Is your lawyer asking these Top 10 legal questions for a zen-like closing?

Corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, describes what your lawyer should be doing for you in a private placement offering.

Understanding your lawyer’s “usefulness” in a deal or transaction is only going to help ensure you are not backed into a corner when closing a private placement.

How to think like a Lawyer

Aside from the usual worry tied to each individual lawyer – such as “how can I ensure I won’t be sued for some reason” or “do I have enough insurance coverage” – a good lawyer will be thinking of the people risk, the regulatory risks, and the legal risks when assisting in raising capital.

Top Ten Questions we consider (in no particular order):

1. Has the company complied with the reps and warranties in the subscription agreement – i.e. is my client making a false or misrepresenting statement in the subscription agreement?
2. Has a proper process been followed by management to ensure the board of directors has been “engaged” in the decision making – no rubber stamping allowed.
3. Have all of the filings for the TSX/CSE or other Exchange been reviewed and approved by at least two officers with knowledge and authority to sign off.
4. Are all agreements with the transfer agent up to date, or are other special agreements needed?
5. Have any communications inadvertently caused risk or open the company to potential lawsuits – who has vetted the press releases, tweets, social media posts, presentations, texts and emails with key persons to assess for risk?
6. Will the closing book comply with the auditor’s requests/audit when the annual audit review begins?
7. Are the SEDAR and SEDI filings ready to go to be filed?
8. Has the Board signed off on the private placement and do we have all of the signatures, or are two board members travelling in remote areas about to hold up the closing?
9. Have all of the sign-offs in the overly complex subscription agreement been initialed by every subscriber, insider or control person and if not, how can we get those sign offs before closing? Are any subscribers over seas, in the U.S. or a different time zone?
10. Are there finders, finders fees, or advisory payments to be made and do such payments comply with securities laws, national instruments, foreign laws?

The focus on process and paperwork is great to reduce risks of legal issues from multiple parties and save time (ie. in the audit or reporting), but rarely coincides with the business need to raise funds and execute the business plan. Stopping to ask why a company needs the money, what the money should be budgeted for and how long it should last is just as important to consider.

The Zen-Like Closing

Answering the above questions will position boards and CEOs to better respond to the unforeseen issue, reduce stresses and allow for a smooth “zen-like” closing process.

Choose to arrange a strategy sessions with your team and discuss your action plan with your lawyer first – or contact us.