Lawyers Mutual’s Checklist for Business Transaction Risk Management

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  • Make sure everyone (including you) knows who your client is. In any ambiguous situation clarify your role early. If necessary to make your position perfectly clear, advise nonclients to get counsel. Make sure that officers and employees of business entity clients, no matter how high ranking, understand you represent the business– not them.
  • Avoid tempting reliance on you by nonclients through your affirmative conduct (accommodative minor legal service to get the deal done) and passive conduct (allowing impressions to stand that you are acting in the nonclient’s interest as well as your client’s).
  • In appropriate circumstances caution your client that your advice is offered in the client’s best interest and should not be passed on as “good advice” to nonclients involved in the
    same business transaction.
  • Carefully prepare opinion letters by: Specifying the scope of the opinion, its purpose, authorized uses and restrictions. Setting out the facts and assumptions on which the opinion is based. Be specific about facts based on your own knowledge and those provided by others who bear responsibility for their accuracy. If others are preparing evaluations on other aspects of the transaction, clearly exclude those parts from your opinion. If you are relying on an expert opinion as part of your analysis (e.g., an environmental assessment), spell it out in your opinion. Being complete – include the pros and cons of the matter. Do not expose yourself to the accusation that you misled by omission. Material limitations must be disclosed.
  • Establish office procedures for quality control of opinion letters. Procedures should indicate who is authorized to sign and release opinion letters for the firm, provide for a
    formal and cold review before opinion release, and require careful screening for prior inconsistent firm opinion letters.
  • Unrealistically short deadlines for the production of opinion letters should not be accepted from clients and requests for additional information from the client should be made without hesitation.
  • Because opinion letters carry a high risk for claims against both you and the client, they require extra time and often much more than the client anticipates. Be sure the client understands this and is prepared for the high billing that usually goes with a good opinion letter.
  • If you deliver documents to a nonclient for your client, be sure you know what information is in them. If the documents do not contain some semblance of truth, you will in all likelihood be held responsible for their accuracy along with the client.
  • If appropriate, be sure to cover with the client in writing (preferably in a letter of engagement) precisely how client funds are to be disbursed.
    • Get client approval before hiring experts and incurring other high expenses. At final disbursement and billing don’t surprise your client with a huge claim on funds.
    • Consider getting the client to pay large expenses directly while the transaction is ongoing and prior to final disbursement. This simplifies things at the conclusion of the matter for all concerned.

 


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