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Why Lawyers Make Good Early-Stage Startup Hires

Posted on September 12, 2017 by admin in Compliance, Corporate Governance, entrepreneurship, International Investment, investment advisory, mergers and acquisitions, real estate, rule of law, Small Businesses, strategy, transaction advisory, Uncategorized, upscale, wealth

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By Daniel Doktori and Sarah Reed (culled From hbr.org)

It’s a startup shibboleth that entrepreneurship and formal education don’t mix. For icons such as Mark Zuckerberg and Bill Gates, so goes the lore, finishing a bachelor’s degree would have only stifled the creativity that fueled their companies to stratospheric success. PayPal founder Peter Thiel offers a $100,000 fellowship to “young people who want to build new things instead of sitting in a classroom.” Graduate degrees are thought to merely exacerbate the problem of too much thinking, too little doing. And while high-profile efforts by top business schools to teach and promote entrepreneurship have lessened the stigma around the MBA, the law degree continues to occupy a unique place of villainy among the startup set. After all, YouTube, Uber, and Airbnb, among many others, were founded on ideas that challenged, if not broke, laws and regulations. When it comes to a tech startup, lawyers are a bug, not a feature. Right?

Maybe not. Lawyers can add value in the obvious ways, helping to avoid early mistakes like issuing stock too late in the game, when the company has grown in value and the employees can no longer take advantage of favorable tax treatment. But more importantly, a lawyer on the early team can contribute to a thriving company culture by asking the right questions at the right times, providing perspective on crucial transactions, and getting smart fast on issues where the rest of the team lacks expertise.

Lawyers help startups deal with common transactions and avoid costly mistakes.

Issuing equity to the early team often triggers time-sensitive filings with the IRS. Successfully commercializing a product depends upon clean and clear lines of intellectual property ownership. Raising outside financing requires compliance with complex securities laws. A misstep on any of these items could mean an early exit for a startup company (and not the good kind). A corporate lawyer with a few years of relevant training can help navigate these and other common set-up requirements.

Moreover, lawyers, particularly corporate transactional lawyers, have repeated exposure to the types of deals — and the associated risks — that a startup will face. The dynamics between a CEO and the investors on her board are a function of the legal arrangements articulated in the financing agreements. The relationship between a company and its customers stems from a license agreement governing how users may interact with a product. Partnering with a larger company in a similar industry can, in the best case, open new markets or, in the worst, box a company into a corner, severely limiting options for growth and eventual acquisition. Lawyers understand these transactions and the perspectives of the negotiators involved.

And when the complexity of the particular deal exceeds the expertise of the lawyer on the team, she can play the savvy procurer of legal services, knowing how to target efforts and limit costs. Such experience comes in handy in managing other third-party service providers such as bankers, accountants, and consultants.

While these benefits are valuable, however, they don’t in and of themselves justify a startup hiring a full-time in-house lawyer. Early stage companies — at least those with founders sufficiently experienced or savvy to recognize that they walk a road pitted with legal potholes — tend to manage such standard risks by hiring outside counsel. And while the costs associated with that outside attorney often rank among the highest in a startup’s budget, they do not typically rise to the level of a full-time annual salary. To justify her presence among the first dozen employees, a lawyer must add something beyond legal knowledge to the equation.

Lawyers are trained to ask the right questions at the right times.

Counterintuitively, lawyers can add the strategic absence of knowledge. President Harry Truman famously longed for a “one-handed economist” when presented with the equivocating analysis of his advisers, but executives in politics and business need to understand opposing viewpoints in order to make informed decisions. Legal education and training includes a strong emphasis on questioning assumptions and probing for further information.

Rather than crippling the company through risk aversion and overanalysis, however, having a lawyer on the early team contributes to a data-driven, analytic culture of thoughtful decision making. Further, lawyers are trained as advisers and service providers. They can ask questions, explore options, and execute on answers, but they don’t expect to make the final call. This comfort with playing a supporting role helps avoid the egocentrism that can cripple any organization, particularly a nascent one.

The lawyer’s craft sometimes can be boiled down to a willingness to immerse herself within the “fine print,” offering to read what no one else will on account of complexity, length, or sheer dryness. Trained to ensure that even simple advice is backed by evidence, lawyers read closely to the point of comprehension as a matter of professional responsibility. Such a skill enables a lawyer to take responsibility for a wider variety of important matters. Fledgling startups inevitably have to rely on analysis over experience. Lawyers fit well in such situations.

Not every lawyer is well suited for the gig, however. A lawyer with the qualifications outlined above needs a tolerance for risk. For one thing, she must be willing to give up her plush office and lucrative salary for a computer station at a long table and compensation in the form of prayers, otherwise known as stock options. Her professional risk tolerance must follow suit. An essential attribute of a business attorney is providing “risk-adjusted” advice, and the level of tolerable risk for a startup generally far exceeds that for a Fortune 500 company. Lawyers at startups need to recognize that a workable answer today is often preferable to the perfect answer tomorrow; hand-wringers need not apply.

But risk tolerance must be accompanied by a stiff spine in situations where the company’s momentum (and the CEO’s vision) hurtles on a collision course with the law or the company’s outstanding commitments. In these cases, a willingness to speak up is one of the many things lawyers can bring to the table.

Daniel Doktori is the Chief of Staff and General Counsel at Credly, a digital credential service provider. He previously represented startup companies at WilmerHale, a law firm.

Sarah Reed is the Chief Operating Officer and General Counsel of MPM Capital, a venture capital firm that invests in early-stage life sciences companies. Previously, she was the general counsel of Charles River Ventures, an early-stage technology venture capital firm.

How can you transfer your music copyrights?

Posted on August 1, 2017 by admin in corporate finance, entertainment, entrepreneurship, International Investment, investment advisory, Personal Finance, real estate, rule of law, Uncategorized

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Wale is a music producer. Recently he composed music for a hit track which enjoyed substantial airplay for over 6 months. Consequent upon the success of his track, he was approached by an international music corporation, who requested him to transfer his copyright in the music to the company in return for a one off payment of $200,000 and royalties capped at 5% of global sales for the next 2 years. They assured him that he would enjoy more concert appearances with the allied revenue streams. Wale is confused and requires advice on his legal rights.

Of all the forms of copyright protected works, music is perhaps the most restricted and licensed. Since music was first broadcast on radio, a vast mechanism for licensing music has emerged from the opposing forces of the recording industry and the radio and TV broadcasting industries.

Copyright ownership can be transferred like any other form of property. Copyright is transmissible by assignment, by testamentary disposition, operation of law, as personal or moveable property. however, to give legal effect to that transmission there must be a written agreement signed by the assignor. Any grant by the copyright owner binds every successor in title except a bona-fide purchaser for value without notice (actual or constructive).

This doesn’t however mean that a copyright cannot be transferred verbally, as it is trite law that a verbal agreement to which both parties have agreed all the terms (i.e. has reached completion) is legally binding. It follows then that a verbal agreement to assign, provided there is no dispute as to the terms of the assignment between the assignor and assignee, is valid and copyright is transmissible by operation of basic contract. It is however advisable that the parties sign a confirmatory assignment agreement which refers retrospectively to the earlier assignment.

The transfer could be partial or total, where the rights owner can transfer all of the exclusive rights his or her grants. In partial assignment, a music author may transfer his reproduction, translation and adaptation rights to a publisher. He may also decide to split his rights between different persons.

Copyright assignment agreements can be limited in terms of duration or territory. The author of a literary work could, for example, assign their right to reproduce it in the UK, Nigeria, Ghana and the Gambia for 4 years.

Copyright assignment agreements can be reversionary, in other words, the rights can revert back to the assignor on the occurrence of an uncertain event, such as an unremedied breach of contract. This protects the assignor from the loss of their rights in the event of the occurrence of certain events which may be vitiate the transfer contract.

The transfer of copyrights contains some knotty issues, which could become highly problematic if not properly managed. When faced with a decision on copyrights, it is best that you seek advice from a qualified legal practitioner, so as to ensure that you take the best steps in the circumstances.

Milton & Cross Solicitors provides advice to entertainers, rights owners, rights administrators and merchandisers. We help them make informed decisions that facilitate high value transactions. Contact us for a free consultation.

10 Reasons to Have an Employee Handbook

Posted on July 19, 2017 by admin in Capital, Corporate Governance, entrepreneurship, leadership, Small Businesses, strategy, transaction advisory, Uncategorized, upscale

Jacob runs a travel agency which caters primarily to individuals seeking overseas admission. After running the company alone for a few months, Jacob hired Lucia to work in an administrative support role. A few months down the line, Jacob feels frustrated because Lucia has not been performing to his expectations. He periodically tries to tell her where she is going wrong, but she usually perceives his attempts as being overly critical and reacts defensively.

Jacob is confused. he is unwilling to fire Lucia, but he feels she is either incompetent or unable to understand his expectations of her. Lucia in turn feels stressed because Jacob has neither expressed his expectations of her, nor is there any handbook or documentation that could give her insight into his expectations. Jacob seeks legal advice on the way forward.

An Employee handbook provides the organisation with the following benefits.

Introduces employees to your culture, mission and values

Perhaps the most important aspect of your employee handbook is the introduction of new employees to your corporate culture. This helps to foster a sense of pride and belonging, which studies show will help employees become more productive in a shorter period of time.

Communicates to employees what is expected of them

A well-written handbook provides employees with a clear understanding of their responsibilities. The handbook also serves as a compass for the organization’s policies and procedures. For example, it advises employees what the procedures are for requesting time off or a vacation. It advises employees whom they should contact when they have an unscheduled absence (and what the timing should be). It tells employees whom to go to if they have questions about any of the specific policies in the handbook.

The handbook also communicates an employee’s general responsibilities regarding safety, timekeeping and reporting. By providing clear, accessible information, handbooks ensure companies continue moving in the right direction.

Educates employees about what they can expect from management and leadership

An employee handbook provides objectives and leadership styles, as well as management best practices, to foster healthy management-employee relationships. It also outlines logistics, such as timekeeping requirements, hours of work and pay periods.These clearly communicated policies help to eliminate confusion and inconsistencies that result when handbooks are silent on these topics.

Helps ensure key company policies are clearly and consistently communicated

No policy is effective if it is practiced inconsistently. A handbook will accurately communicate your organization’s policies regarding employment, conduct and behavior, compensation and other policies and procedures you follow. Most importantly, managers can refer to the handbook when answering questions or making decisions regarding your policies and ensure their answers and actions are consistent with your policies and best practices.

Showcases the benefits you offer

Does your organization offer vacations, investment plan, health insurance, paid parental leave or other benefits to employees? Make sure they know about these policies and the eligibility requirements by communicating them in the handbook. A robust benefits package can help you retain your best and brightest employees, so be sure they know about your full suite of offerings by communicating these in the handbook.

Ensures compliance with federal and state laws

No matter what state or country you do business in, or how many employees you have, you will be subject to state and federal employment laws. Your handbook not only communicates these various entitlements and obligations to employees, but is useful in demonstrating that your organization strives to be compliant with these regulations. you will want to be sure they understand their rights and obligations .

Helps defend against employee claims

Employers should consider it a matter of when, and not if, they will face a lawsuit or similar challenge from a current or former employee. When this happens, one of the most useful documents you can provide your attorney will be a copy of your handbook.

A thorough and compliant employee handbook will help to show that the organization exercised “reasonable care” towards its employees. The employee’s signed acknowledgement page will show that the employee had an opportunity to familiarize themselves with the organization’s policies, a chance to ask related questions, knew whom they could turn to for help within the organization, and agreed to follow the terms and conditions of employment set forth by the organization.

Lets employees know where to turn for help

Ultimately, you want employees to feel comfortable turning to a trusted member of management for help when they want to report workplace violations, obtain workplace-related assistance and get answers to any other questions they may have.When a handbook not only outlines one or two management individuals for an employee to turn to in these situations, but also designates another individual to turn to in the event the employee disagrees with the first decision, they are more likely to keep their complaints in-house, and this is a good thing for employers.

The Legality of Restrictive Covenants

Posted on May 30, 2017 by admin in Capital, investment advisory, Personal Finance, real estate, Small Businesses, strategy, Uncategorized, wealth

If there is a restrictive covenant in effect in the agreement that was signed, the homeowner is not able to do just whatever he or she wants to the land or house. These documents are drafted with specific language in the deed papers or through additional files that specify certain actions for the deed. They have working of running with the land so that anyone that owns the property is affected by the terms.

The purpose of a restrictive covenant is to limit the ability to freely use the property by someone that owns it. These may be placed on deeds by municipalities, land developers and even homeowner’s associations when certain actions are not wanted in a neighborhood or community. It is possible for a private citizen to also impose these restrictions when entering into these contracts so that imposed limitations affect the new owner. The primary reason for these stipulations is to keep the location in order in regard to certain actions such as cleanliness and appearance. The other goal is to increase the property values as much as possible for the entire area.

Community Association

There is a percentage of homeowners that believe that community association has rules that only lower property values based on the regulations implemented. However, most of those included in these organizations are happy and at peace with ensuring the rules are followed. Restrictive covenants may be used as a design to maintain the character of developing land and communities. This may prevent residents from various alterations to the homes in regard to size, appearance and the trees and brush around them. Because being part of a community requires adherence to these regulations, each person must follow the rules. However, homeowners are able to change some of these when they are in good standing with the Housing association.

Due Diligence Before Purchase

There are a variety of sources where restrictions come from on what may be done to the property. This could be the developer when the property is a condo or some building still being constructed. The list of detailed restrictions is provided before the sale in most circumstances so the buyer is aware of these conditions before he or she moves into the home. The title committeemen document is another source of finding the limitations through a restrictive covenant when purchasing a house. The title company usually has these details noted for any limitations that apply to the land or structure that is purchased. A local county deed recorder may supply this information if a title insurance policy is not obtained when the property has been bought. Any applicable restrictive covenants are placed on the face of a property deed as a public record available to anyone. For any additional assistance, a real estate lawyer should be contacted.

Restrictive Covenant Examples

The terms of a restrictive covenant are usually detailed and obvious. This is usually for home bought within certain communities. A covenant affects how high, where and what manner of construction may be accomplished for certain portions of the property. Some require a permit for painting or for decorations. Pets and certain other stipulations such as running a home business may be restricted. Altering the landscape is often limited. Other exclusions may be through adding fences, multiple or large vehicles and materials such as window treatments or solar panels.

Violations and Legal Assistance to Restrictive Covenants

When a homeowner violates a restrictive covenant, the consequences may be as minor as a fine or as severe as suspension of rights on the property. It is imperative that these terms and clauses are fully understood before the homeowner finalizes the purchase of the house or land. To accomplish this, a real estate lawyer should be hired to analyze the wording and how it applies to the purchase. These legal professionals have the knowledge and understanding of how local and state restrictions for both the title and laws affect these terms. Restrictive covenants must be examined thoroughly by a real estate lawyer to ensure what the homeowner wants to do may be done so after he or she buys the property.

Can Your Landlord throw You Out Without Notice?

Posted on April 7, 2017 by admin in real estate, Small Businesses, transaction advisory, Uncategorized

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James is a sound engineer, working with a prominent oil and gas servicing company in Lagos. He lives in a rented 2- bedroom apartment in the Lekki environs with his wife and younger brother. By all accounts he is an upwardly mobile young man with lots of prospects.

Disaster struck in December 2016, James lost his job due to rationalizations at his company, arising from the national recession. Having been sacked, James found it difficult to pay his bills, including his house rent on time as he was used to doing. After making several demands for the rent for close to 6 months , the landlord came with some thugs and forcibly evicted James and his family from the flat, throwing his property into the street and locking the door. James came to his lawyers for advice on how to deal with the actions of his landlord.

The law is clear on the rights of a landlord and a tenant, especially with respect to the termination of the tenancy and the recovery of possession of the premises by the landlord. In the absence of any clause in the tenancy agreement stating otherwise, the landlord is expected to give the tenant adequate notice to quit and deliver up the premises. This general rule is that a yearly tenant should receive at least 6 months notice, a quarterly and semi-annual tenant is entitled to 3 months notice, while a monthly tenant is entitled to 1 month notice. Failure to issue and serve the proper notice to the tenant renders the notice invalid. The notice should be given before the termination of the existing tenancy, as an additional day’s delay creates a fresh tenancy.

If the tenant still refuses to vacate the premises after the expiration of the quit notice, the next step to take is to serve the tenant with a 7 day Notice of owners intention to apply to recover possession. After this expires, the landlord may then sue the tenant and after the magistrate has heard the matter, the court may make an order evicting the tenant if it is proven that he has breached any of the covenants or is in arrears of rent.

The effect of the forcible and unlawful eviction of James is as follows:

The landlord committed a crime by forcibly evicting James
The landlord is in breach of the tenant’s right to quiet possession and enjoyment of the premises.
The landlord may be liable for assault if himself or any of the thugs assaults James in the process of forcibly removing him from the premises.

These breaches may render the landlord civilly and criminally liable. Consequently, it is essential to follow due process in the termination of tenancies.

Payola in the Nigerian Music Industry

Posted on September 26, 2016 by admin in entertainment, Uncategorized

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Oluwole is a musician who someday aspires to make it big in Nigeria. After several grueling sessions in the studio, he has finally been able to record an album comprising a few tracks.

Having poured his heart and soul into his music, Oluwole takes his album to Kevwe a local radio DJ in order to broadcast his songs and increase his popularity, which would in turn improve his chances of getting performances and lucrative endorsement opportunities.

Having jumped several hurdles to meet with DJ Kevwe, Oluwole scored a meeting with the popular DJ, where he asked the DJ to add one or two of Oluwole’s songs to his Playlist. DJ Kevwe, after ruminating on the request, told Oluwole that he was not really inclined towards playing Nigerian music. However, he would be willing to add Oluwole’s songs to his playlist for a month if Oluwole could pay him the sum of N150,000 (One Hundred and Fifty Thousand Naira).

To say that Oluwole was shocked would have been an understatement!! he could not believe that a role model such as DJ Kevwe could be so corrupt! Worse still, he was required to pay for providing the DJ and radio station with content that they would exploit to make profit.

Three months and several radio stations later, the story remained the same, “PAY FOR PLAY”. Now Oluwole is depressed and disillusioned; What could he do to help his situation?

According to U.S. law, 47 U.S.C. § 317, the illegal act of PAYOLA takes place when a radio station plays a specific song in exchange for money, service or other valuable consideration directly or indirectly and fails to disclose on air as being sponsored airtime—rather, presents the song as being part of the normal day’s broadcast. The word PAYOLA takes it root from ‘payment’ and ‘victrola'(an old form of gramophone)

DJ’s and On Air Personalities have plied the black trade of Payola since the early days of broadcast entertainment and payments by musicians to disc jockeys (DJs) and presenters as a condition precedent to promoting their songs is neither new or restricted to Nigeria, but is indeed an international practice. Many DJ’s justify their position by claiming that the musical recordings promoted by the artistes are usually sub standard and as a result, the DJ requires compensation for risking their reputation and goodwill for the benefit of the artiste.

Under Nigerian law, there is no overt criminalisation of the act of receiving money for the broadcast of a musical work by a radio station. However Section 8 of the Corrupt Practices and other Related Offences Act (2000) provides thus:

Any person who corruptly –

(a) ask for, receives or obtains any property or benefit of any kind for himself or for any other person; or

(b) agree or attempts to receive or obtain any property or benefit of any kind for himself or for any other person, on account of-

(i) anything already done or omitted to be done, or for any favour or disfavour already shown to any person by himself in the discharge of his official duties or in relation to any matter connected with the functions, affairs or business of a Government department, or corporate body or other organisation or institution in which he is serving as an official; or

(ii) anything to be afterwards done or omitted to be done or favour or disfavour to be afterwards shown to any person, by himself in the discharge of his official duties or in relation to any such matter as aforesaid, is guilty of an offence of Official corruption and is liable to imprisonment for seven (7) years.

From the foregoing, we can see that the act of Payola is not merely an unethical activity, it is a felony!! Consequently, any person who suffers disadvantage as a result of the actions of a DJ may theoretically petition the DJ for the corrupt action.

However, a challenge may arise from the following factors:

Inadequate skill on the part of law enforcement agents to prosecute cases of payola
Tendency of the law enforcement agents to treat payola as a civil wrong as opposed to a criminal act
General societal tendency to maintain silence over unethical activities by popular individuals.

Until we begin to name and shame the DJ’s and presenters who engage in this despicable practice, our ears and the music industry may suffer from the influx of sub standard recordings and videos, while the growth of genuinely talented individuals may be stunted by the sabotage of the OAP’s.

Just my 2 cents on the matter.