, issues may crop up along the way that cause you to change your mind. You won’t be the first client to say “It is a simple matter / transaction” and then go on to request redraft after redraft.
Thus, the lawyer is estimating the amount of work you need, and also estimating how easy / difficult it is to work with you.
A smart lawyer will charge difficult clients more, because difficult clients will take up more time.
A move to fixed rates
Increasingly, due to the slow economy and resulting competition among lawyers for clients, corporate lawyers are more willing to charge based on fixed rates instead of hourly rates. However, in Singapore, these lawyers are still in the minority. From what we see, most lawyers have done their cost-benefit analysis, and concluded that it still makes more sense to quote on a case-by-case basis.
Some lawyers even offer fee caps to cost-conscious clients, promising not to charge the client above a certain amount. Strictly speaking, this isn’t a fixed fee for completed work, as the lawyer has the option to just stop work if his billing hours have reached the cap. However, this tends to cause client dissatisfaction and is therefore not the first choice of billing arrangement with many lawyers.
Building a good relationship with your lawyer
As a business owner, it is crucial to find a lawyer whose judgment you trust, and build a good working relationship with him or her. As your business grows, you will need more complex advice more frequently, so it does not make sense to treat every legal service as a short-term business transaction. We have previously written on how corporate lawyers serve small and medium-sized businesses.
A good lawyer knows that good clients are worth a great deal, and is willing to provide them with excellent service and value. Like you, a smart lawyer is interested in a working relationship instead of ripping off his client. Even as a small business, as long as you are sincere, there will be lawyers who are willing to advise you with the view of building a relationship.
Moreover, when you have a good working relationship with your lawyer, you will benefit from the ease and convenience of working with someone who has gotten to know your business intimately as it evolved.
Therefore, we recommend that you start by finding a good lawyer you can trust for the long term. You may choose to start here.
