Which is best? A legal Tech Platform or Law Firm?

Have you considered using a legal tech platform in your business?

You are a business leader, and owner of your own company. You are faced with setting up or updating your legal documents (contracts, policies, T&Cs etc) do you:

A) Employ a law firm for all your legal documents?

Or

B) Log on to a legal tech platform and download some templates?

According to the 2021 Small Business Legal Needs survey by the Legal Services Board, just under a third of small businesses used online tools to run specific legal tasks. They used them, for example, to download templates for contracts such as standard terms and conditions or other legal documents.

<h2>Tech Legal Platforms – Pricing</h2> In recent years legal tech platforms such as SeedLegals, Sprintlaw, Pocketlaw, Outpace and others have flooded the market. They offer automated contracting processes and AI-led legal documentation.

They advertise themselves as a cheaper alternative to tailored legal advice. Some platforms claim to simplify the legal needs of startup funding rounds. They offer a much faster and less expensive alternative to traditional processes. These traditionally necessitate lawyers drawing up custom contracts for every transaction.

This sounds perfect to a business which is looking to reduce outgoings.

However, buyer beware! Platform pricing structures may contain hidden costs which undercut their proposed transparency. Our research has revealed at least one provider appears to offer expert legal advice at a ‘flat fee’. However, elements of their service which may make the difference in the quality of your output are only available by becoming a ‘member’. Customisation of standard packages is also possible but again at additional prices.

These hidden costs may change the perception of platforms as a supposedly ‘cheap’ option. Legal firms may be able to offer bespoke documentation from professional lawyers for a similar final price.

<h2>Tech Legal Platforms – How up-to-date are they? </h2> Possibly not as up to date as a good law firm. Experienced lawyers constantly review their practice. This allows them to respond quickly to changes in the law and tailor solutions to their clients. In contrast, legal automation platforms might find it tricky to update all their templates. They have such a variety of differing products on offer.

Being legally up to date is one aspect, but equally how aware are they of existing share structures or arrangements that a company may previously have set up? One client explained how having raised SEIS funding one year, it then tried to use a platform to raise money through EIS the following year. However, the system was unable to reflect the agreements that had previously been made with shareholders. When the company asked for the word versions in order to make their own changes, the platform refused meaning they had to start all over again.

<h3>Law firms – the benefits</h3> The main thing that law firms have in their favour is the ability to be agile and adopt changes in the law. For legal areas in which policy is constantly changing, such as ensuring compliance with data protection legislation and drafting NDAs, employment law, and tax, breaches could cost you money and damage future growth or the reputation of your business. According to a Legal Services Board survey of small businesses, just under a third experienced a legal issue in 2021. Of these, over half experienced negative consequences, such as loss of income (28%), additional costs (11%) and inability to conclude scheduled work (11%). We wonder how many of these were because of poor documents.

It is also important to note some circumstances in which the standardised legal documents offered by legal tech platforms are not detailed enough. Shareholders agreements, for example, can be very standard. However, if you have different shareholders with different classes of shares and rights, this needs to be carefully tailored. Quite often companies themselves don’t understand the intricacies involved and therefore rely without questioning on automation. Would you try to do your own plumbing, for example?

<h3>Complexity requires human expertise</h3> Complex legal processes such as negotiating during VC funding rounds and corporate structuring, creating intellectual property agreements, drafting standard terms for niche markets or cross-border trade which involves other jurisdictions, setting up EMI options schemes involving several classes, etc. are of paramount importance. You wouldn’t want an irrelevant or poorly drafted clause you don’t understand in a template contract to derail a difficult negotiation. These situations require the professional expertise and proactive guidance of an established legal firm. In a 2023 report on legal tech trends, Kristof Cox commented:

Good lawyers can [analyse] a contract and comment on the clauses that are in there. Great lawyers also notice the clauses that are not in there. That is the major risk of working with contract templates or drafting a new contract based on a previous one: something may be missing. Henchmann.

Despite the perceived higher prices of engaging a law firm, the overall value is likely to outweigh the costs for any business that needs solid legal guidance to prepare thoroughly for future growth. Legal firms have a concrete advantage over legal tech platforms in this sense. They can provide nuanced, industry-specific advice, ward against legal pitfalls going forward and assist in securing the legal foundations of the business. This can occur without the more significant costs of in-house legal counsel.

Most good law firms, such as Farringford Legal, will offer their clients a variety of payment options. One-off projects will be priced for a fixed scope of work. Very often firms will have fixed package costs for providing an EMI scheme, for example. On-going needs can be serviced through retainers. This kind of structure allows business owners to budget, manage cashflow and ensure they get a personalised service.

Alexander Egorov, Founder and Board Member at several British companies, notes:

An experienced law firm partner is a valuable member of a successful company’s core team. At the earliest stage in a company’s life, the Founders might use off-the-shelf Articles of Association, but even then a bespoke shareholder agreement is necessary to prevent future problems. As the company grows, legal advice plays an ever greater role with employment and customer contracts, investment rounds etc. Getting tailored legal advice is a necessity, not a luxury. With costs being a concern for all companies, it is advisable to get clear deal fee caps for any project.

<h4>Legal Tech Platforms v Law Firms – Summary</h4> In summary, legal tech platforms may provide a tempting alternative. They offer to cut costs and save time for your business in its early stages. However, it is worth considering the hidden costs within some platforms. These may bring them into balance with legal firms offering fully customised services.

Small inconsistencies in legal documentation early on can lead to larger setbacks down the line. This can significantly impact future growth. As such, there will always be a benefit of referring to experienced legal firms consisting of lawyers who are highly experienced within their practice areas. The perceived higher prices of legal firms are offset by the value of saving your business from suffering financial loss in the future.

Experienced lawyers within legal firms can provide valuable guidance on matters further than just creating legal documents. They provide the human approach which may be preferable for small businesses in their early stages. This is crucial for requiring a solid legal foundation going forward. Legal firms can offer more flexible services, which may prove particularly important for complex legal challenges. This is especially true in areas where there are often legislative changes.

Ultimately, there is no one-size-fits-all approach. The comparative values of platforms and legal firms will change with the needs unique to your company.