A customer sends its framework agreement for signature, with a deadline of Friday. At the same time, a cease-and-desist letter is on the table, a supplier wants to renegotiate, and HR is asking how to word a termination. All of this is legally relevant, none of it is core business, and in many medium-sized companies it all ends up on the same desk: that of management.<\/p>\n\n\n\n
This is often the point at which the term \u201cexternal legal department\u201d comes up. However, most law firm websites describe it in the same way: flexible, predictable costs, a permanent contact person. That is of little help for the decision. The real question is from what point this model pays off economically for your company and when an individual engagement or an in-house position is the better choice.<\/p>\n\n\n\n
clience.legal is a digital business law firm for entrepreneurs. We work for our clients as external legal department of clience.legal<\/a> and advise not only on legal matters but also from a business perspective. This article gives you the basis for your decision: scope of services, a comparison of models, a comprehensible calculation and the triggers at which the need actually arises.<\/p>\n\n\n\n The difference from traditional mandates lies less in the topics themselves than in the way they are handled. An external legal department is familiar with your contractual landscape, standard processes, and risk areas. It is involved before anything is signed, and not just when a letter with a deadline arrives.<\/p>\n\n\n\n In practice, this shifts the point of involvement. In an individual engagement, the law firm comes into play once a decision has already been made and only its consequences remain to be dealt with. In ongoing support, the focus is on the weeks before: on pricing the offer, on the question of which limitation of liability can realistically be enforced in the offer, and on the decision whether a customer must accept your own terms or whether a deviation is economically justifiable.<\/p>\n\n\n\n This also includes the unspectacular work that tends to be left undone internally. Deadlines and terms are recorded so that contracts are not renewed unintentionally. Powers of attorney and signing authorities are put in order. Contract templates get a version number so that sales does not circulate three different versions. These points take little time but prevent a large share of the disputes that later become expensive.<\/p>\n\n\n\n With us, there is an additional level. We look at legal issues in their business context and align them with your goals. We describe what this means in practice under more than just legal advice<\/a>.<\/p>\n\n\n\n In many companies, the legal department has long existed, only without a name and without a budget. Contracts are read by the management, terms and conditions are taken from a template portal, notice periods are kept in a spreadsheet and information is given to customers on a gut feeling basis. This works until the first case arises in which one of these decisions is reviewed.<\/p>\n\n\n\n The effort goes unnoticed because it is spread across many shoulders. Add up how many hours per month your company spends on contract questions, research and follow-up queries, and value these hours at the internal hourly rate of those involved. In most medium-sized businesses, the result exceeds what structured support costs, and the quality of the results is lower because the work is done on the side.<\/p>\n\n\n\n You hire a law firm on a case-by-case basis. This is the most streamlined solution for rare, clearly defined issues. The cost per case is manageable, and the commitment is low. Two disadvantages regularly arise in practice. First, the situation must be explained anew every time, which costs time and creates sources of error. Second, there is no prevention effect because no one sees the recurring patterns within the company.<\/p>\n\n\n\n In addition, there is an effect that is hard to quantify. Anyone who only calls when a dispute arises negotiates from a position determined by the contract already signed. The room for maneuver is then small, and the best achievable solution is often mere damage limitation.<\/p>\n\n\n\n An employed Syndikusrechtsanwalt (in-house attorney) is available every day and deeply rooted in the company. The gross annual salary is roughly between 70,000 and 90,000 euros, depending on experience and region. On top of that come employer social security contributions, workplace, specialist literature, databases and training. Realistically, the full costs are therefore in the six-figure range before the first hour is worked. In addition, there are two structural issues: a single person never covers all areas of law, and during vacation or illness, the legal department comes to a standstill.<\/p>\n\n\n\n You get the continuity of your own department without the fixed costs and without the risk of absence. Depending on your needs, billing is via a monthly flat fee, contingents of hours or fixed prices for defined projects. You get access to several areas of law instead of one person. You can find the options we offer in our pricing models at a glance<\/a>.<\/p>\n\n\n\n A sound decision is based on three figures. First: how many hours of legal work actually arise at your company per year? Include the time management and specialist departments spend on contract questions. Second: what does this time cost internally, measured by the hourly rates of those involved? Third: what disputes have you had in the past three years, and what did they cost in money, time and customer relationships?<\/p>\n\n\n\n The third figure is almost always underestimated and decides the calculation. A single avoided mid-sized lawsuit often finances ongoing support for an entire year. Conversely, for companies that only call when a dispute arises, the largest cost item is not attorney fees but what was signed beforehand.<\/p>\n\n\n\n Also factor in an item that does not appear in any calculation: delay. If a framework agreement sits for two weeks because no one can review it, the project start is postponed and with it the receipt of payment. For larger contracts, this effect clearly exceeds the pure advisory costs.<\/p>\n\n\n\n As a rule of thumb, anyone who regularly concludes contracts with customers or suppliers, employs staff and operates in a regulated environment reaches a scale at which ongoing support is cheaper than occasional firefighting. We explain how to assess the need for individual contracts in when a contract review by an attorney is worthwhile<\/a>.<\/p>\n\n\n\n Revenue thresholds are a poor indicator. Events within the company are more meaningful, because each of them triggers a specific legal need.<\/p>\n\n\n\n If several of these points coincide, ongoing support is almost always worthwhile. We have summarized the typical constellations among SMEs in Advantages of an external legal department for medium-sized companies<\/a> .<\/p>\n\n\n\n The model does not suit every company, and saying so is part of an honest basis for decision-making. For a clearly defined individual issue, such as a one-time corporate conversion or a single lawsuit, an individual engagement makes more sense. The same applies to very small businesses without their own contracts and without staff. Highly specialized questions, for example in patent law, also belong with specialized colleagues whom we bring in as needed.<\/p>\n\n\n\n Another point concerns the collaboration itself. An external legal department only works if it is involved early. Anyone who only informs it after signing pays for a structure they do not use.<\/p>\n\n\n\n In most companies, the collaboration follows a similar course. The first quarter is about taking stock and tidying up. Existing contracts are reviewed, terms are checked for validity and open points are prioritized. Almost always, three things come to light: outdated terms, contracts without an overview of notice periods, and agreements that sales has modified at will.<\/p>\n\n\n\n Standardization follows in the second quarter. Robust templates with defined leeway are created for recurring transactions, so that it is clear in day-to-day business which deviations are possible without consultation and which are not. At the same time, it is determined who in the company may approve what.<\/p>\n\n\n\n From the second half of the year, the focus shifts to projects and prevention. Upcoming projects are discussed in advance, management\u2019s duties are reviewed and the documentation is brought up to the standard that clients and auditors expect. The workload decreases noticeably over the course of the year, because the foundations are then in place and only need to be maintained.<\/p>\n\n\n\n We start by taking stock. This covers existing contracts and terms, ongoing disputes and the question of where legal decisions are currently made in the company. From this, we draw up a list of priorities that we agree on together. In the first weeks, we work through the most urgent points, usually in the Drafting of contracts and T&Cs<\/a> and regarding management\u2019s duties.<\/p>\n\n\n\n Afterwards, the collaboration moves into regular operation: fixed communication channels, a defined escalation path for urgent cases, and regular coordination in which we discuss upcoming projects in advance. Topics such as Compliance and managing director liability<\/a> and personal liability in GmbH and UG<\/a> we support on an ongoing basis, because the requirements keep changing. The professional framework for this is our business law advice<\/a>.<\/p>\n\n\n\n The quality of the collaboration is decided by a few points that should be settled in writing before starting. Record which services the flat fee covers and which are billed separately, so that no discussion arises at the end of the month. Set response times for regular and urgent cases, each with the channel through which an urgent case is reported.<\/p>\n\n\n\n Also specify who in the company may submit requests. Without this, either bottlenecks arise because everything goes through management, or costs get out of control because each department instructs the firm on its own. A small group of authorized persons with clear subject boundaries makes sense. Finally, the contract should cover termination: term, notice period and the handover of records, templates and documentation.<\/p>\n\n\n\n Whether an external legal department pays off for you can be clarified in a conversation. Tell us your company size, your typical contract types and the issues currently being left undone. We will then tell you frankly whether ongoing support makes sense or whether you are better off with individual engagements. To do so, book a free initial consultation<\/a> of 15 to 20 minutes.<\/p>\n\n\n\nThe most important information at a glance<\/h2>\n\n\n\n
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What an external legal department actually does<\/h2>\n\n\n\n
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Why the need is often overlooked<\/h2>\n\n\n\n
Three models compared<\/h2>\n\n\n\n
Individual engagement<\/h3>\n\n\n\n
In-house legal position<\/h3>\n\n\n\n
External Legal Department<\/h3>\n\n\n\n
The calculation: when the model pays off<\/h2>\n\n\n\n
Seven triggers that create the need<\/h2>\n\n\n\n
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When an external legal department is not worth it<\/h2>\n\n\n\n
What typically happens in the first year<\/h2>\n\n\n\n
How to recognize a good external legal department<\/h2>\n\n\n\n
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How we work together<\/h2>\n\n\n\n
What should be included in the agreement<\/h2>\n\n\n\n