Preventive Law is a way of practicing law that prevents risks from becoming legal issues. Because every organization has risks associated with its conduct, many organizations have chosen to hire lawyers to assess these risks and limit their potential for harm in the future. This service can be invaluable to companies as it may save them from large risks and suits down the road. However, many companies have not yet enlisted an attorney to help them in this area. This may be due to a distrust of the legal profession, or it may be as simple as the business is not fully aware of the options available to them. Regardless of the reason for the delay, companies and individuals need to be made aware of the time and money that preventive law services may save in the long run and s to evaluate their risk with a professional. This article will explain what preventive law services are and what industries benefit from preventive law. Next, it will describe the typical process of a preventive law audit. It will then evaluate the roadblocks to preventive law implementation and what can be done to overcome them. Finally, it will discuss the benefits that using preventive law services can bring to businesses and industries.
What is Preventive Law?
Preventive Law is an area of law that focuses on risk assessment and encourages companies and individuals to create policies and practices that minimize this risk. For individuals, preventive law often comes into play when people are making decisions that have a lasting impact on their lives. This often involves decisions like real estate, tax, estate planning, and investments. For businesses, it is often conducted by an attorney that runs an audit to evaluate where the company has the most legal risk and how they can mitigate the possibility of this risk turning into a full legal issue later on. This can involve risks in contract language, practices, policies, and any other facet of the business. By evaluating these risks, the attorney can suggest ways to mitigate the risk or, in cases where mitigation is not possible, draw attention to the possibility of a full legal issue, later on, to help the parties prepare for their legal battles later on.
This can be conducted either by an attorney on staff with the company or by hiring an outside specialist to come into the company and evaluate their risk. If the company participates in a business that exposes them to high risk often, it may be beneficial for the company to hire an attorney full time to help the company continuously evaluate their risk. However, if the risk is low or happens less frequently, companies are more likely to hire an outside attorney to conduct an audit and make suggestions for the future. In some large companies with high-risk situations, it may be beneficial for the company to have a person on staff evaluating risks as they arise and hiring outside specialists to conduct audits and find risks that may have been missed. All options are valuable to companies in protecting themselves from liability and exploring them all will ensure that a company proceeds in the most informed way.
What Industries Benefit from Preventive Law?
While preventive law is beneficial to virtually any company or individual in any industry, certain industries see massive benefits from the implementation of preventive law measures. These are typically high-risk industries that need an extra bit of oversight to ensure that there are no unnecessary risks. These industries include:
- Estate Planning: Estate planning practice is preventive and ensures that there are no risks to a person’s possessions and property when they pass away. A thorough analysis of a person’s plans will reduce or eliminate the risk of the decedent’s wishes being misunderstood after they have passed.
- Tax: Tax preparation and filing involve many risks that can be avoided or controlled by a preventive law assessment before taxes are filed. For companies, this may mean an assessment of the company’s current tax plan and evaluating where risks are currently present and how they may be avoided.
- Governance: How a company governs itself is often a risky situation because it presents opportunities for fraud and self-dealing. Allowing an attorney to oversee the process and evaluate the structure can eliminate risks as a company moves forward.
- Real Estate: Buying and selling real estate presents risks to either side of the transaction. Allowing an attorney to properly assign the risks and help mitigate risk from the beginning of the process will help the parties leave the transaction with minimal risk.
- Investments: The world of investments can be a high-risk industry, so having an attorney evaluate investments and the risks associated with them can help the parties invest confidently and securely.
A Preventive Law Audit
Many attorneys view the process of a preventive law audit as similar to a physical at a doctor’s office. The attorney will evaluate all the pieces while the organization is healthy to determine if there is anything that could make it sick or be damaging to the company. An audit is a thorough and deep analysis of a company or individual’s records to determine the areas of risks that they are exposing themselves to suggest what can be done to mitigate the risks and avoid costly legal battles in the future. Formal audits are usually done by outside attorneys that are brought into a company to evaluate and prevent risk; however, any time a person asks an attorney to look over a contract to see if it is fair, the attorney participates in a small-scale audit of the risks. A formal audit will typically follow five major steps:
- Document Review: This is the part of the process where the attorney will evaluate all the documentation that sets up the foundations of the business. This includes the bylaws, articles of incorporation. Policies, rules, contracts, and correspondence, among other documents. Here, the attorney will be evaluating compliance with local, state, and federal laws and whether the documents complement or contradict each other. This also includes looking for vague language or unreasonable rules.
- Operation and Procedure Review: Here, the attorney will evaluate how the company enforces its policies and procedures. The attorney will look for fair, uniform, and consistent enforcement, as well as any unenforced provisions. They will also evaluate the actions of the board and whether power is being exercised by the proper parties.
- Property: Here, the attorney will evaluate whether the company’s physical space has any known risks associated with it. This is to ensure that the company is not exposing itself to any risk by welcoming employees and customers onto the property.
- Records: At this stage, the attorney will evaluate the thoroughness of the company’s records and make sure that they are not subjecting themselves to any risk by not keeping thorough records of their board meetings and keeping any privileged information separate. This may include ensuring there are proper paper trials should disputes arise.
- Contracts: Finally, the attorney should review all contracts signed by the organization to determine if there are any risky provisions in the contracts that are unnecessary. Ideally, this review would happen before the organization signs a contract, but in the cases where the contract is already signed, the attorney can help the organization prepare for any potential risk that may be associated with the contract.
Each attorney conducting an audit will have their style and order to ensure that the health of the company is not compromised by too much risk. Finding a preventive attorney that fits the company’s needs is crucial to help protect them from unnecessary and unwelcome risks.
Roadblock to Preventive Law
While preventive law is already present in many areas of law related to business, some companies and individuals are somewhat reluctant to include a full-scale preventive analysis of their business. This can be for several reasons, but refusing to assess an organization’s or individual’s risk may end up harming the party in the long run. Here are some common roadblocks to preventive law and how they can be overcome.
- Distrust: Occasionally, the reluctance to engage in preventive law practices may be caused by an organization’s distrust of either the legal profession or the legal system. This may be the result of an individual’s experience with the legal system or a lawyer or the general public’s distrust of lawyers. This roadblock will usually need to be overcome by someone within the organization trying to dispel this distrust and encourage the benefits of preventive law or the people in charge. This could even include using concrete examples of ways that preventive work could have prevented conflicts the organization has faced.
- Costs: Especially when the company is small or there is an individual needing an assessment, there is often a cost barrier to the services provided by an attorney. These are most often the types of people and companies that need the support, but they are also the ones that have an issue affording it. This is usually because attorneys charge for their services by the hour, and this is usually billed at a high rate. Some suggest that this may be more accessible to businesses if preventive attorneys move away from the billable hours model and approaches the fee through a service-specific bill or by a subscription plan that allows businesses to pay monthly.
- Inexperience: It can often be a barrier to engaging in preventive law if a company or individual needs an assessment of a niche area of law and there are not many lawyers trained in the subject matter. If a company would like an audit of their organization but deals with relatively rare areas of commerce, they may have difficulty finding an attorney with the expertise to adequately assess their organization. This can usually be overcome by searching for an attorney who specializes in a specific area of the law that is needed, but it may not be possible for small businesses without the ability to pay for niche services.
Benefits of Preventive Law
While there are barriers to accessing preventive law services, there are many benefits that can be had by a company that chooses to engage in preventive law work to protect their interests and wellbeing. These benefits include:
- Less Risk: This is the most obvious of the benefits that preventive services can bring. By assessing the risks in the business or venture, preventive law can remove unnecessary risks and prepare for disputes should they arise.
- Less Expense: By minimizing risk through preventive law strategies, companies can spend less on legal fees and court battles in the future.
- Peace of Mind: Having an attorney sort through a business’s books, documents, and records will provide the company with peace of mind that they should not be exposed to a large amount of risk later on.
- Guidance: Having an attorney evaluate contracts and documents also provides a framework for the company to use in the future. It also gives the company guidance on how to proceed with enforcing their policies in the long run.
Preventive law is a way for companies to ensure that they are protected from legal risks and be prepared for legal disputes if they arise. Preventive law covers many industries and is encouraged by many different authorities. It provides many benefits for companies who engage in the work, but it does have some barriers that companies must overcome or attorneys need to address to make the work more accessible. Protecting a company from risk is not an easy task, but preventive law practices are experts in creating cost-effective guidance for companies to create a practice to minimize their risk and maximize their profit and productivity. Preventive law is a worthy goal and beneficial for companies to pursue as they seek to grow their influence and corporate reach while ensuring their liability is protected.
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