Starting a business and growing rapidly is extremely exciting at any time. Tapping into those new opportunities and carving out your niche brings so many new things your way.
However, current stress levels for agency leaders appear unusually high. So, what are the base legal requirements you need to keep in mind when starting your agency or kickstarting the next phase of growth this year?
1. Establishing shareholder agreements and proper corporate governance
This may sound like the most boring item in the list, so why is it number 1? Because disputes between the owners of any company can be crippling and can undermine everything else you achieve with clients, with your staff, and with any other stakeholder. After all, if you don’t have a solid and clear shareholder agreement, what happens when a partner wants out? Say you and your partner own 50% of your agency each – do you have agreed non-compete undertakings that prevent you from starting another agency? Or clauses that limit her ability to leave and take clients with her? Is your dividend payout policy clearly outlined and agreed? Did you issue shares to one of your senior staff last year? If so, was it done in a manner consistent with your company constitution? And if so, what class of shares and what rights were attached? If you don’t know the answers to these sorts of questions, it is time to ask yourself whether you are totally across your corporate situation.
2. Creating a suite of your agency’s own template contract documents
Having a set of made-for-purpose contract documents is vitally important. Don’t fall into the trap of relying on a compilation of random documents you have collected over various lives. You know the ones – the employment agreement from three agencies ago, the client services agreement you used that time with the multinational telecommunications brand, and the supplier contract that you are pretty sure hasn’t been updated since 2004…. and that you drafted yourself.
It is always a good idea to have a set of your own, agency-specific commercial contracts drafted by an industry specialist. At the least you should have a built-for-purpose Non-Disclosure Agreement, Employment Agreement, Supplier Agreement and Client Services Agreement, that suit your risk tolerance and your specific commercial and operational needs. Depending on your specialty you might also need a specific Influencer Agreement. All of your contracts will be on-brand, commercially balanced, consistent and aligned with each other, and commercially useful as a result. When you go through this process you get a really clear picture of your agency’s risk position, and what you are willing to agree to and what you are not. It is truly an invaluable process, which ultimately will save you a lot of time and money (and stress) down the track.
3. Getting your pitch materials in order
So a client you are mad keen to work with puts a solid piece of work out to tender. You activate the troops and work like crazy to put your pitch deck together, tweaking a few concepts that have been bouncing around internally that would be bang on point. Everything comes together, and you present to the client. Then, while you’re waiting to hear if you were successful in being added to their panel, you realise something. You have no idea whether you still own the intellectual property in the material you just sold into the client. What if you don’t win the work? Can you pitch the same concepts to other clients? Were there any disclaimers or “commercial in confidence” statements on the pitch deck? Are they legally enforceable? Did the client sign an NDA?
Make sure you know the answers to these questions, and ideally before you pitch.
4. Knowing your rights and obligations when it comes to employment agreements, and when engaging freelancers and contractors.
If you have ever taken an employment agreement you had on file, changed a few things around and then used it to engage a freelancer, consider this your flashing red alert warning alarm.
Due to some recent case law developments in this area, having properly structured documents to govern your employment relationships and your contractor engagements has never been more important. If you get this wrong you might be on the hook for superannuation, redundancy and other employee benefits to freelancers and contractors, as if they were your employees.
5. Structuring your supplier and your client contracts properly, so they are all aligned with each other
Why do your documents need to be drafted with each other in mind, and well-aligned? Well, what happens if you have a Client Agreement that says the client owns all IP on creation, but your Supplier Agreement is silent on IP which means that they own it? Or if you are liable under your Client Agreement for your subcontractors but you have no subcontractor agreements and are left holding the liability?
Or, what happens if your Client Agreement says you indemnify your client for acts of your personnel (and that includes your subcontractors), but your Supplier Agreement doesn’t contain a similar indemnity? If you can’t look to your supplier in the event of a claim, but your client is coming to you, you will be left with a liability gap and will be the one holding the can.
Something as simple as ensuring that your supplier agreements are consistent with your client agreements on issues like payment terms and duration of the contract is extremely important, so you are not locked into paying a supplier for months after you have been terminated by your client.
These issues are equally important when drafting your own agency template agreements and when negotiating with clients on a case by case basis.
6. Make sure you (and your staff!) are clear on the main legal risks that are likely to crop up day to day, and what to do when they do!
Despite your best intentions, there are always little legal issues lurking around the corner. Some we have touched on in this piece, but there are plenty of others. They may be client-related issues like contract disputes or questions about advertising clearance, or they might be IP clearance related (like a trade mark check or a copyright question).
It is important for your team to 1) be empowered with the knowledge that legal issues will arise, and what to look out for; and 2) be sure about the process they should follow when they do.
Sometimes it is as simple as having the right lawyer to call to run something past, a lawyer that can act like your in-house counsel. A lawyer that can help get your staff upskilled on how to spot legal issues, and then help you sort through them when they do. This sort of relationship shouldn’t cost you the Earth, and it doesn’t have to be complicated with engagement agreements and retainers.