Monday, October 27, 2014

Would you ask your chauffeur to fly your private jet?

Probably not. Then why do people (whether entrepreneurs, Individuals, companies and partnerships) resort to assigning their crucial legal work to Financial Consultants or Chartered Accountants? Is it really helping them cut cost? Or is it exposing them to increased, if not unlimited, liability?
Recently, it has become customary for entrepreneurs to get their legal work done by their Financial Consultants or Chartered Accountants. This is mainly because they get to save money as the CA is not authorized to do legal work and hence, charges far less than what a lawyer would charge for the same. Since every company is required to appoint a CA mandatorily, whereas appointment of a lawyer is optional. But what they fail to realize is that the most crucial legal work requires a set of skills and aptitude which a CA would not possess. The quality of the work correlates the quantity of fees charged by them, which is low. When drafting new agreements or joint ventures essential to the business, the best of legal services must be availed of. By giving such work to your financial consultant, you are not only jeopardizing your business transactions, but also putting the entire company at risk. The CA or the FC will only copy-paste clauses from an old agreement without thinking if they are applicable or not, as well as, he will fail to add new clauses which might be important to add as it is case specific.
Financial Consultants are equipped to handle accounts and develop financial strategies and all the operations which constitute “financial services”. These financial services are widely different from “legal services”. Overlapping of the financial and legal services will only cause havoc and chaos for sure, if not sooner then later. Hence, it is advisable that one should refrain from assigning their legal work to CAs. In the long run, such a practice can prove fatal to your business and instead of saving costs you are exposing yourself to failed ventures and unlimited liabilities.

Entrepreneurs assigning such legal work to unqualified non legal persons are only digging a ditch for themselves to fall into. When the time comes and a dispute arises, maybe the arbitration clause would be missing, or the lack of fine tuning in the contract would later lead to bigger issues and hence, huge losses can be incurred by the company. Is it worth saving lawyer’s fees at the cost of humongous risks being associated with it? 

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