Corporate lawyers are held in high regard in the business world, and for good reason.
Corporations rely on their lawyers to perform an ever-wider variety of functions. This increased reliance is due, in part, to heightened government regulation and oversight, the public’s growing expectations of corporate ethics and social responsibility, and the rise of corporate data coupled with data privacy laws.
The good news is that corporate legal teams will continue to enjoy job security. But the bad news is that corporate legal teams are now expected to perform more duties with fewer resources at their disposal. According to a recent Thomson Reuters survey, 65% of legal departments experienced increased workloads over the last year, while nearly 60% reported that their budgets remained the same or decreased in that time.
In this post, we’ll define corporate law and explore the differences between corporate law and business law as well as how the role of corporate law professionals has changed. Then we’ll outline four key developments in corporate law to keep an eye out for in 2023 and share why eDiscovery technology is crucial for corporate legal professionals.
What is corporate law?
Corporate law is a legal practice area specializing in the statutory, regulatory, and ethical standards that apply to corporations. In practice, corporate law touches on a variety of legal subjects, including:
- formation of corporations;
- corporate governance,
- mergers and acquisitions, and
More so, corporate law is a specialized area of commercial law that deals with the legal rights, duties, and obligations of corporations and their stakeholders, including shareholders, directors, officers, employees, and creditors.
Corporate lawyers represent corporations, lenders, investors, and others who operate in the corporate world.
Before we move on, let’s take a step back and talk about what a corporation is. A corporation is a company that is owned by shareholders who authorize the company to act as an independent legal entity. A shareholder is an individual or entity that invests money in a corporation and receives partial ownership in return.
Five common legal characteristics of a corporation
All corporations have the following five principles in common:
1. Legal personality
The investors and owners of a corporation combine their resources and rights in the corporation to form a separate legal entity. The corporation then uses those combined assets to perform business activities.
2. Limited liability
If someone sues a corporation, the corporation’s liability is limited to its assets. In other words, a plaintiff can only reach the assets the shareholders invested in the company, not the shareholders’ individual assets.
3. Transferable shares
Any shareholder can transfer their shares in a corporation to another person instead of dissolving the corporation entirely or transferring ownership as in a business partnership. Although there are limits to how and when a shareholder can transfer their shares, it is relatively easy to do and usually has a small impact on the business.
4. Delegated management
A corporation’s board of directors and officers make decisions for and on behalf of the corporation. Shareholders elect board members, board members hire and oversee officers, and officers manage the corporation’s daily operations. This separation of powers prevents any single person from exerting too much influence over a corporation, which protects the shareholders and the corporation as a whole.
5. Investor ownership
Shareholders own the corporation and can make high-level decisions regarding the corporation. Each shareholder’s influence is typically proportional to their stake, or level of ownership interest, in the corporation. However, shareholders do not run the corporation directly or control its daily operations.
Now, let’s explore the differences between corporate law and business law.
What is the difference between corporate law and business law?
Corporate law involves broad issues regarding corporations, whereas business law involves more discrete issues that apply to businesses of different types, including corporations as well as partnerships or limited liability companies (LLCs).
While corporate law revolves around the corporation-specific subject areas listed above, business law involves:
- advising businesses on employment issues,
- drafting contracts for business use,
- addressing breach of contract issues,
- facilitating business transactions, and
- handling business taxes.
Despite their differences, corporate law and business law frequently intersect because they both relate to how companies operate.
Let’s turn now to what it is that makes corporate law important.
Why is corporate law important?
Corporate law is important for corporations because it can help them understand their legal duties, avoid regulatory enforcement actions and litigation, and safeguard their assets.
Corporate lawyers apply corporate law principles to a corporation’s formation, policies, and business practices. Without having corporate legal advice to guide them, corporations can easily violate laws and regulations and run into contract and licensing issues, potentially costing them time, money, and loss of business.
Corporate lawyers also tend to have considerable business acumen that they use to help corporations plan, strategize, and make important decisions. In the same vein, corporate lawyers can help their clients identify a purpose and set out purpose-driven goals that are broader and more meaningful than simply advancing shareholder interests.
For example, a corporation may define its purpose as helping customers achieve their dreams, empowering underserved populations, or promoting environmental stewardship. Of course, working toward sales objectives related to those purposes can benefit shareholders, but a strong sense of corporate purpose and the existence of purpose-driven goals ensures buy-in at all levels of the corporation and encourages the prioritization of long-term goals over short-term profits.
Today’s corporate lawyers occupy many more roles than the corporate lawyers of yesteryear. Let’s take a look at how the role of corporate lawyers has changed.
What are some of the most common corporate law challenges of today?
Some of the most common corporate law concerns include:
Compliance with regulations and laws
Corporations must comply with a variety of federal and state regulations, as well as industry-specific laws. Failure to comply can result in fines, legal action, and damage to the company’s reputation.
It is generally a complex and challenging area due to the evolving legal and regulatory landscape, as well as the increasing diversity of stakeholders who have an interest in how companies are governed. Moreover, with the growth of data sources, companies may face challenges in managing and governing their data effectively. This can result in data silos, where data is stored in different parts of the organization, making it difficult to access and analyze.
Data privacy and cybersecurity
With the increasing use of technology, corporations are collecting and storing more data than ever before. This has led to a growing concern about data privacy and cybersecurity, as companies must ensure that they are protecting their data and the data of their customers from unauthorized access or disclosure. That said, proper data privacy within corporate organizations is strongly linked with strong data governance practices. By working together, data privacy and data governance efforts can help organizations to comply with legal and regulatory requirements, manage risks, and build trust with stakeholders.
Litigation and dispute resolution
Disputes and litigation can be time-consuming, costly, and damaging to a company’s reputation. Companies must work with their legal teams to minimize the risk of disputes and resolve them efficiently when they do arise.
How has the role of a corporate lawyer evolved?
Corporate lawyers have been a fixture in the corporate world for quite some time, but their role has been far from static.
Historically, corporate lawyers were known for giving ethical and legal advice, overseeing corporate governance, and helping corporations implement new policies. Corporate law was widely considered to be a reactive rather than proactive tool. As such, corporate lawyers spent much of their time responding to new legal and regulatory requirements and performing damage control.
Today’s in-house corporate lawyer is much more integrated into their organizations as a whole and perform a wider variety of tasks, including:
- strategizing and promoting corporate goals,
- staying updated on new regulatory requirements and interfacing with government agencies,
- improving cybersecurity and facilitating compliance with data privacy laws,
- advising on environmental, social, and governance (ESG) issues, and
- protecting the corporation’s public image.
What caused this shift in the way corporations view and leverage their legal counsel? Several events likely contributed to the change, including:
- major corporate scandals in the early 2000s, most notably the Enron scandal, which led to increased government oversight and scrutiny of public corporations’ business practices;
- the 2008 financial crisis, which changed U.S. corporate culture and made corporations more risk-averse;
- the steady increase in the volume of data and the infiltration of data into nearly every aspect of corporate operations; and
- recent corporate budget cuts that have resulted in a greater demand for efficiency.
Each of these factors has contributed to a more challenging corporate environment and increased reliance on internal legal teams. Now, a corporate lawyer must have a wide range of skills to succeed in the current market, including:
- creative as well as analytical thinking,
- the ability to view issues through a business and finance lens,
- clear and concise communication skills,
- strong leadership abilities, and
- proficiency with modern technology.
As the corporate side of the legal industry continues to evolve, there are a few key developments corporations and their legal teams should be aware of.
Four key corporate law developments to be aware of in 2023
Corporations and their lawyers must continually adapt to changing dynamics and expectations. To do so, they must stay updated on current trends.
Our 2023 State of Corporate Legal Industry Report provides insights into modern corporate law based on a survey of corporate legal professionals. Here are four key findings from the report.
Increasing budget constraints
First, corporate law departments are facing budget constraints and will need to operate more efficiently to succeed. Over half of respondents (53%) said that their budget would be the greatest challenge they would face in 2023, while 47% said that improving internal efficiency and productivity would be their greatest legal issue. These statistics reflect the reality that corporate lawyers’ main focus for 2023 will be to deliver strong results despite limited budgets and staff. Therefore, corporate legal departments will need to leverage technology to work more efficiently.
Less outsourcing with outside counsel
Second, corporate law departments want to outsource fewer tasks to outside counsel in 2023. Nearly half of respondents (41%) were considering reducing the number of law firms they work with in 2023, while 25% already had plans to do so. This trend is likely due to budget cuts and the need for corporate legal departments to reduce costs. As a result, corporate legal teams will need to do more in house, including handling eDiscovery and performing investigations.
Overcollection of data becomes more apparent
Third, the overcollection of data is a big problem for corporate law teams. When asked whether it was true that their teams regularly over-collect data, 27% of respondents agreed, while nearly 10% strongly agreed, and 46% were unsure or neutral. Based on these findings, corporate legal teams should be on the lookout for eDiscovery technology that can help them reduce or eliminate overcollection.
Better use and adoption of eDiscovery technology
Fourth, corporate law teams are becoming increasingly interested in modern technology. An overwhelming 74% of respondents said that increasing their use of technology was their number one priority for 2023, followed by upskilling in-house legal teams. Of course, these priorities overlap because legal teams must develop the skills necessary to navigate new tools as their departments upgrade to more technology-driven workflows.
All four of these developments have one thing in common: legal technology is the way forward. And luckily, technology has continued to evolve and improve just as the corporate legal industry has.
eDiscovery technology is paramount for corporate lawyers
Technology plays a critical role in supporting corporate lawyers and helping them do more with less. With the right tools, a corporate lawyer can work more efficiently and still deliver great results to their organizations.
IPRO’s suite of end-to-end solutions for in house counsel can automate tedious tasks, streamline eDiscovery workflows, and help ensure legal and regulatory compliance.
For example, Live Early Data Assessment (EDA) can quickly search, review, and analyze data in place, providing valuable insights into corporate data without the hassle and expense of manual review. The platform can work with large volumes of data across multiple repositories from a single user-friendly interface.
With the help of tools like these, a corporate lawyer can efficiently fulfill the many roles they occupy while saving their organizations time and money.
To learn more about Live EDA and other IPRO solutions, get in touch with us or schedule a meeting with one of our experts. To see the full results of the 2023 State of Corporate Legal Industry Report, download your copy here.
2023 State of Corporate Legal Industry Report
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