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Tuesday, February, 2, 2010

Lawyer, Meet Shareholder Agreement; Shareholder Agreement...Lawyer: Introduction To Drafting Corporate Agreements

Learning to draft agreements, as opposed to analyzing those that failed on some level, comes somewhere during the fifth year of law school, which is to say, not at all. That's why new associates flock to drafting seminars and snap up drafting guides and forms. As a drafter in its own right, Toolbox thought it would lend a hand with a broad overview of the drafting process. First you need some good avoidance techniques — YouTube and video games do the trick. Then you need a snack. Finally, you can sit down and make phone calls before panicking about the looming deadline for the draft agreement you're supposed to have done in the morning. But that deadline won't even make you break a sweat if you've fully digested Introduction to Drafting Corporate Agreements, by Alyssa A. Grikscheit (Goodwin Procter LLP), who chaired PLI's recent seminar Drafting Corporate Agreements.

Grikscheit's perspective is a little less procrastination-laden and more process- and client-oriented than Toolbox's approach. And while she acknowledges that it "is difficult to make useful generalizations about drafting corporate agreements," she also notes that there are "general themes" that come up in any drafting process:

Controlling the Drafting — Who is best placed to prepare the first draft? Sometimes clients will actively resist having their counsel initiate drafting on the theory that it will be less expensive to have their counsel comment on the other side's draft than to prepare the initial draft of the agreement.
Drafting in Context — "Do the parties get along? Will they have to deal with each other over time?"
Structuring First to Minimize Redrafting — In general, "structure and basic terms of the agreement should be nailed down before drafting begins."
Understanding and Addressing the Client's Special Needs — "Many attorneys believe they understand which issues are of paramount importance to their client, only to find out later in the negotiation process that another issue (e.g., use of net operating losses or protection of intellectual property) is actually very important to the client and has not been a focus in the early negotiations or drafting."
Drafting for the Appropriate Time Horizon — Only diamonds are forever; so check out Grikscheit's useful observations on time horizons in the download.
Relying on Forms — Toolbox says, "Nothing is better than a form, until you have to actually deal with reality." Grikscheit would probably agree.
Drafting Agreements That Work Well Together — Remember, foolish consistency may be the hobgoblin of small minds, but that's why lawyers get paid the big bucks...we have big minds and can't suffer any inconsistency, especially in corporate agreements.

Toolbox will implement all of these pointers in the future, but will find time for procrastination between each.

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