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The Role of Local Counsel

One question that often arises in the practice of corporate law is whether you really need to hire local counsel for commercial deals? The answer is an unequivocal yes.  Here is the short answer for why.

Local counsel is the lawyer or law firm that is qualified to do business in a certain geography.  They are often hired becuase the laws of that geography might be critical to facilitating a deal, including a commercial finance deal, a secured lending transaction, or real estate deal just to name a few.

In many transactions law firms will hire local counsel because their clients have business going in other states. As a general rule, a lawyer can only work on a legal matter if he or she is qualified to practice law in that state.  If the deal takes place in a state where there lawyer is not qualified to practice law, then the lawyers would not be able to work on the deal.  On the other hand, if the deal takes place in a state where the lawyers are qualified to practice, but parts of a deal may involve an additional state, then a firm may hire local counsel to assist.

One reason local counsel should be a part of any relevant deal because, without hiring them, lead counsel may be engaged in the unauthorized practice of law.  Anothe reason to hire local counsel is because counsel should also have more knowledge and experience in the states that they practice.  Without getting too far into the weeds,  local counsel is  very important because they provide opinions that give comfort to lendeers and induce them to move forward in transactions that ar eoutside their borders.  These opinions are relied upon to deem the transaction as valid, to show that it complies with all aspects of local law, and that the debt is secured by verifiable collateral in that specific state.

While the folks at many big firms on a deal are certainly smart enough to do such work, they wouldn’t be as close to the matters as local counsel would be and that’s the role of local counsel.

Tags: Law