Opinion of counsel: Overview, definition, and example
What is an opinion of counsel?
An opinion of counsel is a formal, written statement provided by a qualified attorney expressing their professional judgment on specific legal matters related to a transaction or agreement. These opinions are often used to confirm the legality, enforceability, or compliance of a transaction with applicable laws and regulations.
For example, in a merger transaction, the acquiring company may require an opinion of counsel from the target company’s legal team to confirm that the deal complies with applicable laws and does not violate existing agreements.
Why is an opinion of counsel important?
An opinion of counsel is important because it provides assurance to the parties involved in a transaction or agreement that legal risks have been evaluated and addressed. It promotes confidence, reduces uncertainty, and serves as evidence of due diligence.
For businesses, obtaining an opinion of counsel can mitigate risks, demonstrate good faith, and provide a reliable basis for decision-making in complex transactions or regulatory compliance matters.
Understanding opinion of counsel through an example
Imagine a company issues securities to investors. Before completing the issuance, the company provides an opinion of counsel stating that the securities offering complies with applicable securities laws and regulations. This reassures investors that the transaction is legally sound and reduces their exposure to legal risks.
In another example, a lender in a loan agreement requires the borrower’s attorney to deliver an opinion of counsel confirming that the borrower has the authority to enter into the agreement and that the agreement is enforceable under the borrower’s jurisdiction.
An example of an opinion of counsel clause
Here’s how an opinion of counsel clause might look in a contract:
“As a condition precedent to the Closing, the Borrower shall deliver to the Lender an opinion of counsel, in form and substance satisfactory to the Lender, confirming that (i) the Borrower has the requisite authority to execute and deliver this Agreement, (ii) this Agreement constitutes a valid and binding obligation of the Borrower, and (iii) the transactions contemplated herein comply with applicable laws.”
Conclusion
An opinion of counsel provides legal validation and assurance for transactions, reducing uncertainty and fostering trust between parties. It helps confirm that agreements comply with the law and are enforceable, minimizing the risk of future disputes or legal challenges.
By including clear provisions for an opinion of counsel in agreements, businesses can enhance due diligence, ensure compliance, and build confidence in their transactions and relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.