As the events around Silicon Valley Bank’s closure unfolded in recent days, chief financial officers at companies around the country worked frantically to address the potential fallout for their organizations.
But Irene Liu, an experienced legal chief who has served as a CFO, said she also saw GCs jump into action to support their finance teams and companies as a whole.
Liu said legal department leaders and their teams worked to help businesses respond because SVB’s collapse, the second-largest bank failure in U.S. history, was more than just a finance problem.
She and other experts highlighted that in-house counsel are needed in these types of high-risk situations to help review — and in some cases negotiate — contracts and other financial-related documents.
GCs also have a role to play in scrutinizing company communications that will be disseminated to employees and the public.
“In a moment of crisis, people don't realize how incredibly involved the GC and the legal team are,” Liu told Legal Dive.
Olga Mack, a former GC at ClearSlide, said one way legal chiefs could support their CFOs in the aftermath of both the SVB and Signature Bank failures is by quickly analyzing contracts.
For example, businesses worried about cash flow would want to review their agreements to ascertain who among their customer or supplier base has a vested interest in helping the company survive and thrive.
Mack said using a contract lifecycle management (CLM) system to carry out the contracts analysis could provide information about whether a customer might be willing to pay earlier to help the organization stay afloat or whether pricing discounts with a supplier can be negotiated.
Mack, who is currently the VP & CEO of Parley Pro at LexisNexis, said contract management technology could also help a GC generate responses to other key contracts-related questions about pressing financial issues.
“These answers will help you guide your CFO as to which obligations can be stopped with less risk or consequences, which contracts are not material to the business, which ones can be suspended because of permissive clauses or relationships, or what contracts are at will or can be terminated at any time,” she said.
Other financial documents and diligence
Liu, who most recently served as the chief financial and legal officer at Hopin, also said recent events provided plenty of contracts-related work for in-house legal teams supporting colleagues in finance.
She highlighted that any type of financing or loans, such as a bridge loan, will require lawyers to review and negotiate the terms of the underlying agreements and loan covenants.
In-house counsel also are often called on to support the finance team in responding to inquiries from financial institutions as part of their due diligence processes.
“There’s a lot of underlying agreements and diligence that lawyers are involved with that requires tight collaboration between finance and legal,” said Liu, an Executive in Residence with UC Berkeley School of Law who launched her HyperGrowth GC consultancy earlier this year.
Additionally, Liu said GCs have an important role to play in crisis communications, which were certainly needed following SVB’s collapse and subsequent events in the financial sector.
The comms role for in-house counsel includes reviewing messages that will be sent internally to update employees about how the company is responding to the unfolding events.
Lawyers are also typically involved in vetting external communications that are shared with customers and the broader public.
“We vet a lot of the communications to make sure that we’re not over-promising, that we’re not exposing ourselves in some way and that all the information that we’re providing is accurate,” said Liu, a former SVP and GC at Checkr.
“Lawyers are also very good at writing in many ways, so they could finesse, clarify and help from a voice standpoint,” she added.