Rough Justice or Fair Cop? The Reality of Anti-dilution Provisions
October 01, 2003
We need protection against dilution if you engage in future down rounds," said venture capitalists 3 years ago, not really believing that they would need to call upon this protection. However, the unexpected and significant decline in valuations for companies over recent years has focused the attention of VCs and VC-backed companies on anti-dilution provisions. In today's investment climate, VCs are not only more selective with their potential investments, but are also demanding more favorable financial and control provisions in term sheets. In particular, protection against downside risk is of much more significant importance.
PR's Return On Investment
October 01, 2003
What can we make of the fact that the top 25 firms ranked by revenue in the AmLaw 200 have increased their overall presence in the media by around 18%, while firms ranked in the next two quarters (numbers 26 through 75) increased by barely 1%? Below the third quarter, the differences are even starker. Overall, the firms that were ranked 76 to 200 actually engendered fewer media appearances - by upwards of 5% in some instances - in 2002 than in 2001. <br>The easy response is that the larger the firm, the more lawyers and practice groups there are for reporters to call on as sources and commentators; coast-to-coast and abroad. The law of nature is that the rich get richer. It applies to media profile as well.
Improving Law Firm Profitability
October 01, 2003
<b><i>Without Working Longer Hours or Raising Rates</b></i><p>In today's competitive environment, the profitability challenge to law firms is to increase profits while reducing clients' legal fees. This two-part article provides dozens of specific, workable ideas for enhancing profitability, leaving aside the played-out (and problematic) methods of working longer hours and raising hourly rates. This month's article offers ideas in the following categories, which together offer the greatest opportunities for profitability enhancement.
Risk Management Review: A CFO's Approach
October 01, 2003
Set aside some quiet time every year to think through your insurance and risk management programs with someone knowledgeable in the field. Law firm administrators are mostly not insurance experts, and unless there is some crisis, tend not to give this area the attention it needs. Crisis time may be too late.
Unreasonable Compensation in a Professional Corporation
October 01, 2003
Until 2001, the general view was that IRS determinations of "unreasonable compensation" were not a concern for shareholder employees of professional corporations. That equanimity was shattered - at least for those paying attention - by the 2001 Tax Court decision in <i>Pediatric Surgical Associates P.C. v. Commissioner</i> (T.C. Memorandum 2001-81). In that case, the tax court determined that compensation paid to the shareholder physicians in a Texas surgical practice was unreasonably high because it exceeded the value of the services performed by the firm's shareholder physicians. This seminal tax court opinion turned on the issue of profits generated by the non-shareholder surgeons. Analogous compensation scenarios are common in law firms PCs, so they could face similar IRS determinations, with similarly costly results. Lawyers who are PC shareholders should pay close attention to this case.
Billing for Recycled Work: A Follow-up Exchange of Views
October 01, 2003
In a recent edition, Professor William G. Ross analyzed the professional ethics restrictions incumbent upon lawyers who want to bill by the hour for previously produced work product. ("The Ethics of Billing by the Hour for 'Recycled' Work," August 2003.) Edward Poll, one of our prominent Board members, responds to the issue.
Law Firm SurveysPart One: The Major Surveys Compared
September 25, 2003
This three-part article will summarize that discussion. Part One is a general overview and comparison of the major surveys currently available for U.S. law firms. Part Two will advise further on how to select a survey, and Part Three will explain how to get the most out of survey participation.
Partner Capital: Why Firms Need More in 2003
September 25, 2003
Most law firm partners react skeptically to the suggestion that their capital contributions should go up in 2003. After all, with the cost of borrowing at its lowest level in over 40 years, why should partners invest more capital in the firm, thereby delaying or reducing personal cash flow? Nevertheless, even well managed firms are now likely to need more partner-contributed capital than they did just a few years ago.
Tax Cuts for Law Firms
September 25, 2003
With the compromise-laden Federal tax cut now law, what if any are the implications for law firms? Members of this newsletter's Editorial Board and several other recent contributors were asked to address that question.
