Are You Exit-Ready? The Legal Gaps You Might Be Missing | Barbara Neilan

0:00Looking for the perfect rental? Discover top rated stays loved by guests, rated highest by real guests through authentic reviews. These traveler loved stays are recognized by the details that matter most and validated by real experiences. Choose confidently for rentals you can trust. Verbo, book now of occasion rental loved by guests. Meet the Red Bull Dragonberry Emergizer. It's one of the many new drinks out now. Who knew ice cold drinks could be so fire? Try them all only at my dogs. Hiring fast is one thing. Hiring fast and staying compliant across different countries is where things get tricky. And it's exactly the problem Pebble solves. If you've ever tried to do it on your own, you know. The paperwork, the approvals, the regulatory blind spots.

1:00It can take months just to get someone started. Pebble makes global hiring simple. Through embedded compliance and AI-driven workflows, Pebble takes the delays and guesswork out of going global. So founders and HR leaders can move fast without adding risk. Higher in over 185 countries in minutes, not months. Contracts, payroll, benefits, all in one place, integrated with the tools your team already uses. Pebble starts at $3.99 per month per employee. And right now, there's a limited time offer just for podcast listeners that makes it even easier to get started. Go to highpebble.ai before it's gone. That's highpebl.ai. Terms and conditions apply. Welcome to the KJ Masterclass.

2:17Today on Business and Money, we are joined by Barbara Neelan. She is a corporate lawyer works with ambitious business owners on scaling, investment and exit readiness. And we learn from her that legal, hidden legal traps that reduce enterprise value, the commercial contracts, every growing business needs, and how to prepare for due diligence before buyers start asking questions. Welcome to the show, Barbara. Thank you so much for having me. I'm really happy to be here. You're welcome. Welcome to the show, Barbara. Welcome to India in this online form. And I'm sure not just in India, but a lot of people, a lot of businesses across the globe will benefit from what we are going to talk right now. We'll talk about how legal mistakes can cost your business and much more. But before that, let's talk a bit about your journey, your background so that the audience knows who they are listening to. Of course. So, and I'm Barbara Neelan.

3:19I am one of the co-founders of Jameson Law. So we are a corporate and commercial law firm. As you mentioned already, we help ambitious businesses with their growth strategies. So we're managing legal to allow businesses to really grow and scale in the safest way possible, to kind of free founders up to do the important things, but not ignoring the risk at the same time. So what that means is we help with a lot of corporate and commercial matters. So whether that is buying a business, selling a business, restructuring, dealing with contracts with key clients or suppliers, anything like that we help with. In terms of my personal background, I actually originally trained and qualified as a corporate and financial solicitor. I was, I trained in one of the big firms in Scotland initially. And I've gone on to qualify in England, Ireland, New York and California. So my whole journey has been predominantly advising

4:23businesses of different sizes at different stages in my career on kind of corporate and commercial matters. Now my practice is predominantly focused on growth businesses, SMEs that are really ambitious to scale and helping them manage the legal risk as they grow. Absolutely, absolutely. Thank you for that Barbara. Now to understand it in context is that why do businesses initially, especially in the initial years, don't tend to do what is almost everything required in terms of legally. Is it because they're worried about the legal costs or is it that they are too confident that nothing will happen that it's all harmless world. The world is nice of full business people. It is a bit of both. I think that when people start talking to lawyers, they're very scared of cost.

5:25What they don't really see is that it is more expensive to fix a problem than it is to prevent it in the first place. So although there is normally a bit of spend up front, the spend should be significantly less if they deal with it in the early stages rather than trying to fix something that is already broken. So spend is definitely an important part. What I would say is that if a founder is, they should shop around essentially. So if they're looking to engage a solicitor, they should make sure they're engaging with someone who is focused on the growth market, the pricing tends to be more favorable to SMEs in that sense and they need to just be able to feel that they can control the costs. Just because it's expensive doesn't mean that it's not worth managing the risks. So that's the first thing. The second thing is kind of, as you said, it's a little bit of naivety assuming that everybody you're in business with is a good person.

6:27You've maybe known them a while, relationships are fine. There's no need to document. And so there's more of this mentality of kind of waiting until something goes wrong. And founders do often see legal advice as kind of emergency support rather than strategic. So there's a little bit of, you know, we've not had a legal issue so far. So why would we need any help? If a business is going to grow and be successful, it, there will at some point be a legal issue that needs address. So it really is just a question of when you're going to deal with it, not us. Absolutely, Barbara. Absolutely. Now let's look at it from a business person's point of view, when they start a business, they are too new. They are more worried about clients, you know, leads and all that stuff. And they know their business will succeed or not. And many businesses actually do not. At that point in time, most of them are either bootstrapped. And then they think, you know, legal costs can be such a big,

7:31you know, dampener for them. And actually, if they have to pay a good amount, they may lose money whatever they have put into that business. In that scenario, when is the best time to actually evaluate everything from a legal perspective? Should they wait for five years, seven years, or should they wait, do it, start doing it from one or two years, especially when some money comes in, because not everybody has that much of expenses that they can afford or can they do that. Absolutely. And this is a significant problem. When I'm speaking to the founder of a Star TAP, if we're saying the first year of the business journey, my recommendation is always to make a list of the key legal areas that need to be addressed and prioritize them maybe every quarter, every six months. I really think that a lot of law firms do Star TAPs a disservice

8:33and they tell them that they have to spend six, seven, 10,000 up front to get all their legal paperwork in place. And it is terrifying to Star TAPs, mainly because from what you've said there, you know, the money that they do have in the bank should be put towards growth. If they use all their cash flow to protect the business from a legal perspective, that's fine. They have a protected business, but they have no business to grow when they have no money to fund that growth. So I always say create that list, focus on the really key high risk areas first and work through them. So for a lot of businesses, their key documents will be, it will probably be their client contract or terms and conditions. However they sell, whether that's online or kind of in person, that client contract will be the main document and they should probably prioritize spend on that. Afterwards they'll want to think about their brand,

9:34so they'll want to think about making sure that they have trademark protection. Everything else can probably be pushed out a little bit until it is extremely urgent. So for example, we sometimes have clients that come to us and they'll say, I want all my documents prepared. I want contractor agreements, employment contracts, I want client contracts. They've not even started trading or hiring anyone yet. And this stuff is really important and it needs to be done at the appropriate time but it doesn't all need to be done upfront. Absolutely, absolutely. So a lot of business people are very smart people even when they are having a startup, it takes a lot of understanding of things to start a business and then look for scaling and growing it. But how do you evaluate from a legal perspective and the point of view as to what needs to be taken care

10:35of there are many areas which you don't know that they can create problems later on. Anything in an request can create a problem later on from your company's name to even your name or anything as that can create conflict and some lawsuit against your name. So how do you suggest some tips for businesses to evaluate from certain angles, not just one or two things? Yeah, I mean, I would say if a business owner can have a free consultation with a solicitor that would be the easiest way for them to do it because that solicitor, if they offer these kind of consultations, should be able to take them through step by step. However, if that's not accessible for whatever reason, then I would be thinking about you want to think internally within the business and externally from the business. So internally, we want to think about things like the ownership structure, is the business registered properly?

11:38Do you have an agreement that covers the owners of the business, the directors of the business? That's from an internal perspective. And then if you have staff, for example, if you have any employees or contractors making sure that all of the relationship with them is documented, you have a contract in place. Then you want to think external to the business. So what does your client facing documentation look like? What do your terms and conditions look like? Do you have a client contract in place? Do you have protection for your trademark? Have you protected your brand? At the end of the day, there will never be any way where a business owner can cover off all of the risk areas. But if they can run through that checklist that I've given there, think about what's an internal risk to your business and what could be an external risk. And then I would prioritize in terms of likelihood of risk. If a business, for example, is only owned by one person, then the likelihood of a director or a shareholder's dispute is very low.

12:39So there's nothing they would need to deal with there. But if someone is selling to hundreds and thousands of customers, their client terms and conditions are probably their highest risk area. So it will very much come down to the business itself. And where the founder themselves believes there's most likely to be an issue if one arises. It's a bit of an art more than a science, which is why speaking to a solicitor to go through your exact business is very helpful. But that's the way that I would look at it if you don't have access to that kind of service. Absolutely, Barbara. Now, for a brick and mortar business, which is in a particular location, in a particular state, that is one can still understand that law of the land applies there. But a lot of businesses, small businesses, are selling online. Yeah. And one may not be sure what laws apply there,

13:40how to look at it from that point of view, any tip from that part. Yeah, I mean, it's very tricky if you're selling online to make sure that you comply with all of the laws and regulations across the world. That is very difficult. If you are predominantly targeting, for example, the UK or the US, then I would speak to a specialist advisor in that area to make sure that your documents, your terms and conditions, for example, that they comply with local laws. Things like personal data, if generally, if you comply with GDPR in the EU, then you will mostly satisfy the data protection requirements across the world. But there's no field proof way to do this for the entire world. What the offender is best placed to do is to look at the markets that they are deliberately and intentionally targeting and make sure that they are aware of the legal requirements there

14:43and that their teases and sees properly comply with the local laws for that area. Absolutely, Barbara. Now, let's look at it from two perspective. One is a business owner will say, I just want to grow this business a bit. And then I will just see how it goes. Maybe I'll just keep it with myself, grow old with this business, whatever way it happens. They don't look at pure terms of exist strategy or anything. Another group is that they start it from that point in time. It's from that point of view only. That I will keep this business as soon as it starts getting some good valuation. I will exist that will be good money for me to retire early in my life with lots of money in my bank. From these two points of view, how is it that they can start making sure that their journey is full proof from a legal point of view?

15:48Any examples that you can show that, this is something very simple that they didn't do it. And later on, it impacted their growth or even their exit and valuation. I think the first thing to say is that even if you don't have the ambition of selling your business, you should pretend that you do. Mainly because it is a good discipline for you to have everything in order and making sure all your risk areas are covered off. So by that, I mean, having all your paperwork in order, making sure you have all the contracts with clients and suppliers and staff members sign that you need to, and making sure that you have the right documentation in place, and organized in a correct order where you need it to be. I'm so sorry. I've just been interrupted here. I'm really sorry.

16:48No problem. Don't worry. Just give me two seconds. I'm very sorry. Right. I'm really sorry, but my daughter just walked into. No, no, no, no, sorry. We are humans. And human beings, you know, don't worry about this. I am sorry. I'm very proud of us to think. But any finder, whether they are going for an exit or not, they should be looking to make sure everything is properly documented and organized. That just allows them to make sure there are no risk areas. Many business owners who think that they will never sell actually end up do sailing at some point, even if it's just because they decide to retire, they plan to close down the business, and then all of a sudden a buyer appears. That is quite common. And so it's a very good discipline to have to act as if you're always going to sell.

17:50It allows you to keep organized and allows you to keep your risk areas covered. Now, in terms of what I have seen, some of the biggest issues that I see is people not making sure they properly own their intellectual property. So an example would be a business owner who's looking to sell. They had a lot of tech source code created by contractors. They never had those contractors sign an agreement. And that meant the intellectual property didn't become the property of the company. So essentially, a buyer came along, offered a really great price for the business. But then the business couldn't prove that they owned what they were selling. And in that case, the buyer actually pulled out. There are different situations. The buyer might also look to negotiate down the price of the business, but it will have a negative impact on the deal. And that's why it's a nice discipline to have to make sure that everything is documented properly. If you do end up with a surprise sale that you weren't planning to become involved in,

18:53it's a lot less painful of a process if you have that all sorted from the beginning. Absolutely, Barbara. So business people, not everyone will know about law, neither lawyers. How do I get a good lawyer for something like this? Because I don't know, as I said, nothing about the legal system as well as the lawyers. And you talk about, you know, that best lawyers create business value, not just legal documents. Yeah. So I would be looking specifically for business owners that are, sorry, for solicitors that promote services to small, medium-sized businesses, to growth businesses, to start-ups, maybe if you're in that category. And look for firms that do things a little bit differently. So they might offer you free consultations to talk about the growth of your business. They might offer some resources that aren't costing the same as legal fees, but things like, you know, guides on how to run your business

19:56or guides on how to draft your tees and seas when you're dealing with customers. All these things would generally, in my opinion, make the law firm a bit more approachable and probably more, you know, designed to help you grow your business with you. Us specifically, we advertise ourselves as kind of commercial and legal business advisors, which means that we're regularly discussing with our clients, you know, new business initiatives that they might want to get involved in. And thinking about the legal risks beforehand, which really helps to add value to the business because they are thinking about all the key risks before they take that leap, before they take that decision to do something significant. And it also, a lot of the time, can prevent them from making poor decisions as well. Absolutely. Legal advice may be, you know, seriously legal advice may be one of things,

20:56but continuously you may have questions as a business. And so how do you take care of that? Do you talk about, you know, fractional legal partners? So is that the right answer for this, for any sort of business? I think so. If you can find a partner where the pricing works for you, because legal services are expensive, so it is important that you factor that into your budget and your forecast as you grow. And so absolutely, if you can find a legal firm to work with that offers some sort of subscription service or an available fractional council service, I think that's a really good way to get access to legal advice. As I said, the prevention with legal advice is always better than the cure. It's always easier and it's always less expensive. So although it might seem like a cost upfront, developing that relationship and having someone there for when things go wrong,

21:57and they unfortunately will go wrong at some point, it just makes it easier to manage through the process. Absolutely, absolutely. But rather, there is so much to learn about all this from you, and I'm sure a lot of businesses would want to connect with you for us, be your client. What's the best way for them to do so? You can get in touch with me via our website. Our website is jamesinlaw.legal, or you can email us at info at jamesinlaw.legal. We do offer free legal advice calls, as I mentioned earlier. So if anybody would like to participate in one of them, they're very welcome. Wonderful. With this, it's a wrap on this very special edition of the KJ Masterclass Live. Thank you so much indeed for joining us. Thank you so much for your time. I'm really grateful.