27/11/2008

We recently had a client approach us with an urgent business investment matter. Our client wanted to invest in a business and the business needed our client’s investment money to continue purchasing products to satisfy concerned suppliers and customers of the business. There was considerable pressure on our client to complete the transaction as quickly as possible so that the business operations would not be delayed causing potential damage to the goodwill of the business.

When we met with our client and outlined the documentation she needed based on her description of the transaction, it amounted to no less than 8 separate contracts, many of significant complexity. Our client, citing time constraints and the need to keep legal costs to a minimum, elected to go with only one of the recommended contracts being a shareholders agreement. The other contracts which were designed to secure and protect her investment in the business were rejected by this client.

It is almost never a good idea to rush into a complex commercial transaction. Generally in complex matters there is a sequence of events that must happen to complete a transaction. An investor that gets the sequence wrong or neglects to complete some of the actions, can end up damaging the business or relationship they were keen to invest in, or worse, lose their investment.

As commercial lawyers we understand and sympathize with time constraints faced by certain clients. Where possible, and where prudent to do so, we will do what ever we can to assist our clients to meet their deadlines. However, where we believe a client is taking unwise action or accepting unnecessary risk, it is our duty to advise the client of this fact, even if it is not something the client wants to hear.

Likewise, we understand our client’s desires to minimize legal costs. It makes sense to us when some clients want to “leave the lawyers out of it” until the last minute when negotiating and implementing complex commercial transactions. Where the parties can fully agree on the terms and conditions of the proposed transaction before bringing in the lawyers to document it with the appropriate legal contracts is a good way to minimize legal costs, and we wholeheartedly support this, even if it means the matter is “urgent” by the time we get it. It can actually make our job easier when the parties have taken the time to consider and agree on all the issues they feel are important and relevant, have obtained professional advice from accountants, tax agents or business advisers, and are in a position to give us clear and concise instructions.

If you would like more information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.