General Counsel Initiative Solutions
Getting Paid
Situation
As part of our general counsel responsibilities, we monitored our client’s business relationship with a major customer, and noted that the customer’s receivable balances were outpacing acceptable limits. This set off an alarm bell. We investigated the financial viability of the customer, and concluded that the customer’s ability to satisfy the receivable was at risk. This created a difficult conundrum for our client: the customer was an important part of the client’s business plan in both the short and long terms, and the client was extremely reluctant to limit, let alone stop future sales to the customer.
GCI Solution
The client authorized us to work with the customer, who depended upon our client’s shipments to stay in business. The principals of the customer offered personal guarantees, but we insisted on financial statements and concluded that the guarantees would not provide appropriate security. Ultimately, we worked out a plan in which a portion of the receivables were collateralized, and the remainder was secured through a refinancing the customer was able to successfully consummate with its bank, with our assistance. The receivable was ultimately satisfied and by working with the customer in as non-confrontational way as we could, the customer remained a valuable and long term source of revenue for our client.
General Counsel Initiative Solutions
Contracts: Swords, Shields, and Safety Nets
Situation
Our client managed commercial and industrial construction projects. In the course of our regular consultations with the client, we learned that our client was purchasing significant equipment for incorporation into the construction projects without recognizing the significance of the “fine print” included in the transactions by the equipment vendors. As is typical, the “fine print” limited the remedies our client could pursue against the equipment manufacturers if the equipment did not function as our client’s customer required, or if the delivery of the equipment were substantially delayed. This created a situation in which our client could be liable for hundreds of thousands of dollars of lost profits incurred by its customer, with no recourse against the equipment manufacturer which had caused the problem.
GCI Solution
We created certain contract review templates and checklists that our client could utilize for purposes of spotting problematic equipment purchase transactions, assessing what risks were and were not tolerable, and understanding when to utilize our services behind the scenes in order to manage risks in an appropriate way. We also assisted our client in maximizing certain insurance coverages that would fill in other gaps. The upshot was a business approach that limited potential liabilities while allowing the client to continue to conduct business in an expeditious way, without unnecessary costs.
