Opinions of counsel for company: Overview, definition, and example
What are opinions of counsel for company?
Opinions of counsel for a company are formal written statements issued by a legal advisor (counsel) that express professional judgment on specific legal matters related to the company. These opinions typically address legal issues concerning the company’s corporate structure, compliance, validity of contracts, or other significant legal matters. An opinion of counsel is often required in transactions such as mergers, acquisitions, financing, or securities offerings to confirm that the company has taken the necessary legal steps and that the transaction complies with applicable laws and regulations.
For example, a company might request an opinion of counsel to confirm that its stock issuance complies with securities regulations or that its corporate actions are valid under state law.
Why are opinions of counsel for company important?
Opinions of counsel are important because they provide assurance to investors, buyers, lenders, or other parties involved in a transaction that the company’s actions are legally sound and compliant with the law. The opinion helps mitigate risks by addressing potential legal issues and ensuring that all necessary legal steps have been taken. In financing or M&A transactions, a positive opinion of counsel is often a condition for proceeding, as it adds credibility and reduces the risk of legal challenges later.
For companies, obtaining legal opinions from counsel helps ensure that they operate within the legal framework and are prepared for any challenges that may arise in complex transactions.
Understanding opinions of counsel for company through an example
Imagine a company planning to issue new bonds to raise capital. Before proceeding, the company’s legal counsel provides an opinion of counsel, stating that the bond issuance complies with all securities laws and that the company has the legal authority to issue the bonds. This opinion gives investors confidence that the company is in good legal standing, helping to facilitate the bond issuance process.
In another example, during the acquisition of a smaller company, the buyer may require the seller to provide an opinion of counsel confirming that the company’s corporate structure is valid and that no legal issues will affect the transaction. This reassures the buyer that the seller is in good legal standing and that the acquisition will proceed smoothly.
An example of an opinions of counsel clause
Here’s how a clause related to opinions of counsel for a company might look in an agreement or contract:
"The Company shall deliver to the Purchaser an opinion of counsel, in form and substance satisfactory to the Purchaser, confirming that the Company has the legal authority to enter into and perform its obligations under this Agreement, and that all corporate actions necessary for the execution and delivery of this Agreement have been duly authorized."
Conclusion
Opinions of counsel for a company are essential legal tools that provide assurance regarding the legality and validity of corporate actions or transactions. Whether in securities offerings, mergers, acquisitions, or financing, these opinions help protect all parties involved by confirming that legal requirements have been met. For businesses, obtaining these opinions is a crucial step in mitigating legal risks and ensuring compliance with applicable laws.
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.