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Drafting a Business Case for Legal Technology 

As we approach the end of the year, pressure to secure and plan legal budgets rises. Any forward-thinking legal professional knows the importance of implementing tech solutions that streamline your daily workflows. However, evolving your team’s budget to meet these pressing needs is uniquely complicated.The Value of Technology Historically, technology hasn’t played as significant a role in legal operations as we’ve seen in other industries. However, with the world’s sudden shift to remote work and the ease of technology setting expectations of instant accessibility, our traditional industry is changing. In fact, in “The Future of Legal,” Gartner urges firms and in-house teams to adopt a technology plan by 2021 if they wish to remain profitable as the industry changes. Legal professionals are jumping on solutions that streamline all aspects of legal operations, including docketing software, financial software, and entity management software. But for those who have yet to take the technology leap, understanding how to position your needs and secure the needed budget changes is new territory. Drafting a Business Case: Best PracticesUnderstand your pain points. Before you begin drafting your business case, clearly outline the challenges you face and how they hinder productivity for your team and the business overall. Meet each point with a solution. Thoroughly overview your solution’s value proposition, and touch on the specific solutions for each pain point or need. Define your team. Ensure that you have a clear outline of who will engage with the software and how. This includes day-to-day users, administrators, project managers, etc. Elaborate on the type of access this person will have and how each user plays a role in solving the need.Use metrics when positioning return on investment. Be transparent with upfront costs and projected results. Whether referring to monetary ROI or invested time, use specific and accurate numbers, and explain how these benefits will affect the company at large.A sample from our Business Case TemplateOutline the risks. Transparency is critical to your value proposition. Be accurate and informative about potential risks and security plans for managing them. Want to Learn More?For more information on drafting a business case, you can access our free webinar, How to Secure a Budget for Legal Technology, where industry experts provide a business case template, discuss the intricacies of budget planning, overview what to prioritize in terms of financial investment, and unlock best practices for explaining ROI in both cost and time. 

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In-House Counsel: Best Practices

In-House Counsel: Trusted AdvisorsLawyers who work “in-house” for businesses are not outside advisors. When they embrace their role, and understand what is fully required from them, they become trusted advisors and close business colleagues. Corporate lawyers are often portrayed as professionals whose function is solely to evaluate risk and often restrain businesses from actions that may enable their growth and creativity. Yet this is decidedly not the role of an in-house lawyer. Rather, a lawyer who goes in-house to work at the heart of a business is an expert in their business. They can provide their colleagues with the benefit of valuable, specialist knowledge to propel the business forward and produce success. The Role of General CounselGeneral counsel is at once a primary member of a corporation’s senior management team, yet their role, by its very legal nature, demands an element of caution that their colleagues lack in their approach. Yet it is their colleagues and superiors; the company’s CEO and the board of directors, who will routinely request both their legal and business advice. It might even be asserted that they will be reliant on the guidance of the in-house lawyer in major business matters. In this increasingly fast and complex age of globalization, in-house counsel must have the ability to provide practical yet intellectually sophisticated advice in response to a huge variety of issues, often under great pressure. There are great benefits for companies in having counsel on their team, rather than consulting an outside lawyer. There’s no one who knows the business better than one who works in it every day, and over the course of the past few years, the role has increasingly become a vital one to business management teams, with their presence having been proven to result in more accurate business forecasts, as well as massively reducing legal risk.A skilled and knowledgeable in-house lawyer is, therefore, a huge benefit to a management team. However, just like business, whatever the sector, the role is constantly evolving. As such, in-house counsel must be flexible and able to adapt to whatever situations are thrown at them.That’s because, unlike in the past, in-house teams are not chosen solely for the provision of their legal acumen, or their ability to draft contracts – although these skills are of course still very much required. Rather, the role played by in-house counsel these days is more of a strategic partner that supports the business in whatever way required, whether that be the provision of legal advice, the improvement of systems and processes, ensuring compliance with regulations, or responding to client and supplier problems.Best Practices for In-House CounselIn-House Counsel: A Guiding Figure In-house counsel does not provide, therefore, only a legal role, but acts as a guiding figure for other executives in highlighting issues in the context of the bigger business picture. In the completion of their work, in-house counsel should always simultaneously keep in mind the business, its management, clients, and corporate development. This, in addition to the necessary consideration of legal issues, is undoubtedly difficult. Yet it is necessary.A Focus on the Big Picture This leads to the vital importance for in-house counsel of looking at the big picture; that is, considering the business as a whole. Lawyers must always ensure thoroughness and a focus on details; however, as in-house counsel, they must also consider what their company’s business team really needs them to do. That means not only the standard diligence that is involved in checking all documentation but really reflecting upon and understanding where the business is going and how any potential impediments standing in its way might be resolved.The InterpreterA key role for in-house counsel is as a liaison between the company and its clients or business partners. That means taking on a number of roles, from facilitator to interpreter. The lawyer’s purpose is to understand the complexity of legal issues and resolve them. Furthermore, a company’s business team is likely to have neither the time nor the legal training to understand certain legal complications, regardless of their intelligence or business experience. They will expect their in-house counsel to solve legal related matters that arise, without being required to listen to any prolonged explanations of any issues. For in-house counsel, this means that they must be skilled at identifying the key legal issues which they must be able to deal with alone, and identify those which must be considered together with the business team – and then have the skilled capacity to discuss those issues in such a way that they can translate, as it were, the legal jargon into straightforward business English. Essentially, in-house counsel best practice in this regard is to collaborate with the wider team as business partners, bringing their own unique legal skills to the table to achieve the resolution that’s the best result for the business.Risk Identification and the Courage to Say No The identification of material risks is, of course, a major function of lawyers, and in-house counsel are no different. One problem lawyers often experience is the need to tell their clients “no”. A client might arrive at a meeting with enthusiastic plans for expansion into certain jurisdictions or markets, for example, but there can be valid reasons why these plans are just not possible; legal, regulatory, financial or simply property-related. In such regular instances, lawyers are placed in the role of the negative member of the team who is the blocker of plans. Whilst that may not always be the most exciting position to occupy, it is the role of in-house counsel to identify these risks and warn their colleagues against making expensive or even unlawful mistakes that could jeopardize the business in any way. In-house counsel must be prepared to warn their business colleagues against moving forward with any transactions that have the potential to cause economic, legal, or reputational damages.Acting as a Business GuardianThe best practices for in-house counsel are quite fundamental. Consider the business and its functions in the wider context, and not merely the legal issues. Act as the translator for the business team, breaking down legal issues into plain language and explaining what they mean for business development. Consider economic, legal, social and reputational risks and, where necessary, have the mettle to stand their ground and refuse to support hazardous business plans, even where colleagues are enthusiastic. Essentially, acting as a guardian for the business, guiding it away from harmful transactions, and protecting it from risk.Evidently, these three key functions are closely interrelated, and in-house counsel must achieve the delicate balance of applying their judgment, legal knowledge, and experience, as well as business pragmatism. Yet these insights do not take into account the importance of factors such as building relationships and gaining a real understanding of company culture. In-house counsel should get to know their colleagues – introducing oneself, making conversation, and appreciating what they love about the company. Building personal relationships is crucial, and, like in so many areas of life, the ultimate key to success in business. Professional acumen is important, but communication is fundamental to successfully acting for a company as in-house counsel.

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Lower Costs and More Effective Management: How Legal Entity Management Software Solves These Issues

Technology and the Elimination of Distractions Modern life – and business - is full of distractions for professionals, and lawyers are no different. Legal professionals are often overwhelmed by all the numerous tasks that must be completed each day, and this impedes effective task management, hinders the completion of real work, and reduces firm productivity. There are numerous obstacles to overcoming this problem: a lack of planning, the ineffective management of both tasks and time, distractions from phones and emails which, whilst crucial for client communication, also hamper productivity, and, to put it succinctly, the poor prioritization of projects. A haphazard approach spells failure for the intensive focus that is required to successfully complete client work and, importantly, reduces overwhelm and improves productivity – and profits.Legal entity management software offers law firms a powerful solution and the benefits of using a third-party platform stem from its user-friendly features and wide range of customization possibilities. Here at Athennian, we are familiar with the difficulties that law firms have encountered in the past with their use of legal entity software, and our purpose has always been to analyze and implement how we can enable lawyers to use IT software as effectively as possible in the working environment. Athennian has long studied how the minor distractions that take up so much of a legal professional’s day – the invoicing, searching for documentation, document signing, and so on, can be integrated to provide one single, one-stop solution that will save time and effort, leaving space free for the rea, focused legal work to be done. Athennian’s entity-management suite provides a valuable, cloud-based solution that enables lawyers, paralegals, corporate secretaries, and indeed any firm that requires a scalable solution to securely address the routine tasks that require constant ongoing attention, and instead increase billable hours.Legal Entity Management: Scalable Features and Cloud-Based Integration The scalable, cloud-based integration of key firm functions that Athennian provides, including features such as the facility for eSignatures, document automation and custom templates, means that using this technology as a base, legal departments can work together more smoothly, in the knowledge that key business procedures are already covered. Not only this: in full awareness of the complexity of practice law, as well as the actual business aspect, Athennian has developed a powerful solution that enables total integration. It isn’t simply a database; rather, our legal entity software focuses on enabling ways in which colleagues can easily and efficiently communicate and collaborate with one another in a workspace that ensures the speedy signing of documentation, the ability to quickly search for, find and download folders and files, the auto-population of templates, and the ability to work together with colleagues in real time.By using this technology as the core base for operations, law firms can function more efficiently and better execute client work. Essentially, the use of legal entity software means that firms have the ability to keep a significantly tighter rein on operations, and this results in reduced spend across the business. It also means that legal departments are both internally aligned, as well as working better across the firm with other departments, so that there is the elimination of any confusion or delays when different departments, such as corporate and property, are working on the same transaction. ‍Streamlined Security and Standardization This increased streamlining of documentation, records, and the facilitation of improved communication all means that firms have a tailored tool at their disposal that has the ability to improve almost every aspect of their business. A centralized, technological solution means lower costs. Security concerns are also eliminated; Athennian uses rigorous monitoring tools and security controls to ensure that every single aspect of its operations, from document storage to reporting, to third-party integrations and auditing, are watertight. With all of the advantages that legal entity management software offers, the cost-effectiveness of an investment in an integrated solution is evident. Key to this is the allocation of a budget to technology and software; the cost-savings leveraged are achieved by the improvement of work processes, the expansion of team capabilities, and the fundamental standardization of business operations. One of the key solutions that Athennian provides is the means by which routine matters and templates can be standardized. Given that a high percentage of firm work is routine, standardization offers the potential for huge savings. These tasks and the related savings translate to almost every aspect of a firm and its business. Just one example is provided by e-billing - the software will automatically check invoices and eliminates the mistakes and omissions that often occur with human reviewers, and allows for the review of non-compliant invoices that may have been approved for payment. Whereas in the past, different departments in the same firm may once have adhered to different guidelines with regard to invoicing procedures, these will now be standardised and integrated. This solution improves not only cost-transparency, but also means that firms now have the ability to better estimate their costs and profits.‍Increased Legal Focus and Reduced Costs The tighter control of firm variables, the standardization of documentation, and the implementation of a collaborative, cloud-based solution means that professionals are left free to carry out the critical legal work that brings in the true revenue and raises the firm’s reputation. By reducing time and spend on tasks that can be standardized and accessed by all workers from a single, cloud-based point of access, legal departments are able to focus on work and achieve improved hourly rates and work volume. This enhanced digital proficiency transforms firms into smoother operations, where colleagues have immediate access to crucial documentation and can work together in real-time. This elimination of the time wasted on the manual compilation of routine documentation and financials, with, instead, lawyers freed to work on their key areas of expertise, results in huge benefits. The improved spend, timekeeping, better-organized workload, and automation of routine documentation results in improved management, reducing the need to spend any more vital time on tedious tasks, faster work processes, reduced costs, and, ultimately, a focus on the completion of actual legal work. 

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Using Technology to Achieve Legal Operational Maturity

Just like any modern industry, operations play a critical role in successful business function. In the legal industry, operations are defined as a set of business initiatives, processes, and job functions that enable the efficient practice of law. They include technical practices and business strategies that aid legal professionals in delivering optimum services to their clients.According to the Corporate Legal Operations Consortium’s 2021 State of the Industry report, 57% of those surveyed ranked “automating legal processes” as a high priority for 2021. In addition, 54% rank “implementing new technology solutions” as an equally high priority. With the industry’s growing adoption of automation, tech solutions are more business-critical than ever before, especially when looking to achieve operational maturity. The Pillars of Legal OperationsThe Association of Corporate Counsel (ACC) lists fourteen target areas of legal operations: Change Management and Communications, or the strategic planning for implementing intended changes within the company, provides alignment, support, and structure for company-facing legal operations.Contract Management, including all processes related to contract creation, execution, storage, and compliance.eDiscovery, which is defined as the identifying, collecting, and production of electronically-stored information for reasons relating to lawsuits or investigations.External Resources Management, or the processes relating to selecting, managing, and compensating vendors.Financial Management, including management of all resources, revenues, expenses, and budgets, in addition to ensuring compliance between accounting.Information Governance, or a secure system for managing business-critical data that upholds an organization’s compliance, entities, and other functional requirements.Innovation Management, including evaluating, choosing, piloting, and implementing all innovative systems within the legal department. Intellectual Property Management, or the processes related to the return on investment in the intangible assets of an organization, such as patents and trademarks.Internal Resources Management, defined as the operations that advance HR within the legal department. Knowledge Management, or the strategic collection and distribution of understood knowledge within a company. Metrics & Analytics, or the collection and organization of data for decision making and performance management.Project & Process Management, including planning and coordinating all initiatives in the pursuit of efficiency. Strategic Planning & Legal Operations Leadership, including processes that set operational alignment, allocate resources and define metric standards.Technology Management, or the procurement, evaluation, and maintenance of user-friendly, modern, and scalable software Technology ManagementIn todays digital age, organization’s must strive for advanced maturity in the fourteenth and most relevant pillar, Technology Management. According to Gartner’s report, “The Future of Legal,” teams with a technology-forward approach are predicted to outperform those without by 2025. Advanced technology operations include a well-defined 5+ year technology roadmap that follows industry trends and adapts to ongoing benchmarks. Operational maturity in this area also requires a top-down approach––meaning the support and advocacy for tech solutions should exist from the senior management level down. Organizations with dedicated technologists or IT resources are well-positioned for operational maturity. However, a crucial part of technology management is finding software that can function 100% off-premises––especially as remote-working becomes the norm in more and more industries. The use of innovative solutions improves efficiency in every area of legal operations––HR software has a huge impact on mature internal resources management, eDiscovery would not be possible without automation, and cloud-based knowledge libraries are necessary for company-wide alignment. In fact, ACC data suggests that mature legal operations require relevant software solutions for each of the 14 areas. How Mature Are Your Legal Operations? Where does your organization currently stand on technology? Have you implemented a five-year roadmap that includes solutions to help manage operational challenges, such as corporate governance and entity management?Take our short, interactive assessment to determine your legal operations maturity status, and receive customized recommendations and improvement areas. 

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11 Reasons to Move to the Cloud from An On Premises System

Many organizations find that cloud based solutions meet their needs while providing a number of additional benefits. Cloud solutions make sense for companies of all sizes who are interested in taking advantage of secure, modern solutions. Keep reading to learn about the benefits of working in the cloud and why it should be part of your digital transformation strategy.1. Easy to AccessThe most important benefit of cloud solutions is that it is always available. Your users are able to connect and access key data and files anytime, anywhere, using nothing more than a modern web browser. 2. Improved Security‍‍Internal IT teams have many tasks that they are responsible for, one of which being security monitoring. The key differentiator between cloud and on-premise solutions is encryption. The encryption of data means that information is less accessible by hackers or anyone not authorized to view your data. In addition, cloud-based services typically offer a number of security settings that can be set based on the user, allowing for easy control over what information can or cannot be accessed. Modern cloud-based applications are also secured and monitored by a dedicated security team, with a defined set of audited controls and tools that are onerous to implement for all but the largest enterprise businesses. 3. A Gateway to InnovationDevelopers are able to deploy new services and features with the speed and agility that is only possible in the cloud. This fuels innovation and helps you gain or maintain a competitive advantage. 4. Reduced Maintenance CostsWith cloud computing, your IT team no longer is responsible for managing software or security updates. On-premise solutions typically require substantial upfront setup, patching, and other time-consuming maintenance from IT. When you adopt cloud solutions this is all managed by the service provider, leaving your teams free to focus on more important business goals.5. Increased Collaboration Cloud solutions empower your teams, who may be in multiple locations and timezones to collaborate easily. When teams are able to work and share documents and records in real time, efficiency increases.6. Reduced RiskAs more collaboration starts to happen it becomes increasingly critical that you are able to control where and how documents are being shared. With on-premise solutions, your team is sending files back and forth as email attachments to be worked on by one user at a time. This results in a mess of conflicting file content, formats, and titles. With a cloud solution you reduce the risk that files are shared and stored on individual team members' computers. This helps to ensure that all files are stored centrally and everyone sees the most recent version. 7. Multi-Tenant Resource PoolingCloud solutions are by design, multi-tenant. This allows for multiple users to share resources but without exposing them to security risks. 8. Ability to Scale RapidlyAnother major benefit of cloud computing is its scalability (or elasticity). This means that cloud services automatically scale up or down as needed, ensuring that resources are available when required. It is no longer necessary to buy additional hardware -- this automatically happens! 9. Simple to ImplementWhen you choose a cloud solution, you remove the need to coordinate a large IT project to manage the implementation. When your team is able to implement a key application quicker, the return on investment and impact is also realized more rapidly.Cloud-based services can be deployed within weeks or months compared to the years it can take to strategically plan, buy, build and implement an on-premise solution. 10. Increase ReliabilityReliability is a major benefit to cloud solutions. When you introduce cloud solutions you can expect uptimes of 99.99%. Modern cloud-based architectures provide a level of fault tolerance in areas like; the application, supporting databases, and data center in the case of disaster recovery that are not easily matched by older on-premise architectures. This means that when one server is down another server will take its place; all your data will be kept safe at any time.11. Reduce CostsSignificant savings can be realized when cloud solutions are adopted. Operating expenses related to supporting on-premise solutions will be removed as well as capital expenditure on internal infrastructure. Your team will no longer need to manage and maintain equipment and infrastructure as this is passed along to the cloud provider. Utilizing cloud services reduces ongoing costs, as the responsibility for maintaining and replacing equipment and infrastructure as well as IT environment management is passed to the cloud provider. Companies can also take the initiative to directly negotiate a deal with the cloud provider instead of blindly signing up or accepting terms and conditions.

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Legal Entities Vs. Employer of Record

It has been said that the most valuable assets of a business entity are its people. Employees, workforce, human capital––whatever the preferred term, the entity's employment of a labor force – its status as an employer – carries with it a myriad of benefits, tax, and labor law compliance obligations. The complexity and nuance of remaining in compliance with employment-related laws, regulations, and internal policies sometimes warrant time or expertise that is simply lacking within the business entity or unable to be allocated to the compliance obligations at hand. Within this compliance space, the relationship between a legal entity, employer of record, co-employer, and joint employer becomes apparent.In such cases, a legal entity may decide to contract out some administrative components of its employment-related compliance obligations to third-party entities such as an Employer of Record entity or a Professional Employer Organization. Some considerations of outsourcing employer compliance obligations are whether the employer contracting for services (the “client-entity") needs to be formed/registered in the jurisdiction in which the employee performs the work, what compliance obligations are outsourced, and which one (or both) of the contracting parties is considered the employer for purposes of risks and liabilities associated with the status of the employer.Employer Compliance ObligationsA legal entity can be defined as a company, organization, or institution – be it in the form of a limited liability company, corporation, limited partnership, general partnership, or business trust – that has legal obligations and rights. The compliance obligations include those concerning entity formation, registration, regulatory filings, reporting, and remitting of payments. For example, some entities are required to have registered agents, file annual reports, and file transactional reports at the time of formation, merger, or dissolution. Business entities may also be subject to industry-specific compliance obligations such as those in insurance, banking, healthcare, and pharmaceutical industries.A legal entity may or may not be an employer. Whatever the definition of the employment relationship as given by a particular statute, regulation, or case law, as an employer, the entity is accountable for compliance obligations arising out of its status. For example, US-based employers are required to calculate and withhold federal income tax, social security tax, state income tax, and other taxes from employees’ wages, remit the withholdings to the appropriate tax agency and file quarterly reports. Employers may also have compliance obligations stemming from the retirement and health-related benefits it offers employees, such as disclosure, recordkeeping, and/or reporting under the Employment Retirement Income Security Act (ERISA) or the Affordable Care Act (ACA). An employer’s employment practices such as employment verification and pre-employment background checks can give rise to compliance obligations, for example, under the Fair Credit Reporting Act (FCRA) or separations of employment giving rise to compliance obligations under unemployment insurance laws. Lastly, employers can have compliance obligations around workplace facilities and conditions such as those imposed by workers’ compensation and the Occupational Safety & Health Act (OSHA). The Employer of RecordAn employer of record contracts with a client-entity to assume certain compliance obligations the client-entity has with respect to its status as an employer. The employer of record serves in an administrative capacity, distinct from the day-to-day, onsite operations over which the client entity maintains control and direction. With this contractual division of administrative and operational oversight, the employer of record becomes the direct employer of the client-entity’s employee(s), assuming the risks and liabilities associated with the contracted-for services. These services can include pre-employment screening, entering and managing employment contracts with employees, visa applications and immigration compliance, collecting and tracking hours worked, payroll processing and tax withholding, benefits administration, workers’ compensation and unemployment administration, and severance arrangements, all administered in a manner compliant with the benefits, tax, and labor laws of the country and locale in or from which the employee works.Employer of record arrangements are routinely used in the global and domestic employment mobility contexts and may offer several benefits to a legal entity that wants to establish a presence in a different state or country than the jurisdiction in which it is formed/registered.Co-employment and Joint EmploymentIn addition to engaging an employer of record wherein the employer of record takes on specified liabilities and risks as the employer, a client entity can also contract out its employment-related compliance obligations by entering a co-employment relationship with a professional employer organization (PEO). In a co-employment relationship, the client-entity shares employment status with the PEO. In other words, unlike with an Employer of Record entity which is considered the employer, both the PEO and the client entity are considered employers but have contractually agreed which party will assume primary responsibility (and shared liability/risk) for compliance obligations. For example, if the PEO failed to remit payroll taxes or workers' compensation insurance premiums as its contract with the client entity required, the client entity could be held financially liable by the applicable government agencies.Furthermore, unlike partnering with an employer of record entity which does not (initially) require the client-entity to have a registered or formed legal entity in the jurisdiction in or from which the employee performs work, when engaging with a PEO, the client-entity has a registered legal entity in the jurisdiction where it co-employs employees. The relationship between the PEO and the client-entity is intended as an ongoing relationship and not as a temporary relationship as with an employee leasing arrangement for staffing projects and tasks that have a start and end date.As mentioned above, whether an entity is considered an employer can revolve around whether that entity controls and directs the day-to-day operations of employees (as distinct from the entity performing only employment-related administrative tasks). Whereas co-employment focuses on contractually agreed upon administrative services (and sometimes strategic services or business advising), a joint employer relationship is focused on the element of control and which entities benefit from the employee’s work. Joint employment can be seen in employee leasing or temporary staffing situations where the staffing agency is the primary employer, and the client-entity becomes the secondary employer through its control and direction of the workforce. The status of a joint employer can become important for determining whether the client-entity will be subject to liability and risk for, for example, certain wage and hour employment practices regulated by such statutes as the Fair Labor Standards Act and labor practices as regulated by the National Labor Relations Act.In SummaryIn summary, legal entities have options when it comes to contracting out employment-related compliance obligations. The contracting process allows a client entity to unshoulder the administrative challenges that come with being a compliant employer by shifting its employer status to a third party in an employer of record, co-employment, or joint employment relationship.

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4 Critical Steps in Corporate Subsidiary Management

What is a Subsidiary?Corporate business owners understand the value of creating companies to secure and safeguard the owner’s personal assets. Oftentimes, corporations with a large portfolio of assets create new legal entities to hold individual assets or a class of assets, such as real estate, stock, or materials, while controlling over 50% of the subsidiary’s shares, to protect the corporation’s assets. Each new legal entity that is wholly owned by the parent corporation is considered a subsidiary of the parent corporation.Using subsidiaries as a holding company for the parent corporation’s assets provides significant legal protection from lawsuits against the parent corporation and precludes claimants from going after the parent corporation’s other assets by essentially removing the parent corporation’s liability to that of the subsidiary. Subsidiaries also allow quick and efficient due diligence if the parent corporation pursues liquidation. Further, if a parent corporation seeks financing, it can efficiently enable its subsidiaries to act as guarantors and grantors of security. Creating subsidiaries introduces many legal and business complexities that require continuous attention. The benefits of corporate subsidiaries are manifold, but parent corporations often fall victim to being accountable for the subsidiary’s liabilities because of poor subsidiary management. This article suggests three steps corporations should take in managing their subsidiaries to ensure effective subsidiary management and the security of the parent corporation’s assets. #1- Pre-Formation PlanningBefore forming the subsidiary, the parent corporation should plan and organize which assets or functions of the business the subsidiary would hold, where the assets or functions will be located, and whether the subsidiary will conduct business and hire employees. The answers to these questions will allow each subsidiary to serve a precise purpose, which will increase efficiency at every stage and simplify its governance.The parent corporation’s managing officers should also consider centralizing all decisions regarding the subsidiaries’ management with the corporation’s legal counsel or the corporate secretary and passing a resolution authorizing the corporation’s legal counsel or the corporate secretary to take certain actions on the corporation’s behalf, such as the formation of subsidiary companies, deciding the appropriate jurisdiction for each subsidiary’s formation, filing all necessary documents and reports for each subsidiary, maintaining each subsidiary’s records, and paying any required taxes and fees. Initially, each subsidiary will prepare articles of incorporation and bylaws or an operating agreement. The parent corporation should pursue uniformity and should draft articles of incorporation and bylaws or operating agreements that are substantially similar in form to ensure no contradictory clauses or obligations. The subsidiary’s bylaws or operating agreement should include clauses that provide indemnification to the subsidiary’s directors and limit the directors’ personal liability. Both the parent corporation and subsidiary should also pass separate resolutions and a contribution agreement for the issuance of stock in return for capital contribution, which will allow the subsidiary to demonstrate it has adequate capital to exist as an independent company.#2- Maintaining the Subsidiary’s StatusIt is foreseeable that parent corporations may forget calendar dates when taxes or annual reports (or equivalent filings, as applicable under the jurisdiction’s laws) are due for each of its subsidiaries. When a subsidiary’s taxes or annual reports are past due, the subsidiary is considered not to be in good standing, and the parent corporation exposes itself to the liabilities of the subsidiary (depending on the jurisdiction’s laws and whether the parent company is a corporation). This scenario occurred in a recent case where the parent corporation was successfully sued for money the subsidiary owed to a contractor because the subsidiary was not in good standing.Accordingly, it is paramount that parent corporations assign a person responsible within each subsidiary for keeping track of due dates for any taxes and annual reports. The subsidiary then should consider passing a resolution authorizing the person responsible within each subsidiary to explicitly take any actions necessary to maintain the subsidiary’s good standing. The person responsible could be one of the subsidiary’s directors or the subsidiary’s legal counsel.Although the parent corporation wholly owns its subsidiary, the subsidiary should hold its own annual meetings or execute unanimous written consents. If the parent corporation has many subsidiaries, although the directors may be the same, each subsidiary should hold its own annual meetings or execute unanimous written consents rather than performing the same jointly. If possible, the directors of each subsidiary should be different individuals. Through the subsidiary’s resolutions, each subsidiary should be able to demonstrate that the subsidiary is its own company rather than the parent corporation acting through the subsidiary. #3- Document EverythingIf one were to ask a group of attorneys for some non-billable legal advice, they could probably agree on two words: Document everything. Such is the importance of maintaining accurate and up-to-date records on everything. Keep every conversation, contract, note, deed, receipt, complaint, settlement, change of information, and file. More importantly, each subsidiary should diligently create corporate records for every action that requires board resolutions or consent, as provided by the bylaws or operating agreement. Every stock or asset transfer, material contract, annual meeting, director elections or appointments, and any significant corporate action should be documented in a board resolution. Within the resolution approving of certain actions, a catch-all clause approving of “all corporate actions necessary to further the company’s interests” should also be included to allow the flexibility of demonstrating that all actions performed were by the subsidiary rather than the parent corporation. After creating subsidiaries, document recording systems often become—for lack of better words—sloppy. Papers get misplaced, lost, or confused. To remedy this, management should consider creating separate filing systems for each subsidiary rather than centralizing document management with the parent corporation. This function can also be achieved by having someone responsible for accurately filing documents and assigning them to the correct subsidiary’s folders. All documents should be well-organized and filed with the appropriate subsidiary.‍#4- Invest in Tech SolutionsA cloud-based legal management system streamlines subsidiary management and allows its users to plan, maintain, and document each subsidiary’s records seamlessly. Further, a cloud-based entity management solution minimizes the risks of non-compliance with jurisdictional regulations. With a focus on increasing productivity, scalability, and an automating manual process, Athennian leverages user data to quickly populate reports, certificates, and other necessary documents in one accessible program, eliminating the headache that comes with managing subsidiaries the traditional, time-consuming way. 

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5 Signs it’s Time to Update Your Law Firm’s Tech

A lot of the work that we do on a day-to-day basis revolves around the technology we have, and it’s ability to keep up with our workflows. Paralegals and other legal professionals rely on the software their firm provides, and when this is slow and outdated, it can be a major headache. You can’t guarantee top of the line security for your clients’ personal information. It takes much longer to access the things you need on a computer running at a fraction of its maximum speed. Is your law firm’s technology outdated? Here are the key signs: Sign 1: Your Profits Are Steadily Declining Year After YearClients are consistently putting pressure on your firm’s overall revenue, whether that’s through demanding alternate billing options or refusing to pay for administrative costs. If your firm is absorbing costs that clients refuse to pay, you have likely seen a decline in your overall profitability. This means you might be more hesitant to spend money on even more systems that you might not be able to recover from. However, if your expenses are increasing and your profits are declining, the best solution is to improve the efficiency of your work. Outdated software puts a strain on paralegal teams, but with newer and faster legal tools, paralegals can focus on higher-value tasks. Entity management platforms such as Athennian have several resources to help improve your workflows, including client portals to make communication and collaboration more efficient; improved task tracking and document automation tools; reporting dashboards that allow you to view client information in one place rather than wasting time searching, and more. Sign 2: You Still Have Large Blocks of Filing Cabinets. Think about how difficult and time-consuming it can be to locate that one document you need when you have to search through a filing cabinet in the office. And, what about when you need that document when you’re out of the office, or when you’re working remotely as was the case during COVID-19? Paper files pose significant security risks when compared to digital files. It is scarily simple to misappropriate paper documents and files whether by theft, photocopying, or just taking a picture. Firms must consider whether paper filing still complies with a lawyer’s ethical obligations. Lastly, paper filing is expensive. It takes up very costly real estate in an office. Firms are reducing their overall space to accommodate remote workers, and therefore, decreasing the physical size of your office can more than offset the cost of going digital. Sign 3: Your Existing Systems Don’t Talk to Each Other. Consider your day-to-day workflow. Do you frequently have to go into one system (or filing cabinet) to get documents for a client, copy them over to your email so you can discuss them with the client, upload the document to another program to edit it, email the client back and forth until you have a final copy, then go into another system to upload the final document and file it? If so, you are not putting your skill and experience to good use. Properly integrated entity management tools can help streamline your entire workflow, end to end. Many firms have purchased three or four different systems to accomplish different pieces of their workflows. Digital entity management tools are designed to provide exactly what your firm needs, without a puzzle-piece approach. By integrating solutions like Athennian into your practice, you’re connecting all the dots in one system that can be customized to your firm’s needs. Sign 4: Your Team Needs More Flexibility, But Your Systems Rely on Too Much Manual EffortRepetitive and duplicative work is usually a symptom of either poor system integrations, or outdated procedures. When you have systems that can talk to each other and share critical data, you can reduce the amount of time you spend searching for documents and entering data. Manual processes make the work day hard and they increase risk in more ways than one. For example, they can delay documents from being created due to missing data, therefore increasing the time taken for documents to be signed by the appropriate stakeholders. Not only do manual processes increase the risk of missing deadlines, but this can also have a costly effect on compliance. New, cloud-based digital systems can automatically populate data with the click of a button, facilitate e-signatures, and file documents with the government in a fraction of the time. Without the need to go through multiple manual steps, legal solutions like Athennian simplify the process and deliver a key advantage to your firm. Sign 5: You Frequently Deal With Tech Support ProblemsSo much so, that team members would rather use their own devices. In many cases, outdated software requires at least one IT professional to be fully dedicated to maintaining it - whether that’s adding new users, fixing glitches, manually updating the system on the server, and more. In some law firms, it is also possible that the software is obsolete, and current approaches can’t solve the problem. It may cost more to attempt to salvage what you have than it would be to purchase a new piece of technology. Opting for newer technology will allow you to receive quick and accurate help when you need it. This allows IT resources to be proactive and plan for future initiatives, rather than trying to fix the same old problems. Is it Time for a Legal Tech Update? Solid legal technology is critical to the growth and success of your firm. Updating the technology you have available may be necessary in order to continue providing the highest quality of service to your clients. Athennian can migrate your business data to the cloud easily, efficiently, and cost-effectively. Read our free Entity Management Starter Kit for a high level overview of how we do this. 

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The Impact of the ESG Regulations on Entity Management in North America

Environmental, Social and Governance Disclosure Obligations Lately, there has been a great deal of news in the media about the potential for ESG (Environmental, Social, and Governance) reporting regulations to soon become mandatory for North American entities, and in fact, on June 16, 2021, the U.S. House of Representatives enacted legislation that imposes both due diligence and disclosure requirements on companies that are publicly traded. Indeed, the COP26 Summit, the United Nations Climate Change Conference 2021, has highlighted not only the importance of tackling the globe’s long-term shift in temperature and weather patterns as a direct result of human activity, but also the vital role of business in this struggle.Indeed, at the COP26 conference, the International Sustainability Standards Board (ISSB) was created with the aim of facilitating a global and harmonized system of specific sustainability disclosure standards. With ESG representing the philosophy that companies should look to align their operations with values that support sustainable economic development, there is valid concern that this will create risks and onerous obligations that may potentially impact on the ability of a company to create long-term value. This is linked to disquiet not only about climate change, but also connected issues such as resource scarcity and social criteria related to a company’s business relationships, governance, and its treatment of employees.How Legal Technology Facilitates ESG Compliance Yet ESG and the forthcoming regulatory requirements provide a unique opportunity for legal entities to benefit from the operationalization of ESG standards and disclosure requirements. It is legal technology that will provide your legal or business organization with the crucial ingredient for the implementation of ESG principles in your corporate strategy, and this ultimately depends upon successful integration. This will involve the organization-wide incorporation of ESG into numerous matters, including the enactment of workforce diversity and inclusion policies, the business credentials of partners and your investment strategy, as well as your organization’s approach to compensation and the identification of ESG risks. This is undeniably a great deal of work, and there is a lot to consider. There are, however, unquestionable benefits for a firm that incorporates a more integrated approach to ESG. Indeed, to name just one compelling reason to implement ESG principles in your organization, there is significant evidence that sustainable corporate practices tend to result in increased performance. An open and integrated approach to working on the basis of ESG principles will also be undoubtedly effective in enhancing your reputation. The reverse of this approach has proven to be devastating for companies; an organization’s failure to ensure visibility into its own activities can result in the imposition of legal fines, lost profits, director liability, and a damaged reputation. Indeed; the impact of “high ESG controversy” events has been shown to result in the underperformance of shares even a distance of two years later.The previous voluntary and essentially market-led practice under which organizations provided their own data and disclosures, and which were often not even externally verified, will no longer be acceptable. To this end, the use of legal technology to facilitate the integration of ESG principles in your organization will be crucial. With the explosion of new data sources, business models, and external forces, we are finding ourselves in unchartered territory where traditional corporate governance may not be sufficient to address the risks involved. The ESG and corporate social responsibility concerns that impact how companies interact with stakeholders including employees, customers, shareholders, and suppliers mean that any attempt by law firms and the legal departments of organizations to track these requirements manually will be a recipe for disaster.Yet many legal departments are already weighed down by heavy workloads and budgetary restrictions and lack the capacity to properly manage the extra tasks imposed by the requirements of ESG compliance. Often, the tax and finance departments are brought in to support the legal team, but they are likely to be struggling with their own pressures and priorities. While some firms do possess internal solutions to entity management, they are often bespoke and lack the scale, convenience, and responsiveness of an off-the-shelf software solution.Legal Technology and the Integration of ESG Factors It is fortunate, therefore, that software entity management provides a vital means for the proper centralization of your organization’s data, and for ensuring that your ESG goals and forthcoming disclosure requirements are met. Entity management can be used to integrate ESG regulations into the day-to-day operations of a company. As the world grows ever more global, organizations will need to focus on building awareness of social and environmental responsibility.Indeed, entity management software provides a means by which organizations can collect, benchmark, and report ESG data in a seamless and flexible manner. Its comprehensiveness means that it is easy to create dashboards and reports that measure and report accountability across all organization units so that lawyers and executives can see where improvements are needed quickly, effectively, with robust metrics reports. Entity management software, through interactive dashboards and reports, means that organizations can proactively identify risk. It also helps to drive business operations, ultimately leading to increased sales and market share. By the inclusion of multiple ESG considerations within your organization’s internal policies or procedures, the associated processes are delivered through the software entity management system, monitoring compliance with automation specifically designed to integrate and analyze your data. Crucially, the software streamlines process time by avoiding the delays caused by manual processes, eliminating the need for IT staff to maintain multiple spreadsheets or different information technology systems. Implementing Entity Management Software in Advance of ESG Disclosure RequirementsThe imminent requirement that ESG disclosure will soon be required of SEC-listed companies means that entity management organization should no longer be overlooked, given the huge value it provides. Through an automated workflow, an entity management solution will enable an automated workflow for all governance and ESG activities, providing a centralized foundation that will ensure an organization’s compliance with all legal and financial requirements. With a leading legal entity management system in place, you will reap the benefits of the most up-to-date legal technology. The previous time and effort expended on monitoring compliance of legal and business functions across jurisdictions will finally be eliminated, ensuring that you stay ahead of the game and are in place to meet all ESG compliance and reporting obligations.

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The Solution to Outdated Software: Athennian vs. EnAct

According to EY research, 96% of legal teams face challenges with their entity management due to organizational challenges, mismanaged formats, and other unique complexities. With a concerningly large percent of the industry reporting inefficiencies, it is important to take a look at the existing infrastructure that supports this particular function of law. Entity management is one of the most laborious processes in corporate law, as it requires constant maintenance and review. Most entity management platforms on the market today were created before the year 2000, meaning they were designed pre-cloud, pre-wireless, and before the tech standard became at-your-fingertips-accessible. Shouldn’t a process so complex have a product that not only matches its nuance but also enhances it through today’s best-in-class technology? Feature Comparison:As EnAct nears its end of life, users are considering switching to similar Corporatek systems or migrating to a modern, scalable, cloud-based solution that understands the day-to-day needs of a legal professional. Unlike EnAct, Athennian requires no installation or IT management and lives securely in the cloud. Without constant IT management, businesses save time for higher-value tasks and can put budget toward advancing their technology road-maps instead of depleting IT resources.Athennian provides users with a secure and flexible solution to their entity management. The ability to add unlimited users to Athennian gives teams the flexibility to collaborate and share data with stakeholders easily.With Athennian, users can access the system from anywhere with no limitations. This is a direct contrast to Corporatek’s VPN requirements needed for remote access, and their pay-per-user model. Athennian’s ease-of-use is fueled by its rapid auto-population function, allowing users to create signature-ready documents with the click of a button, whereas EnAct’s manual functions add friction and time to an already complex process. In addition to Athennian’s ease of use, our dedicated product team maintains a system that works with 99.99% uptime. Athennian’s routine weekly updates seamlessly integrate into the system, unlike Corporate systems which are frequently down and often require manual intervention and maintenanceWell-loved features of EnAct can also be found in Athennian. For example, both systems allow for easily exportable digital minute books, and have access to intricate org charts that map subsidiary relationships. However, with Athennian’s platform, certain regions can eFile, streamlining the entity management process even further. For a complete feature comparison, you can download our Feature Comparison sheet:‍Upgrading to Athennian From EnActAthennian’s dedicated migration teams make transferring your business-critical data simple, secure, and streamlined.Athennian has developed a proven methodology for successfully transferring your data from EnAct to its new home in Athennian. Athennian can expertly migrate all data from EnAct, such as:Entity & compliance detailsAddresses, agents, registrationsBy-laws, articles, governance, etc. Shareholders, share classes, transactions, certificates, etc. Directors, officers, etc. Custom coded documentsFor a full overview of the migration process from EnAct to Athennian, you can download our Migration Sheet, here.

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Gartner Urges Legal Teams to Take on a Technology Strategy by 2025

It is more important than ever to maintain resilience and prepare for capricious circumstances in today’s world of constantly changing variables (e.g., climate change, political and social upheaval, economic volatility, the COVID-19 Pandemic). According to a recent report from Gartner, research suggests that businesses that have demonstrated this durability share three critical attributes: Responsive risk management, a dynamic culture, and a flexible structure. Responsive Risk ManagementOrganizations that prioritize risk management through implementation from a senior leadership level are more adaptable to unforeseen changes. Constant coordination, management, and mitigation prove to yield better outcomes; however, only 13% of respondents feel confident that they can manage cross-functional risks without pulling from other business areas.A Dynamic Culture‍Gartner characterizes a dynamic culture as “communicative, collaborative, cooperative, and creative.” The research concludes that organizations with time-efficient and relevant decision-making processes are more likely to thrive competitively.‍A Flexible Structure‍By adopting practices that leverage technology and remote-working, teams create a globally diverse and competitive environment and empower a more inclusive workforce. Legal teams that have embraced digital and remote-enabled practices have seen huge benefits since the start of 2020. Adopting a Technology StrategyAdopting a strategy or roadmap is uncharted territory for an industry that has been historically resistant to technological change. Among those surveyed by Gartner, only “9% of respondents feel confident that they can create a cohesive, long-term plan for digitalizing the legal department.” Gartner reports that legal departments struggle to leverage technology and rely on “market hype” rather than addressing their unique needs and investing in solutions that will impact their broader business outcomes. Action StepsAccording to the survey, there are three key action steps to follow when implementing a technology strategy: 1. Identify ChallengesGartner urges legal teams to identify their challenge areas and prioritize those technologies that can improve their most pressing needs. In looking at the business at large and identifying the overarching challenges, the logical solutions become apparent. ‍2. Create Operating ProcessesAlign your team with new operations that supplement your technology investments. A technological roadmap requires adaptation and ground-up tactics for creating streamlined processes. ‍3. Plan & TestAccording to the report, it is critical to involve stakeholders when identifying future needs. With top-down alignment, you can "pressure-test hypotheses" and create designs for solutions moving forward.Need More Help Evaluating Solutions?Because legal teams are unpracticed in the evaluation stage of software buying, Athennian has created a guide for purchasing legal entity management software.For best practices and a detailed checklist for what to look for in a technology vendor, download Athennian’s Essential Checklist here. 

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Introduction to Transfer Pricing and ICAs

This blog is based on the guest chapter written by Paul Sutton of LCN Legal in Athennian’s Best Practices in Corporate Subsidiary Management eBook.Transfer PricingTransfer pricing, also known as TP, is a set of international tax laws that determine a company’s charges, such as royalties, service fees, and goods prices. These decide what is paid between connected entities within a multinational group and influence where profits are made and taxed. What is the Arms Length Principle?The arms-length principle is an adopted international standard for determining transfer prices for tax purposes. According to LCN Legal, what this means is that “tax authorities review the transfer prices affecting a particular enterprise, and then tax that enterprise based on the profits it would have made had the prices been negotiated between independent third parties.” This applies to ongoing and one-off transactions and to both legal entities and branches. However, this increases the risk of double taxation because the implication is that any tax change should apply to all jurisdictions. If this does not occur, the enterprise may be taxed twice. What are ICAs? Intercompany agreements, or ICAs are a fundamental component of transfer pricing compliance for multinational groups. According to Paul Sutton of LCN legal, intercompany agreements “define the legal terms under which transactions occur within a group of companies.” These transactions can look like:Head office and back-office services (e.g., finance, tax, legal, and HR services)Marketing servicesR&D servicesIT services and supportShared services arrangementsSale of goodsSales agency and commissionaire arrangements Intellectual property licensesRevenue/profit sharingCost-sharingContract manufacturingToll manufacturingLoan facilities (e.g., term loans, revolving credit, and overdraft facilities)Intercompany debt in security form (e.g., loan notes)Guarantees and other forms of security or financial supportCash poolingSecondment of staff and other mobility arrangementsICAs play a critical part in implementing transfer pricing policies, including:Describing the transactions – (e.g., recording which services are provided or intellectual property is licensed.)Allocating contractual risk between parties – (e.g., risks include product liability claims, credit risks, or inventory risks.) Specifying the fees to be paid by the correct parties – (e.g., royalties or license fees.)Specifying which party owns intellectual property rights used connection with the arrangement.In a tax audit, ICAs are one of the first items that tax administrations will ask for. An ICA must match the group’s transfer pricing policy and tax filing; otherwise, the group is instantly disadvantaged. Not only will this extend the audit process, but it will also undermine the enterprise group’s credibility. What Makes an ICA Effective? To be successful, an ICA must be aligned with the allocation of functions, risks, and rewards described in transfer pricing policies. It must also be legally binding and correctly managed (i.e., signed and dated by all participating entities.) In addition, ICAs require regular maintenance so that they accurately reflect the group’s policies and structure. Without proper maintenance, a group could find itself with an excess of penalties. For more information on effective ICAs and their commonly occurring issues, you can download the Best Practices in Corporate Subsidiary Management eBook, which includes an entire chapter on ICAs and TPs. 

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