If you are a key employee with your company and it is going through a merger or acquisition, one of the most critical decisions you can make in protecting yourself is hiring your own personal attorney. It is all too common for executives to mistakenly believe that the lawyers handling the merger or acquisition are also representing their interests when negotiating retention agreements. When an attorney represents a corporate client, the corporation or company is the client, NOT the individual executives, officers or directors.
Generally speaking, all lawyers are prohibited from representing parties with adverse interests, except under very specific circumstances. California’s Rules of Professional Conduct, Rule 3-310(C):
A lawyer “shall not, without the informed written consent of each client:
(1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or
(2) Acceptor continue representation of mor then one client in a matter in which the intentions of the clients actually conflict.”
A lawyer representing a corporation must consider that the motives of the directors and officers can be different from those of the CEO or Founder. The overall best interests of the corporation as an entity is what the attorney must protect. When you consider an executive’s retention agreement is often negotiated when the company is merging with another entity or is being acquired, is the company’s interests the same as the executives? The answer is NO.
In a merger or acquisition, the company’s attorneys are focused on obtaining the best possible terms for the company, ensuring the continued success of the company, while also saving money wherever possible. In other words, the goal of
the company’s lawyer is to convince the key employees to continue working for the company on the best possible terms for the company, including monetary. In other words, the company attorney’s obligation is to protect the interests of the corporation and this obligation supersedes any interests of the officers personally. Executives should consider this a direct conflict of interest.
Another area of concern for an attorney representing both the company and the individual executives is the protection of confidential communications. The company’s attorney may reveal to the corporate board what an officer divulged, violating the officer’s right to protected communications. If the officer had his/her own legal representation, all conversations between them would be confidential and protected by the attorney-client privilege.
If you are an executive or other key employee in need of representation during negotiations of your retention agreement in a merger or acquisition of your company, we can help. Our experienced attorneys understand the importance of having your best interests as our sole focus. Schedule a consultation today!