04 considerations between establishing an in-house legal department and using legal retainer services

04 considerations between establishing an in-house legal department and using legal retainer services

Nowadays, as people are willing to proactively seek business opportunities out, the nature and structure of transactions are becoming more diverse and complicated than ever. In order to utilize such diverse business opportunities, enterprises are in urgent need of legal assistance and consultation. However, many enterprises find themselves stuck on whether they should establish their own legal department or use legal retainer services from law firms.

Specified hereunder are certain aspects that enterprises should take into consideration when deciding to either establish an in-house legal department or use legal retainer services elsewhere:

1. Specialization

In-house legal personnel is mainly responsible for observing corporate compliance, drafting and formulating guidelines and rules to be used within the enterprise. These employees will have a certain level of specialty within the main business lines of the enterprise. However, when being confronted with a new sector or constant changes of the law, the specialization and work processing efficiency of internal personnel may no longer suffice.

By using legal retainer services from law firms, enterprises can utilize the workforce, experience, and in-depth consulting skills of the lawyer team specializing in all the areas covered by the law firms. Simultaneously, with the nature of their professional practice, law firms are quicker to update themselves on the changes in laws and practical opinions of state authorities, courts and other parties about an ambiguous legal matter.

2. Experience

Attorneys at law firms are used to meeting and working with different clients and fields. This allows them to frequently study how the law works in various sectors. Therefore, law firms’ knowledge of the law and experience in handling problems are both vertically deep – the ability to give in-depth advice on specific fields, and horizontally advantageous – wide-ranging experience in many different sectors. Meanwhile, in-house legal personnel mostly work with clients in their enterprise’s customer segment or cases related to their enterprise’s business lines. Therefore, the practical experience possessed by in-house legal departments will be somewhat limited.

3. Costs

In order to establish an in-house legal department, companies will have to pay salaries, allowances and other relevant perks, arrange workspaces and office equipment, etc. This in time will place a burden on the companies’ budget (payment for social insurance, health insurance, unemployment insurance, periodic bonuses, year-end bonuses, perks and other preferential policies). Meanwhile, when using legal retainer services, enterprises will only have to pay a fixed fee each month. Expense management will be much simpler. Simultaneously, enterprises will also be able to streamline their internal organizational structure, helping them to focus exclusively on their business targets.

4. Scope of liability

Although in-house legal personnel is obligated to review and suggest plans to assist the enterprise’s owner during the business operation, at the end of the day, the enterprise would still endure its own liabilities. Meanwhile, law firms give a certain level of commitment and take responsibility for the accuracy of their advisory opinions.