How a Company Without a Legal Department Should Use Outside Attorneys

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

At startups and growing companies, it is not unusual to have no dedicated legal department in-house, or only one person in charge. While the work that needs attention keeps increasing, such as checking contracts with business partners, preparing terms of use, fundraising, and labor management, there comes a point when internal resources alone can no longer keep up.

At such companies, using outside attorneys only as "someone to look at a contract when a request comes in" may not produce sufficient results. What is needed is the perspective of using outside attorneys as part of the company's own legal function. The scope of support for companies without a legal department is also described on LegalAgent's Legal Outsourcing page.

Reviewing Contracts One by One Rarely Leaves Standards Behind

A practice that tends to arise at companies without a legal department is forwarding each contract received from a counterparty straight to an outside attorney. Dealing with individual matters is not a problem in itself. But if the reasons for decisions are not recorded, each answer ends up as a one-off, and it is hard for the company's own standards to remain.

Examples include how far to accept the counterparty's demands in a non-disclosure agreement, whether to allow subcontracting in a service agreement, how to set the limitation of liability clause, and how to handle ownership of intellectual property. If these are reconsidered from scratch every time, the speed of review will not improve, and business units will also be unsure in what situations they should consult the legal function.

If you work with outside attorneys, it is essential to feed individual review results back into company-specific rules and decision criteria. It is desirable to gradually clarify frequently occurring contract types, clauses on which you cannot compromise, and the range that can be decided at the business level.

The Importance of Sharing the Background and Premises of a Transaction

If you hand an outside attorney only the text of a contract, the advice inevitably tends to stay with general legal explanations and formal risk comments. In practice, however, the content of the advice changes depending on which business the contract is tied to, what the relationship with the counterparty is, and how much risk your company can tolerate. This is because even for the same clause, the right landing point differs between an early-stage startup negotiating with a large company and a company concluding a contract with a major customer around its Series A.

When requesting a contract review, convey the aim and importance of the transaction. If you also include the desired signing date, the history of negotiations, and the points of concern within the company, the premises for the review can be shared.

External Collaboration with Decision Support in View

Legal outsourcing tends to bring to mind drafting contracts or checking their wording on the company's behalf. For a company without a dedicated department, however, what truly provides support is the role of backing up management and business decisions.

Designing terms of use and a privacy policy when launching a new service, checking the actual history of past issuances of shares and stock acquisition rights with fundraising in mind, setting information-handling standards when introducing AI tools, and preparing for due diligence when considering M&A cannot be handled just by following the wording of clauses. It is necessary to determine which matters to address first in light of the company's stage of growth, its business model, and how it is seen by investors and business partners.

Drawing the Line on Decisions the Company Should Keep for Itself

No matter how extensively a company uses outside attorneys, it is not appropriate to hand everything over externally. There is information and there are decisions that should be kept within the company. Which customer relationships to prioritize in its business strategy, how much risk to accept in moving forward, and when to explain matters to investors are management decisions the company itself should make.

Outside attorneys convey the possibility that risks will arise, their impact, and the negotiation options. The purpose is to enable management to make decisions with these in mind.

Simply setting up a concise consultation point of contact, information-sharing routes, and internal approval procedures makes it easier to prevent communication from stalling.

Using Generative AI and the Human Role

Generative AI can be useful for summarizing contracts and for the groundwork of checking basic clauses. It is a person who checks that output and makes judgments in light of each company's business environment and risk tolerance. Even for work that uses AI, decide in advance who checks which parts.

At LegalAgent, for companies without a dedicated legal staff member and for small legal teams, we value working together to build the legal service structure itself rather than stopping at one-off reviews. We aim not to be someone who rushes in only when trouble arises, but to provide support with an ongoing understanding of the state of the business.