Two Step's Private Company Equity Management Blog

In the past few weeks, I’ve met two corporate paralegals who have been using our product, Corporate Focus, to track minute book and capitalization information for many years. Because they’re each tracking upwards of 1,000 client companies for their firms, they keep very busy.

We estimate that paralegals like these have tracked more than 1 million stock certificates for privately-held companies in our system over the past decade. But despite the obvious improvements in efficiency that Corporate Focus has made possible, I still have one small pet peeve: The amount of time, energy and client fees that are wasted on stock certificate printing. And in the current environment where legal staffs are smaller and clients are going over outside counsel bills with a fine-tooth comb, every minute counts. 

So when these paralegals told me that each stock certificate they print for a new company uses a "blank" stock certificate form instead of a "pre-printed" stock certificate form, it made me realize that law firms can make small changes that yield big benefits for everyone involved. It may seem like a minor thing—the difference between a stock certificate that just has a border (or standard eagle design) as compared to one that also has pre-printed text and lines. But, when you're the one responsible for printing hundreds or even thousands of certificates each year under the pressure of a deal closing or a FedEx pick up, it matters. Because if the partner or client notices that the numeric text is crooked or misspelled on the certificate for 255,715 shares for which the investor just paid $2.5 million, everything just comes to a screeching halt.

With different printer drivers, assorted printer models, and varying cuts on every printed batch, there is just no way to make every single stock certificate identical. The only way to get it right without wasting precious time is by printing to a blank stock certificate form. With a blank form, there is no need to coordinate names and numeric text with pre-printed lines, because you print the lines and text simultaneously with the stockholder information.

As one paralegal told me, when you've completed your 25-to-1 reverse stock split in Corporate Focus and all the numbers come out right, you don't want to spend extra hours printing the 200-300 stock certificates that now need to be re-issued. She also told me that at their firm, they no longer adopt a specific form of stock certificate in the by-laws or minutes when they are forming a new company. That means that if they need to change the form to a new style for cost or efficiency reasons, there is no extra legal action required that creates unnecessary legal work or fees. Talk about great client focus.

Now, if you think this is just minutiae that lawyers and paralegals obsess about in their spare time, imagine the next time you have to mark down a legal bill because it took two hours to print 26 common stock certificates (making you late for dinner and behind on your more important legal work). Wouldn't the client have been much happier if they'd been billed merely 20 minutes to "just print a few certificates," as they see it?

Then, take another look at the difference between the "border only" certificates, the "blank eagle" certificates, and the dreaded "pre-printed" forms of the same. These are all available from any stock certificate printer (such as Goes Lithograph or Corpex). It's just a matter of choosing how efficient and productive you want to be—for yourself, and for your clients.

Over the past 30 days, I came across four articles that made me sense a shift in the air regarding online access to legal client data. Collectively, these pieces focused on a trend that’s sweeping the corporate landscape: Realizing the tremendous productivity and client service benefits—and the fact that email, laced with inefficiency and security issues, simply isn’t cutting it anymore—lawyers are finally getting comfortable with the idea of their confidential client data being stored somewhere outside the four walls of the firm.

Fortunately, it seems that this comfort level is starting to jive with available technology—and the small current is becoming a wave.

At Two Step Software, where we track online minute book information for over 150,000 client companies, virtually all of our new law firm customers over the past few years have stored their client data at our hosting facility. Why? Because our hosted solution offers better performance, greater security (i.e., biometric checks, 24/7 surveillance, and diesel generators for power outages), and vastly reduced support costs (no upgrades, no in-house servers). The hackneyed phrase "better, faster, cheaper" comes to mind.

As discussed in these articles, the objections of yesteryear regarding online client data no longer carry the day. Imagine when all of your client information is online and available to you and your clients 24/7—whether you're in the office, at a board meeting, or on a"so-called" vacation.

In March, a law firm blog posted the question What about an online minute book? The writer’s comments were:

"Don’t you think it would be nice if you could do corporation minutes online? And keep them in an online minute book? Instead of keeping them in a 3-ring notebook? Well, I do. I dream of it. Minutes in the cloud. I’d type them up, hit the upload button, and watch them magically appear, organized in chronological order, right there on the web page. The online minute book web page. It would have to be secure, of course. Only those with permission could see them. But they’d be there all the time. Whenever you needed to review them, you’d just click and down they would come from the Internet cloud onto your computer screen. Like rain. Minutes would come from the cloud like rain. Ahh. That would be nice."

Later that month, the International Legal Technology Association (ILTA) published their March 2009 White Paper issue, which included an article I wrote entitled: Client Intelligence: Answering the Call for Greater Productivity. It discusses the numerous productivity benefits—for both lawyers and their clients—of a centralized information repository for client information and documents.

A week later, Brett Burney wrote the article "Storing Your Firm's Data in the Cloud" in the Legal Technology section of Law.com. In it, he acknowledges lawyers’ past reluctance to store client data outside of the firm, while stating that today's online storage usually involves "a server-class machine, probably in an ultra-safe bunker." Burney notes the common acceptance of "deal room" data centers such as those offered by Intralinks, DataSite or Firmex, which have proven their superior security compared to traditional conference rooms.

A few days later, in the blog Compliance Building, Doug Cornelius wrote a post entitled "Extranets for Law Firm and Client Collaboration - Moving Beyond Email" where he discusses some of the challenges of deciding on the right extranet platform. Cornelius made the point that email no longer counts as "collaboration" in the Sharepoint, Web 2.0 world.

These are just a sampling of the growing number of articles that are discussing the topic of moving client data “to the cloud.” Where does your firm stand on the issue? If you're not doing it yet, maybe it's time to explore the brave new world—and the big benefits—of online client data ... one cap table, one minute book, one client at a time.