When a business orders software from an IT company, a variety of situations are possible. For example, if a client enters the market with a new idea, as a rule, he reduces his risks due to the “minimum version of the product” (MVP), which can be gradually increased and scaled when there is demand. Both sides discuss and find a model of cooperation that is convenient for them. We always treat business needs with understanding, for example, the need to develop a product in a short time or “save" an outdated IT solution.
At the same time, one should not forget about negative examples: non-payment of debt. As you know, a business has ups and downs, sometimes a fall turns into a peak, from which the company cannot exit. In the event of an “economic peak”, Russian companies often file for bankruptcy, because this is the easiest way to avoid paying debt. They do this exclusively in accordance with the requirements of the law, without taking into account moral obligations to partners, on the principle: "Nothing personal is just business."
Any business is a risk, and business in Russia is a double risk. When developing a business, exercise due diligence while remaining customer-oriented.
If a service provider works in the field of information technology (IT), its activities have the following features:
- the released IT product (program code) cannot be “touched and touched”;
- as a rule, the developer creates the product in the client’s internal information system;
- it is most difficult to “reach” foreign customers to receive payment: you need to know the specifics of the legislation of the country in which the company operates.
Next, we will consider how you can take into account the needs of the developer and client and reduce risks at the start of the project, as well as share recommendations.
How to analyze the activities of counterparties
The legislation of the Russian Federation establishes that all business entities, when concluding contracts, must exercise due diligence when choosing a counterparty. However, neither in the legislation, nor in the comments to it there is a list of specific steps that must be taken every time transactions are concluded.
By “due diligence” we can understand the analysis of the economic condition of the future counterparty - that is, its solvency.
A good lawyer, especially in IT, is an analyst and strategist by virtue of the above industry characteristics. This means that he needs to be able to read the balance sheet and other financial documents, draw up a complete picture of the state of the counterparty and predict its further financial development. Moreover, the lawyer must do all this before the conclusion of the transaction.
Do not rush: look around, and then sign the contract
How does a lawyer analyze risks, unlike, for example, his colleague, an accountant?
No one argues that an accountant or economist can conduct a comprehensive analysis of the financial statements of a future counterparty. However, the lawyer analyzes a number of balance sheet items, correlating them with those activities that the future counterparty carries out.
Consider an example.
The balance of Society 1 is positive in every sense. He has stocks, fixed assets, impressive authorized capital, net profit and revenue. But at the same time, accounts receivable are excessively large, this suggests that Company 1 has many debtors.
Suppose that a company has entered into an agreement with this Company 1. At a certain point, it did not pay for the services provided to develop a software product and, having many debtors, offered to conclude an assignment agreement.
If you agree to this form of payment, there is a risk that the company will receive debts that cannot be repaid, for example, if most of the debtors of Company 1 are in a pre-bankrupt state. Thus, the software product has been made, Society 1 has paid off, but the developer has not received money and is unlikely to receive it in the coming years.
The example above proves the need for an integrated approach to counterparty analysis. If the lawyer does not have the transcript of certain articles of the counterparty’s balance sheet, he can obtain information on the presence or absence of litigations and enforcement proceedings in relation to the potential counterparty using special services (about them later). At the same time, the lawyer does not put the prospective partner in a potentially awkward position, since he does not need to turn directly to the company for information.
Output:
To reduce financial risks, both parties need to carefully analyze information about the counterparty and think through the terms of future contracts.
In the event of any problems, a company that checks the reliability of counterparties will benefit: it will not have to spend time on courts, drawing up claims and claims, it is also an additional concern for the company's reputation.
“Due diligence” is a necessary practice when choosing a counterparty, especially in an IT company, due to the characteristics of the industry: first of all, this is the high cost of services and instant customer access to the result of work (daily uploading of source code to the client's repository).
Legislation requires a lawyer to be an analyst. His responsibilities include making recommendations regarding transactions, therefore, the lawyer becomes the guarantor of the company's security.
How to comply with the interests of both parties
The lawyer is faced with the task of providing in the contracts favorable conditions, both for the client and the company, that reduce the risk of financial losses and help the contractor to timely receive payment under the contract. The better the lawyer will write down the guarantee of payment in the contract, the greater the likelihood that the company will not go to court to restore the violated rights.
In fact, the lawyer seeks payment under the contract at the stage of its conclusion, but how?
According to the law, an agreement is the expression of the will of two parties. Each party in the legal relationship seeks to get the maximum benefit, as well as to protect themselves as much as possible. It happens that for this, customers include in a future contract conditions that are difficult to call favorable conditions for the partner. In this situation, lawyers use the principle of “checks and balances” in response.
This means that the lawyer mitigates the negative aspects of the contract proposed by the client, making corrections beneficial to the company, while preserving the version of the client's contract as much as possible. From the side it may seem that it is impossible to keep the wording of the client’s contract if it infringes on the rights of the other side, but we can say with confidence that this is not so.
As an example, one of the most effective methods can be used - “mirroring”, that is, duplication of a clause of an agreement whose action is directed exclusively to the company, but indicating that the same conditions apply to the client. Often this method is used in the sections of the agreements on liability of the parties.
Example: contractual jurisdiction
Another example of the implementation of the system of checks and balances in contracts is contractual jurisdiction.
Clients propose to include in the contract such conditions for the consideration of disputes in court that are convenient for them. For example, it looks like this:
“If it is impossible to resolve the disputed situation through negotiations, the dispute shall be considered in the arbitration court of Moscow.”
The lawyer proposes to include the following wording in the contract to maintain a balance of interests:
“If it is impossible to resolve the disputed situation through negotiations, the dispute shall be considered in the arbitration court at the location of the plaintiff.”
These examples show how a lawyer can balance the interests of each of the parties to a transaction at the stage of concluding a contract.
Most companies have their own framework agreements. However, it is important to understand that they are optimal for working with the bulk of customers, but are not suitable for companies that follow a customer-oriented policy and are looking for an individual approach to each client.
What else to consider
Even if the contract is perfect, it happens that a lawyer has to work on contractors by sending complaints. However, there is always a choice how to do this.
If the partner deliberately avoids payment, it is most likely that the claim will be perceived solely as formal “paper”, which is necessary before the lawsuit is filed. And yet, if the document clearly sets out the negative consequences of non-payment for the counterparty, it can push the partner to pay the debt out of court.
The task of the IT company’s lawyer is not only to analyze the counterparty’s economic condition (for example, using VLSI), but also to track its legal cases - for this, you can use VLSI and other systems, such as E-Justice. It is important for a lawyer to quickly and fully evaluate the ability of a counterparty to win in litigations where he is involved.
What is the role of a lawyer
It is not enough for a lawyer in an IT company to simply follow the letter of the law. He must keep in mind in the current state the entire volume of norms governing a particular situation.
If the wording in the legislation is vague, the lawyer needs to analyze the judicial practice on the relevant issue and be able to find a suitable justification for the decision in various disputed situations.
The skills of information retrieval and analysis of legislation, by-laws and judicial practice allow the lawyer to give recommendations on concluding agreements with a particular counterparty based on the analysis of his financial documents.
Thus, a lawyer is not just looking in the law for rules governing this or that relationship. In the IT field, a lawyer is an analyst who helps the company not to lose its money.
From the outside it may seem that the lawyer impedes the work of the company with its meticulousness when checking contractors and forming the terms of the contract. However, if the company aims to develop and reduce financial risks, then at the stage of the transaction it is necessary to analyze the activities of contractors and determine which cooperation will not only bring the company the desired profit, but may also take time and other resources. As a rule, the risks are highest when working with small companies. The company should carefully study potential partners to avoid the so-called one-day firms that are interested in receiving the product without payment and will be hiding from collecting receivables.
The conclusion is obvious: it is advisable for the contractor to conclude agreements with trusted contractors who have been cooperating for a long period of time. This allows you to minimize the financial risks of the IT company. At the same time, all situations are individual and each client is important to the company.
To summarize
The lawyer of the IT company provides legal support for the business, applying the rule of law favorable to the company and taking into account the prevailing judicial practice.
The lawyer analyzes the future solvency of potential counterparties before the transaction is concluded and helps to formulate the contract in such a way as to comply with the interests of the parties and ensure that payment is received after completion of work.
We at SimbirSoft pay attention to each client and provide for various scenarios of cooperation. With the help of the legal service, we build a balance of mutual obligations at the start of the project, which allows us to guarantee business security and solve the problems of our clients.
Thank you for your attention, we hope this article was useful to you!