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21/07/2020
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Start & Grow Chapter 1: Get your Legal Setup Right

The Legal Guide For Entrepreneurs in Switzerland 

Your legal setup is like the goalkeeper in soccer: It doesn't win the game for you, but it definitely can prevent you from losing it. So when you start and grow your company, make sure you get your legal set-up in order so you don't lose money, time and sleep, and instead focus on building a great company.  

In this Start & Grow series, we show you how to get the most value from your legal setup (protecting yourself and your business) while minimizing costs (time and money): From incorporation and financing rounds to employee stock option plans and data protection compliance, you will learn what works and what doesn't based on our experience with hundreds of startups.  

First, get to know the LEXR Legal Framework to spot legal challenges: This simple framework is based on five legal areas and three problem types which helps any non-lawyer quickly spot problems. Then, we compare the different options to solve these problems and explain why we do at LEXR what we do.  

 

1 Five Legal Areas 

To spot legal problems, it's important to understand where they appear. In general, there are five legal areas that any company must tackle: 

  • Corporate: The power and money structure of your company and the source of many startup failures. Who gets what piece of the pie, who brings the money, and who makes the important decisions?  
  • Regulatory: The government regulations applicable to your business – if you wonder why nobody else has done your business before, regulatory restrictions are often the answer. Besides data protection, this is highly sector specific, ranging from financial market regulation to food safety.  
  • Intellectual property (IP): The most valuable asset of many companies, intellectual property law is all about protecting your brand, patents, copyright, data and general know-how from your competitors.  
  • Contracts: As the legal basis for your relationship with customers, suppliers, and partners, agreements are usually only looked at when there is a disagreement. Do it right when times are good so you are safe when the relationship goes bad.  
  • HR: Attracting and retaining talent is the key to success. A solid legal setup helps you with this and minimizes risk when it does not work out.  

 

2 Problem Types 

Not all legal problems are the same – from managing the day-to-day legal to the strategic legal decisions, there are three main legal problem types:  

Strategic legal ('Get me an expert'): The rare 'bet-the-company' questions where there is no room for error.  

  • Samples: High stakes business disputes, government inquiries, patent applications. 
  • How to solve it: As strategic legal issues tend to be expensive to solve, the approach is two-fold: First, avoid legal issues where possible (in particular business disputes and regulatory inquiries are often just a symptom of neglected day-to-day legal operations). If it cannot be avoided (such as patent applications), talk to experts early on. The experience of an expert to deal with these issues can make or break your company.   
  • How we solve it at LEXR: We have experts in most areas of law within our team, and where we don't have the expertise ourselves, we tap into our network of lawyers and help ask the right questions to keep costs low.  

Legal projects ('Solved by others before'): There are legal tasks that your company may only face once or a few times, but that many other companies have solved before you.  

  • Samples: Financing rounds, setting up an ESOP, getting to GDPR compliance.  
  • How to solve it: Do not re-invent the wheel. Stick to what worked for others before. Rely on best practice and established standards. 
  • How we solve it at LEXR: With our flat-fee legal solutions, we have distilled the experience of hundreds of cases into a best practice standard that we tailor to your specific needs.  

Legal operations ('Daily business'): These are the everyday legal processes and questions your business faces. 

  • Samples: Reviewing sales agreements, appointing a new board member, hiring a new employee. 
  • How to solve it: Automatization and standardization. Solid processes and good templates are the key to ensure the daily legal operations do not evolve into major issues. Invest in a sound setup and train the people at the frontline (sales, procurement, HR).  
  • How we solve it at LEXR: With our best practices and specialized software, we can manage this for you on a subscription basis or help you set up your processes internally.  

 

3 The LEXR Legal Framework 

Combining the legal areas with the problem types gives you the LEXR Legal Framework. With this, you can categorize legal issues at a glance and decide who should deal with it and how. Also, the framework ensures that you do not forget a critical area in your setup or in recurring legal reviews. 

Complete the framework for your own company – you can simply download an empty version here.  

 CORPORATEREGULATORYIP               CONTRACTSHR           
HIGH

What: Founder disputes, M&A, exits, IPO
Who: Shareholders, board members
How: Get at least one expert opinion

What: Business critical license, investigations
Who: C-Level, compliance team
How: Get at least one expert opinion

What: Patent applications, disputes

Who: C-Level

How: Get at least one expert opinion

What: Disputes, strategic partnerships

Who: C-Level (with sales or procurement team)

How: Get at least one expert opinion

What: Set-up of pension fund, mass dismissal
Who:C-Level
How: Get expert counsel 
MEDIUM 

What: Financing rounds, shareholders’ agreement

Who: Shareholders, board members

How: Get a flat-fee quote from your go-to legal

What: Data protection compliance etc.

Who: Compliance team

How: Get a flat-fee quote from your go-to legal

What: Trademark registration, license agreements

Who: Dedicated IP person

How: Get a flat-fee quote from your go-to legal

What: Revision of T&C, large procurements, termination of contracts

Who: Sales, procurement

How: Ask your go-to legal

What: ESOP, bonus plan, termination of C-Level

Who: HR and C-Level

How: Get a flat-fee quote from your go-to legal

LOW

What: Cap table, mutations, general assembly

Who: Board members, CEO

How: Have solid templates, outsource to specialized providers

What: Day-to-day compliance (e.g., KYC)

Who: Compliance team

How: Automate or outsource to specialized providers

What: Renewals, monitoring

Who: Dedicated IP person

How: Automate or outsource to specialized provider

What: Day-to-day contracts

Who: Sales, procurement

How: Set up a processes for automated contract creation, digital signature and storage & insights 

What: Hiring / firing, day-to-day questions

Who: HR

How: Have solid templates and processes or outsource

 

4 Comparing Different Legal Solutions 

From document platforms to traditional law firms, different types of problems call for different types of legal solutions. Here are the benefits and downsides of the different solutions:  

Do-it-yourself (great for bootstrapping, high opportunity costs): With an abundance of online advice available, an uncle that studied law and cheap document template platforms, bootstrapping legal work is easier than ever before. Also, there is more and more specialized software, e.g., for contract management, that help to manage legal. However, reading into all the different facets and setting it up correctly can consume a lot of time that may be better spent on development or fundraising, and in practice, we regularly see that mistakes are made that are costly to fix later on.  

Hiring an inhouse legal counsel (hire for regulated industries): Hiring a lawyer for an inhouse team is the solution most larger companies have opted for to lower the high cost of retaining law firms. Also, if you work in a highly regulated or legally complex industry, having legal experts in your organization makes sense. On the downside, finding and retaining talented lawyers is difficult, and the full cost of an additional headcount with holidays and sick leave is quite high. Also, as the workload fluctuates and there is a wide range of different legal areas to cover, external expertise will still be required from time to time.  

Traditional law firms (hire for the highly complex transactions): Traditional lawyers are trained for litigation and giving tailored advice in highly complex transactions. The high price they charge for their expertise can be well worth it in critical moments of your company. However, for the simpler legal projects and legal operations, they often lack the technology and processes to provide cost-effective solutions.  

LEXR (expert know-how, fast delivery, transparent pricing): We combine our expertise in the tech, fintech and digital space with technology and new fee models to deliver expert services quickly and with transparent pricing. For strategic legal work, we rely on our own experts in our core areas of expertise, or help you select and manage external experts. For legal projects, we combine best practice templates with tailored advice from our experts to guide you through the process. For the daily legal operations, we help you set up the right tools, templates and processes, or simply take care of it for you. 

 

Conclusion & Outlook 

Legal does not need to be costly, complex and time-consuming. With solid legal setup and a modern legal partner, you can focus on your business instead of legal work. In the next posts, we will deep dive into the different areas and guide you through specific topics. If you have feedback or wish to learn more about a particular field, do not hesitate to get in touch!