With an expanding role, cutting-edge technology at their fingertips and the growing confidence of their organisations, Asia’s GCs are more powerful than ever before. Haky Moon tracks how their role has evolved from just providing legal advice to helping shape their company’s future

Once regarded purely as purveyors of practical advice, and as conduits between the business and the legal profession, general counsel today have emerged as critical strategic operators integral to the growth of businesses.

This shift in the role of GCs over the past few decades has become increasingly pronounced in recent years as more businesses expand across borders. The trend is particularly visible in Asia, where a business has to navigate multiple jurisdictions and legal systems.

The modern GC is a commercially savvy legal professional who provides practical solutions and drives the business strategy of the company by managing legal, regulatory and reputational risks, says Arijit Chakraborty, chief legal and compliance officer at Manulife Singapore.

Developing effective strategies to tackle these multiple environments can make the difference between business success and failure. This is where GCs come into the picture. They are now directly involved in developing business strategy, brainstorming products and working to meet revenue goals.

“In the face of the increasing complexity of legal compliance works caused by the nature of multijurisdictional legislations and regulations of new developments, innovation from different perspectives is required for our work,” says Michelle Hung, GC and compary secretary at Cosco Pacific, a Hong Kong-based shipping company that is a subsidiary of China Cosco and part of the Cosco Group.

“This includes legal advisory, commercial viability analysis, risk management and liaison with stakeholders and especially shareholders which set out the foundation for a multi-functional role of a GC,” adds Hung.

This is particularly true across Asia, where the legal system of almost every country are different, and in some cases underdeveloped, require the company and its legal personnel to adapt to keep up with rapid economic and social change.

For Shih-Jern Liang, a lawyer who recently joined international fashion brand Ralph Lauren as the company’s Asia-Pacific GC, meeting challenges and driving growth is key to the job.

“The increasingly complex regulatory environment in the Asia Pacific region does present more challenges, as we need to keep up to date with the changes in various jurisdictions,” says Liang. “We do need to anticipate potential legal issues – we rely on various sources, including our external law firms to provide helpful legal updates that are relevant. At our company, the regional GC is and has always been seen as a business partner.”

NOT JUST A COST CENTRE

Within the businesses themselves a shift is also underway, a shift that is changing how legal departments are seen. Legal and compliance professionals are increasingly seen less as cost centers and more as business partners.

This has required open discussion and strong links to the business. As long as GCs can demonstrate that costs related to manpower, external legal spend, training and automation are essential from a governance perspective to support the business and the board more effectively, senior management are much more receptive to any recommendations that GCs might put forward. This is particularly important given that modern companies prefer to limit what they outsource to cut costs.

“For day-to-day operations, everything is done in-house. The senior managers of the business side of the company have an in-house legal counsel assigned to them to assist them through legal and compliance. As a member of senior management, I advise and contribute in all strategic decisions and business goals of the company,” says Chakraborty.

“The objective nowadays for all financial institutions is to develop a business strategy, which is compliant, sustainable and brings value to customers,” says Chakraborty. “Therefore a GC’s involvement at the onset of such strategy is of utmost importance.”

Chakraborty’s team of 35 legal and compliance officers  rarely uses external counsel any more, leaving that expense to areas that require specific expertise or that cover uncertain territory, such as cross-border equity transactions.

MORE WORK IN-HOUSE

Modern GCs are less likely to reach out for external advice, preferring to do so only when it makes business sense.

“To my knowledge, apart from matters they are not familiar with, everything is kept in-house. As a GC they tend to tap into the business side on a day-to-day basis. They are involved in the strategy of the businesses or sitting on committees. In that way, the role of GCs has evolved. It’s not just purely legal,” says Eleanor Cheung, head of inhouse at Lewis Sanders, a legal recruitment consultancy based in Hong Kong.

And yet, even as the role of GCs evolves towards greater self-sufficiency and less contact with external counsel, there is little to suggest that outside lawyers with specific expertise are not still sought after. Rather, the relationship between in-house and external lawyers has evolved just as much as the GC’s own role.

“It all depends on the industry, but companies are still seeking external advice. Financial institutions still rely on external counsel, whereas companies in retail and FMCG (fast moving consumer goods) usually try to control costs and try to do everything internally,” says Cheung. “However, if the transaction is of a large-scale they still use external firms… Transactional lawyers, such as external M&A lawyers are still high in demand in the region.”

The demand for external counsel is typically linked to the specific needs of a company or a market. In Asia, for example, one area in which GCs usually tap into outside lawyers is M&A, often because M&A transactions are usually one-offs rather than regular business operations.

“When we deal with our clients, we actually hear quite a number of demands for M&A lawyers, outbound and inbound,” said Cheung. “The scale of the transaction depends on what company they are. It also depends on the growth cycle of the company. For multinational companies, some of them have frequent M&A transactions.”

ANATOMY OF A DEAL

Hung agrees that GCs are generally expected to play a much more active role in the business.

The company she works at, Cosco Pacific, is part of China’s biggest shipping company. Various subsidiaries are engaged in managing and operating container terminals and related businesses. Acquisitions are common. In May, for example, the company announced plans to acquire a 35 percent of Euromax Terminal Rotterdam BC for 41.4 million euros ($46 million) to expand its overseas operations.

This transaction provides a good example of the role that GCs play, said Hung.

There were two parts to this transaction. Even while the company worked with external legal advisers, in-house legal teams were heavily involved in structuring a deal that made business sense.

“The transaction exhibits the significance of a business-oriented mindset and the commercial understanding of a legal team,” says Hung. “We have an increasingly emerging role as a strategic adviser in addition to a legal adviser.”

“At the stage of preparation, we participated in internal discussions regarding the project origination and feasibility study, from which we acquire a thorough understanding of the commercial initiatives of the project,” she explains.

“During the stage of the due diligence process, we coordinated with legal advisers in different jurisdictions according to the geographical coverage of the target companies to conduct legal due diligence. This is done to assess the validity of legal documents in relation to the target companies and identify actual and potential legal risks that Cosco may come across in the execution process,” she adds.

Finally, “during the execution process, we worked with legal advisers to prepare relevant legal documents in accordance with applicable laws and regulations. We also participated in negotiations with counter parties in order to strive for the best long-term commercial interest of the company in a compliant manner.”

As GC, Hung also has to cope with all mandatory disclosure requirements and ensure that disclosure documents are issued and filed in time. After that, it is up to her team to make sure all conditions of the deal are fulfilled, ensuring internal and external compliance, making sure deals are legal and ultimately profitable.

And the GC’s job continues even after the deal is done. After the closing, Hung’s team coordinates the appointment of nominated directors to the newly acquired companies and follows up on all commitments.

ROLE OF TECHNOLOGY

This evolution in the role of GCs is aided by emerging technologies. The need to control costs translates into great demand to increase efficiency and optimize productivity and technology can help both of these.

Sophisticated software is playing an increasingly important role in the work of GCs, all the while reducing redundancies. Technology can help track documents and court cases, for example, or track multiple regulatory requirements.

“Any document executed in the company is controlled in-house. The legal team sends out the original PDF documents. Then we use a document tracker. It starts tracking where the document is. The legal and compliance team is the depository of all the originally executed documents. We chase the business and get the documents,” he said. “We have created legal templates, checklists, SOPs , that are also embedded in the database,  instead of looking for external counsels. Business can access those documents directly from the database upon request,”  he says.

Regulation nowadays plays a big role. Now we are using a lot of data analytics to do client profiling. We are looking at data mining and analytics to understand customers profiles better in order to mitigate money laundering and fraud risks.  So we are using data analytics… again the software usage also shows that we are now moving from reactive to proactive role.”

Effective matter management is key for GCs that may have to track ongoing issues in multiple jurisdictions. On any day, a GC at a regional or multinational company may be tracking an IP lawsuit in China, a labor dispute in Vietnam, changes in customs requirements in South Korea, the drafting of new valid contracts in Malaysia and an M&A deal done in Hong Kong for a company with operations in six countries.

In these efforts, technology can be an enormous asset.

There is no shortage of case management software in the market, with some of the better known names being AbacusLaw, Legal Files, Rocket Matter, Clio and others.

Another area in which technology can help is in discovery. E-discovery software has become increasingly important in the last couple of decades as companies rely more on digital data. Here again, there is no shortage of products with names like Logikcull, Wind, Safelink Litigation Data Rooms or Discovery Attender among the better known.

One report by Future Market Insights suggests that the global e-discovery market could grow from $7.2 billion in 2015 to $21 billion by 2022. Much of the growth will come from North America but Asia Pacific is an increasingly important region.

Software helps corporate legal department manage files ranging from contracts to litigation and everything in between. One piece of software developed by Thomson Reuters, Practice Point, is used to organize legal research. Drafting Assistant – Transaction is another piece of software to scan legal documents and spot errors or inconsistencies. Other software like Dockets or Court Express helps legal departments manage information and track cases. Legal Tracker, for its part, is widely used by GCs to track their ongoing court cases, manage billing and track performance analytics.

BUSINESS PARTNERS

“Previously, the role of the GC was more post ad-hoc, a liaison between business and external counsel. A lot of work was outsourced,” says Chakraborty. “Now the role has evolved significantly. The business side used to decide everything, and then come to the legal compliance team. That has completely taken a different turn.”

“I am part of the senior management team. I get involved in all projects from the beginning now. We work with the business side to find the solutions,” Chakraborty explains. “Business stakeholders understand the complexities and nuances of a GC position and consider the GC as a business partner whom they can trust to receive the right advise and guidance.”

GCs are not ”business stoppers” anymore. Instead, they are business enablers. 

“The big change in terms, of soft skills, is that it is not sufficient for you to highlight the legal risk,” says Chakraborty. “From an external point of view, you can come up with the risk and tell the business, but in-house, your work doesn’t end there. You are working with the business to find the solutions. That has been a huge deviation from the past. Nowadays, you have to analyze the risk, work with the business side, and come up with a solution where both of you are comfortable. It all boils down to how you manage your stakeholders.”

This means that in-depth knowledge of the law in not one but multiple jurisdictions is useful but may not be enough to take on the job. Finely tuned business acumen is not only important, it is required.

This business acumen is cultivated by gaining a thorough understanding of the company that the GC works at and its products as well as how both fit within every single market where the company operates. Modern GCs do this by being directly involved in the early stages of planning new products. In Chakraborty’s case, this often refers to new insurance products, which are often tied to complex legal or regulatory requirements.

“We are in the insurance business, so we send our team to product trainings. We must know how pricing is effected, how the solution model works and if you don’t understand it you can’t be an in-house legal counsel,” says Chakraborty.

The added responsibility in the role means that GCs are expected to undergo business training, the type of training that executives in other areas of the company are expected to have. This need for business acumen spans both the GCs and their teams.

“I have lawyers coming from different backgrounds. One of the more important things we do is that, rather than training them from a legal angle, we train them to adopt the business angle,” concludes Chakraborty of Manulife. “I send my lawyers and compliance officers on product training and ask them to take up certification courses related to insurance business so they are more equipped and knowwhat actually goes through in the business. I focus more on the business side than grooming them to be better lawyers.”