Future Lawyer Blog

Insights into the Commercial Application of Law: HSF and “Smoothie Limited”

Last month Herbert Smith Freehills (HSF) hosted an event providing students with an insight into the commercial application of Law. The event began by an introduction of HSF by one of the hosts, Paul Hartley. Paul initially briefed the audience on HSF and stated that HSF has 26 offices around the world in 20 countries with a 5222 headcount. The firm is very diverse and spread globally, working on very distinctive projects. The firm has won several awards such as IP Litigation Team of the Year 2019. Lastly through Pro-bono Citizenship and 25856 hours of advice, the firm stays inclusive and focused on making an impact on society.  

Paul conducted a corporate case study which incorporated the lifecycle of a fictional start-up company called “Smoothie Limited” and how law can assist or help this fictional company in its operations.

The first case study was divided into 10 stages: the first stage named as the Idea stage. When people pitch an idea for a business idea, it becomes essential to protect the idea, the brand logo and branding. IP Law plays a crucial role in initiating these pre-requisites. One of the examples given for this was of Coca Cola , Coca Cola has been successfully operational since 1891 due to its trade secret.

Having this trade secret differentiates it from other soft drink companies. This reflects the importance of protecting the brand from competitors and preserving its value. Moreover, the parties to the idea would establish their business as a separate legal entity and register the company which requires legal paperwork as well as legal understanding of why the business should be a separate legal entity. At this idea stage, land law may also play an essential role when a workplace is required to bring the idea into action.

A Smoothie company provided the case study…

The next stage in the lifecycle of a company that was spoken of was raising capital for the company. A factual scenario in the case study was presented where Smoothie Limited, the fictional company, wanted to create two subsidiaries to divide the creation and distribution of its product. As the business grows, its solicitors will need to tackle issues of employment law, health and safety etc. This makes it essential for the business to comply with laws and guidelines to have safe practices and maintain good public relations. The role of a lawyer goes beyond assessing whether the company is complying with the relevant law, but a commercial lawyer needs to be aware of market conditions such as sustainability and sustainable practices to show the responsible nature of a business. This reflects the importance of being commercially aware. Two words law students are very familiar with these days!

The next stages where company may require an application of law are when it provides security over a loan or is experiencing hardship. The business may provide security to the bank when it is borrowing money and lawyers working in the banking sphere can assist with technicalities of a loan and providing assets as a security to the business. At times there may be the possibility that the business fares less well and may face money problems. A lawyer works with their clients through the good and bad times to establish a solid loyal relationship. Lawyers having particular knowledge of insolvency law will play a part in providing legal assistance.

The next stages over the lifecycle of a company cover acquisitions, global expansion, takeovers and turning the company into a Public Limited Company. Mergers and Acquisitions (M&A) are one of the key commercial areas that big city law firms operate in. Lawyers conduct due diligence over the company and assess the prospects of the deal and whether the management of the company complies with best practice. The speaker of the event noted that his trainee had to go over a million documents during his last due diligence exercise but the AI technology used by the firm made this task easier. HSF uses an alternative legal services team that then reviews these contracts/ documents. Another factual scenario that was raised during the event was Smoothie Limited wanting to obtain a listing and offer shares to the public at  London Stock Exchange. The company is likely to need external assistance from lawyers to advise them on the process and practices of the listing, and the lawyers go through the security offering, prospectus and listing rules to provide that effective advice.

In the next factual scenario, after obtaining a listing the company wanted to expand in China. As big firms like HSF have a network spread around the world, they have lawyers in various jurisdictions to provide local advice in such situations. They would be aware of the local law of China, the domestic competitors and what the local practices are, which will assist in expansion into an unfamiliar market. Lawyers go far beyond protecting a company from the consequences of law, assisting them to grow also. Moreover, at the end of the lifecycle of a company, another company had prospects of taking over Smoothie Limited. In order for a successful and profitable takeover to occur, it becomes essential to make sure all shareholders are getting a fair share of their money back. Lawyers have to ensure that the offer is compliant with the Takeover code.

Lastly, when people sell their business, they might wish to join the board and become a director of the takeover company. However, becoming a director holds responsibility and when businesses face human rights issues or other issues, directors hold that responsibility. Therefore it is a lawyers task to assist these individuals in understanding what they are signing up for and ensure they know of all the consequences (such cases may lead to criminal liability).

The pathway to the High Court…

In the second part of the HSF event, we moved to briefly discuss the simplified path of a case to the High Court. Kate Meakin who works in the disputes department at HSF took us through this section of the event. The process for a case in the High Court is shown in a simplified manner below.

The aim of dispute avoidance is to avoid starting proceedings and encourage settlements outside of the court and to identify differences and resolve them between the parties, possibly through ADR. During pre-action parties identity issues and try to resolve differences before the court proceedings. In pre-action solicitors draft a letter of pre-action setting out the basis of the claim and seeking disclosure of key documents. Kate mentioned that mediation can begin after the trial or parallel to it at various points of time.

Lawyers assess the case and determine what the parties are aiming for, in order to effectively advise them over the scope of trial or mediation and which route would be more successful to meet their aims. Statements of case are the documents of the case, they tell the court their story. These are used alongside a claim form which notes what the claimant wants. This claim should be brought within the limitation period and at this stage the case becomes public. After the claimant submits their claim form, the defendants then need to respond by filing a defence or a defence and counterclaim. As the case begins, there may be interim issues such as security for costs to increase the chances of recovering costs. Moreover freezing orders can also be sought from the court to deter the defendant from moving their assets. Interim issues can also arise in respect to the jurisdiction of the courts and whether the case can be heard at that particular court and is most appropriate to.

At the disclosure stage, relevant documents will be disclosed and provided to all parties. A “cards on table” approach is used, where everything is disclosed except for the information that holds legal privilege. Evidence can be factual in the form of witness statements or expert evidence where experts provide their opinions. This evidence is exchanged between both parties before the trial starts. Moving on, parties may at times be required to conduct mediation where a third party facilitates negotiations between the parties, and seeking to help them find a mutually acceptable compromise of the dispute.

If mediation does not work out, the parties then go to trial. During trial both the parties present their evidence, cross examine each others’ witnesses, and present their legal arguments. The parties are allowed to appeal, subject to permission but the appeal must be over the decision and is not a re-hearing. Lastly, the courts may take steps to enforce any orders which are not complied with.

The event concluded after a Q & A with the audience. It was very helpful in giving me a deeper understanding of how and why the law is required in our commercial operations. I highly enjoyed the event because of its unique approach in using a case study.

Breshna Rani

Thanks to Breshna Rani, LLB2 student and a member of this year’s Lawbore journalist team for writing up the HSF event.

Breshna is passionate about writing and the arts, and loves to explore different areas of law. 

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