Legal advice may include, for example, the valid existence of the Company, the valid issuance of shares to investors under applicable corporate law, compliance with certain laws relating to the transaction, the applicability of transaction agreements and, in some cases, the existing capitalization of the Company. Legal opinions do not express opinions on all aspects of the company and its operations, but focus on a specific range of corporate and securities elements. While the opinion is given for the good of the investors, there may also be benefits to the company. The assessment process may reveal historical deficiencies in important business formalities that are in the company`s interest to remedy. In addition, the fact that the company has provided legal advice in previous transactions can not only reassure current investors, but also facilitate the future financing process. Indeed, if a company is invited to obtain legal advice in a subsequent financing round, the relief work that the lawyer must carry out should generally only cover the period that has elapsed since the last legal opinion was prepared by the same law firm. Opinions are normally published in these jurisdictions at the request of the court, and to the extent that they contain statements about what the law is and how it should be interpreted, they reinforce, modify, set or remove a precedent. If a court decides that a notice must be published, the notice may be included in a volume of a series of books called Law Reports (or journalists in the United States). Published court opinions are also collectively referred to as case law and represent one of the most important sources of law in common law legal systems. Also known as an “expert opinion”, a legal opinion is issued in the form of a letter from a law firm expressing legal conclusions and/or analyses of a particular transaction. The recipient of the notice then relies on its content as the basis for concluding the transaction. Late obtaining expertise, which requires the borrower`s lawyer to do additional work, is often problematic due to time constraints. In addition, due diligence can sometimes uncover issues related to corporate or loan documents that need to be resolved before the notice can be issued and the transaction can be completed.
For these reasons, it is preferable to agree on the scope of an opinion and complete the diligence of the opinion as early as possible in the transaction process. A good opinion is practical, specific, based on legal theory and recommends action. If you`ve ever made a presentation at a fundraising meeting with a venture capitalist, chances are they`ve asked you to provide legal advice from a qualified lawyer. Legal opinions are formal letters from the advisor to the investment group summarizing relevant legal issues after the legal counsel has conducted a formal due diligence on the Company`s intellectual property rights and legal documents. Legal advice is often one of the critical final steps before closing venture capital financing, transactions and deciding whether or not to invest in a new venture. Start-ups, especially those in exceptional technology industries such as SaaS, blockchain, AI, electronics, semiconductors, energy or others where venture capital funding is needed to launch and scale, should be proactive and anticipate and plan for the inevitable legal advice requirement. To best prepare your tech startup for funding and success, check out our guide, 5 Fundraising Secrets for Tech Startups. While the use of legal opinion has declined in recent years for many large transactions, particularly those involving government business enterprises, there are still instances where legal advice is required – such as under subsection 13.4(1) of the Insolvency and Insolvency Act, RSC 1985, c B-3 (“BIA”). A legal opinion is a mandatory closing delivery for many financing transactions, but the nature and purpose of the legal advice is often misunderstood by non-lawyers involved in the transaction. Typically, lawyers representing the parties work directly with each other on the notice.
Clients are usually involved early in the process when asked if an opinion should be required, or late in the process when problems arise.