Insights and updates
from MinuteBox
The adoption and implementation of legal technology within law firms is becoming increasingly common. As technology continues to advance and change the way we work, law firms are recognizing the benefits and are becoming more open to using legal tech to streamline their processes and increase efficiency. However, while firms may be receptive to legal tech, the adoption and training of the technology can be a problem.
Here’s a summary of what we’ll look at in this post:
- Firms are becoming more receptive to legal tech
- Newer lawyers within the firm are receptive to legal tech but adoption and training can be a problem
- Adoption and training are crucial for success
- Continual training and technology champions are necessary to ensure the system is being used on a regular basis
One of the main issues is that newer lawyers within the firm may be receptive to legal tech, but may struggle with adoption and training. They may be familiar with the traditional way of working and may find it difficult to change their habits. Additionally, when a deal or case becomes stressful, it can be easy for them to fall back on the familiar and rely on paper documents and traditional processes.
Watch the full interview, The Importance of Adoption and Training in Legal Tech
This highlights the importance of adoption and training for the successful implementation of legal technology. Without proper adoption and training, the technology may not be used to its full potential and may not have the desired impact on the firm.
How to overcome legaltech adoption issues in legal departments
To overcome this, firms should focus on continual training and the appointment of technology champions within the firm. These individuals will be responsible for ensuring the technology is being used on a regular basis and providing support and training to their colleagues.
In conclusion, while the adoption of legal technology within law firms is becoming more common, the success of the technology is dependent on the adoption and training of the technology. Firms should focus on continual training and the appointment of technology champions to ensure the technology is being used to its full potential.
What are the key attributes of an innovative law firm and how much do they really matter?
Managing a law firm in this era of rapid change is a massive challenge. It’s hard to know the right thing to do. It feels like the ground is constantly shifting. Your firm’s lawyers are giving conflicting reports on the state of business while your clients keep demanding “more for less.” Many legal tech companies are stepping up to help with these challenges. Yet these companies often meet resistance from the very firms they are trying to help.
I’d like to introduce Sean Bernstein. Sean is a co-founder of MinuteBox, a next generation cloud-based minute book and corporate records solution for law firms, accounting firms and internal legal departments. As an entrepreneur in the legal space, he’s spoken with dozens of law firms, ranging from single lawyer offices to global behemoths. As a result, he has some thoughts on what distinguishes innovative law firms from more traditional firms.
This article presents both the “outside looking in” and “inside looking out” perspectives when it comes to what makes a law firm “innovative”. Following Sean’s remarks, I offer some thoughts on how things look from within a law firm. Overall, we conclude that although certain firm attributes are prevalent in innovative law firms, such attributes are quite limited in predicting a firm’s “innovativeness”. Instead, the proper circumstances appear to be a more reliable indicator of a modern innovative law firm.
Sean’s Observations
From my experiences as a legal entrepreneur I’ve come across commonalities inherent in more innovative firms. In my ideal world, these attributes would permeate across every law firm globally. These attributes include: being proactive about risk, streamlined processes for implementing new technology, dedicated resources for innovation, and strong senior leadership support for innovation.
Being Proactive About Risk
Trying something new requires taking on some risk. But risk is inherently unavoidable. Ironically, given today’s changing legal landscape, not doing anything can be just as risky as trying something new. In some cases, I believe maintaining the status quo can be problematic. Understanding that indecision is still a decision, innovative law firms put themselves in the driver’s seat by proactively choosing which risks to take and which to dismiss.
Closely tied to understanding risk is understanding your firm’s internal pain points. Firms that have identified their pain points and strategic direction in advance (usually through in-depth process mapping) have an easier time deciding what to buy and what solutions fit within their risk tolerance profile. They also avoid being surprised by a problem and making reactionary decisions.
In the context of MinuteBox, our team has mapped out a spectrum of firms ranging from those merely curious about our solution to those who have clearly identified and prioritized improving minute book management. Law firms that have already performed internal strategic analysis will have a simpler (and less costly) buying process; they are empowered to find the products with the best overall fit and more readily adapt it to their workflows.
Streamlined Processes for Implementing New Technology
While each new technology can bring new challenges to an IT team, what’s not new is the fact that such technology is a part of the strategy of law firms. We believe that the firms that can quickly test new technology and make it available to users will have a competitive advantage. The ability to do so lies in having streamlined processes.
Implementing a new tool requires cooperation from the firm’s IT personnel, its Innovation team, and the end users at the firm. The most effective firms have alignment across these different stakeholders. Clear and consistent communication enables each person to handle their part of the job independently. In an ideal world, the appropriate individuals in both the law firm and the vendor would be in constant communication and feedback on everything from a solution’s efficacy, ease-of-use and overall value-add. Conversely, traditional firms may have a less formal technology implementation process, which can lead to bottlenecks or implementation purgatory as other more pressing matters take precedence.
At MinuteBox, our seamless implementation process is as important as our solution and we will do whatever it takes to determine if our solution is the right fit for your firm. But at the end of the day, this process is made infinitely easier if a firm has outlined a process where the steps, roles and duties of all those involved are clearly outlined.
Dedicated Innovation Resources
It’s not uncommon to hear some variant of “this solution looks great, but we just don’t have the budget right now.” NOs are fine. They are part of an entrepreneur’s life. More interesting is the varying definition of “budget”: it can mean everything from an ambiguous term with no set amount, to a defined sum of money set aside specifically to implement new solutions and innovations.
Having a dedicated budget for innovation can send powerful messages. First, when partners see that a portion of the firm’s profits are going toward “innovation,” it signifies that senior leadership believes change can have positive benefits for the firm. Second, setting aside a budget generally correlates to hiring staff dedicated to working on these projects. Smaller firms that do not have the size to hire dedicated people usually designate someone internally to future-proof the firm. Either way, designated roles further signal that a firm not only values innovation in concept, but is actively pushing forward an innovation agenda.
Change (and by extension innovation) is hard. It requires research, internal analysis and the right team to actually implement a solution once decided. But having dedicated and motivated staff, supported with some internal financial backing, is a great indication that a firm is serious about change.
Strong leadership support
Arguably the most important factor is strong leadership. It is difficult for lawyers and staff to feel comfortable about trying something new without senior leadership recognizing the value of their efforts. Effective leaders create a sense of urgency and communicate a clear vision of what change will look like across the entire firm – legal and “non-legal” alike.
Although I rarely have a complete picture of the internal workings of the different law firms I encounter, it is obvious when senior leadership prioritizes innovation. It can be as simple as allowing junior lawyers to sit on innovation committees. Proactively developing leadership skills can improve every aspect of a firm. As Blane Prescott notes, “the single most common success factor for law firms today is great leadership.” Senior leaders that embrace innovation will help foster change throughout the firm.
At the end of the day, I want to work with law firms that want to work with me. I don’t want to be a burden or an imposition within a law firm. Big or small, I want to dig deep into a firm’s problems and try and tackle whatever issues they face together. I want the incorporation of MinuteBox within a law firm’s workflow to be a mutually beneficial experience that creates a strong relationship of trust and understanding.
James’ Observations
Thanks for those great insights, Sean. I think it’s valuable to see what attributes generally correlate with innovative law firms. Still, sometimes firms with the attributes you covered still remain ineffective when it comes to preparing for the future. Why? I think that beyond these attributes one must consider the circumstances within a firm. The proper circumstances allow these attributes to have the desired effect, or not.
For example, consider David Maister’s observation that expertise-based work is on the opposite end of the spectrum from efficiency-based work – and that “every aspect of a practice group’s affairs, from practice development to hiring, from economic structure to governance, will be affected by its relative positioning on this spectrum.” There is unavoidable tension between innovation efforts, which generally aim at efficiency, and law firms taking pride in their specialized expertise. Even if you have the right attributes in place, so many lawyers and others will be operating strictly to optimize expertise.
One type of positioning is not inherently better than the other. But if a firm cannot adapt its business model to help users justify using efficiency-based innovations then it will be nearly impossible for them to do so. While it might appear from your end that certain law firms are effective or ineffective based on certain attributes, my experience working within these firms tells me something deeper is going on within firms, whether they realize it or not. As change management expert John Kotter points out: “we underestimate the subtle and systematic forces that exist in virtually all organizations”.
Being proactive about risk
To your point, risk is always present. But I’m not sure if a firm’s risk tolerance is a reliable indicator for finding correct solutions. As Clayton Christensen points out: “many of the executives who have been unable to create sustained corporate growth have evidenced a strong stomach for risk”. If there’s not much correlation between risk tolerance and sustained growth in business generally, it’s safe to assume the same goes for law firms.
Consider a firm that has decided to proactively manage risk: how does it accurately assess those risks? The problem with large firms seeking growth is that the exciting growth markets of tomorrow are small today. Even if a firm wants to pursue a certain opportunity, its size and business model can still make it impossible to justify doing so.
Even though firms are indeed aware of industry trends and have smart people working on preparing for the future, an organization’s size and business model can skew its perception of risk. So no matter how much a firm might understand it needs to change, it cannot justify doing so given the constraints it has built for itself. As Christensen puts it: “[Disruption] is not a story of incompetence. It is a story of perfectly rational, profit-maximizing decisions.”
Streamlined Processes for Implementing New Technology
As someone who works in innovation, I know that at times it can indeed feel like there aren’t any processes. Some firms are better at this than others, but every law firm already has processes for implementing and managing new technology. Given the amount of technology involved in every law firm (e-billing, document management system, accounting software, laptops and mobile devices, etc.), processes are a must. I’ve come to understand that delays arise not from any attributes of an IT team, but the circumstances under which they’re operating.
The best processes in the world will barely matter if the work you want done is deemed “extra” compared to everything else handled by the IT department. There are a long list of responsibilities for these teams that are more important than implementing new innovation software. Implementation procedures are important, but the resource allocation priorities of IT provide ample justification for postponing innovation efforts.
Further, if an IT team seems genuinely resistant it might be because, though they don’t get any reward for implementing new software, they certainly take on all the risk. It doesn’t matter if something was or wasn’t IT’s idea, any cybersecurity issue is always seen as IT’s fault. As Gary Moore explains, in any industry, “technical function is often last to get on board”. And the way past this is not in processes but in changing incentives. As Moore explains: “IT only get on board after the executive function makes it a priority, which they will only do after a department makes it clear they have a problem.”
Dedicated Innovation Resources
Resources are indeed a crucial piece to any endeavor. But they are quite malleable to their circumstances. Having an innovation fund doesn’t guarantee a firm will invest in the right technology. Similarly, just because a firm has dedicated staff working on innovation doesn’t mean the rest of the firm is receptive to their efforts. Getting a firm to buy new software is one thing, getting a firm to actually use it is often quite another. So just like processes, resources are crucial and yet limited in their effectiveness.
While resources and processes are often enablers of what a firm can do, a firm’s values can represent constraints by outlining what a firm cannot do. A firm with one set of values would be incapable of succeeding in anything other than the work that aligns with those values. The “subtle and systematic forces” of the organization won’t allow it – even with dedicated staff and budget. Christensen’s observation that “organizations cannot disrupt themselves” implies how deeply an organization must change in order to shift its values and corresponding business model in order to adapt. The magnitude of this change is why he suggests an organization build an off-shoot organization with values that lead to better outcomes, or undertake a herculean managerial effort in order to redesign itself.
Strong leadership support
I’ve spoken before about the massive shift in required skills involved in going from lawyer to managing a law firm. And while I still think that argument has some merit, even those who have spent entire careers managing companies struggle with sustaining growth. As Christensen observes:
“about 90% of all publicly traded companies have proved themselves unable to sustain for more than a few years a growth trajectory that creates above-average shareholder returns. Unless we believe that the pool of management talent in established firms is like some perverse Lake Wobegon, where 90% of managers are below average, there has to be a more fundamental explanation for why the vast majority of good managers has not been able to crack the problem of sustaining growth.”
Though all companies struggle with navigating a changing marketplace, one particular obstacle for law firms is embedded in the leadership style that typically works for expertise-based companies. Maister explains that in expertise-based companies (like most big law firms), “the autonomy of the individual partner would be among the most supreme virtues in the firm, with little use made of formal internal structuring.” This setup has had much historical success. But as the legal industry undergoes structural shifts, this hands off approach is now a liability. Christensen explains that: “disruptive innovation is the category of circumstance in which powerful senior managers must personally be involved… A senior-most executive is the only one who can endorse the use of corporate processes when they are appropriate, and break the grip of those processes and decision rules when they are not.” No amount of business acumen will be sufficient in creating change unless senior leadership is willing to be hands-on throughout.
Conclusion
A proactive approach to risk, streamlined processes, designated resources, and management skills are all necessary for a firm to be able to adapt for the future, but they alone are not sufficient. As much as certain people are pushing for change, employees at every level make prioritization decisions. And those decisions are derived from how the firm sets up its values. One set of values is not inherently better than another, and it is possible to navigate the tension between expertise vs efficiency; but the conflict between them will always be present.
Selling products that make an organization more efficient is one thing. Organizations trying to transition from expertise-based values to efficiency-based values will, as Maister puts it, “be transforming the fundamental nature of their firm.” And those asking their lawyers and staff to become more efficient while focusing their incentives and growth strategy on expertise-based work will have a hard time navigating that tension. So legal technology companies must be conscious of the changes their solutions ask of a firm. Similarly, the more conscious law firm leaders are of how much they are asking their lawyers and staff to change, the less frustrated these might be when things don’t go according to plan.
The priority of any business is to increase revenue. In order to achieve that objective, it requires a strategic deployment of time, resources, and manpower that can be used to initiate revenue-driven activities that will ultimately help grow the business.
In the legal community, the objective remains the same as any other entity: how do you grow revenue, in this case, Legal Recurring Revenue, to support the interests of the firm? At the same time, diligent recordkeeping of minute book minutes must be preserved with the highest standards of quality assurance.
When the average law firm has only 3 full time employees, it’s even harder to walk that fine line. However, firms can give themselves a competitive advantage over their competitors by investing in sophisticated subsidiary management technology.
What is subsidiary management software?
Subsidiary management software enables legal entities to digitize their minute book record keeping processes. Cloud-based subsidiary software uploads all minute book records into structured, organized digital documents that simplify how legal professionals review and share minute book records with clients.
MinuteBox is one of the leading subsidiary management solutions. It uses biometric & hardware key authentication technology to safely secure all minute book records in the cloud. MinuteBox also integrates with Touch ID, Windows Hello, and FIDO Key support to make it easier for authorized users to access minute book records and corporate documents.
Since it is a cloud-based solution, account holders can access all records with speed, efficiency, and proficiency from anywhere in the world. Records are always at your fingertips, streamlining the entire review process with speedy solutions to uncover crucial information in seconds.
The bottom line is that subsidiary management solutions like MinuteBox make minute book record keeping a lot more fun for legal departments. But they also provide significant business benefits that translate into more opportunities to increase Legal Recurring Revenue for the firm.
More efficient minute book record keeping
To really understand the benefits of subsidiary management solutions, let’s break the benefits down using a few plausible scenarios.
The paper minute book record challenge
In one scenario, a firm has all client minute book records in paper documents. All of those binders are stored within large filing cabinets at the offices of the firm. Labels are attached to the files that, theoretically, makes it easier to find those records in fully stuffed cabinets.
However, let’s say there’s a particular file within that binder that needs to be amended or verified. How much time do legal professionals have to spend combing through the entire binder just to find that one particular page containing the record in question?
This is one of the main reasons why, according to a Legal Trends Report, only 2.5 hours per working day are devoted to billable client hours. Environments that retain outdated manual processes to update minute book records are sacrificing too much of their legal professionals’ time that could otherwise be reinvested into revenue-driven initiatives.
The subsidiary management solution
In the second scenario, a firm has a subsidiary management solution to streamline the entire minute book record keeping process. Instead of binders of files stored in filing cabinets – all of which costs valuable office space – the records are stored digitally in the cloud.
If a client has a question about a particular minute book, the search for that file is significantly more efficient than using the paper record format. With a quick search in the subsidiary management platform, the record can instantly be pulled up for review. All the pages are organized similarly to a PDF document, enabling legal professionals to quickly scroll to the page in question and provide a clear answer to the client’s question.
This entire review process is completed in a matter of minutes. When all minute book reviews are conducted this way, legal talent can spend the majority of their days on billable client activities. They’ll also have the time to actively recruit new potential business for the firm.
Efficient minute book management boosts client satisfaction
Let’s stay with both of those scenarios for another minute. One firm uses the paper minute book review process, and the other firm has a subsidiary management solution in place. In this hypothetical situation, the client asks to clarify information contained in their shareholder ledger. They want to clarify details about a particular share issuance on a specific date.
Both firms rush to uncover the answer to that looming question. One legal team must go through their filing cabinets, uncover the minute book record in question, and then search through the file to find the page that documents the share transaction. The other team does a quick search in their subsidiary management platform and brings up the file in question in a matter of seconds.
Which firm is likely to better satisfy the client? Given that client satisfaction is a critically important factor in boosting client retention, which firm is most likely to retain the client’s business for the foreseeable future?
It’s an obvious answer that emphasizes the main underlying benefit of subsidiary management technology. Companies that can conduct minute book reviews instantly help their employees earn back valuable time that can be used to further the interests of the firm. Additionally, a speedy solution to uncover important information provides clients with instant satisfaction that their concerns are immediately addressed.
This is why all legal entities should embrace the benefits of subsidiary management solutions like MinuteBox and incorporate their time saving attributes into existing minute book record keeping processes.
Breakthroughs in legal technology have helped paralegals modernize how they complete their duties and responsibilities. Platforms like entity management software have helped paralegals at leading law firms or as members of in-house corporate counsel complete their duties with speed, efficiency, and proficiency.
Automated solutions like legal entity management technology are enabling some of the growing paralegal trends. Today’s paralegals can use these solutions to reduce the abundance of clerical and administrative tasks on their respective work plates.
In turn, they can use the time that they save on these important entity management tasks to contribute to growth in ways that directly impact the bottom line of the business. Let’s look into how legal technology is impacting growing paralegal trends and the relationships that legal support teams have with their respective businesses.
What is the outlook for the paralegal jobs market?
Here’s some promising news for aspiring paralegal talent. The government of Canada forecasts that 18,900 paralegal job openings will be made available between the years 2022 and 2031. Additionally, data suggests that 20,500 trained paralegals will be in the market to fill those vacant positions.
The data also breaks down the expanding job market using provincial considerations. For Canadian paralegals, the provinces of Manitoba and Quebec have very good job prospects for paralegal talent. Alberta, Saskatchewan, Nova Scotia, and Newfoundland and Labrador also show promising opportunities for paralegal professionals.
Paralegal trends that benefit from intuitive legal technology
Now, let’s look at the legal trends that impact paralegal workforces. As you build talent acquisition strategies to attract the most skilled paralegal workers, make sure that you have systems in place to help simplify their workloads. Today’s paralegals embrace innovation, so demonstrating your embrace of innovative technology will help your firm stand out.
Here are the biggest emerging trends that matter most to paralegal professionals. Legal technology, such as intuitive solutions like entity management software, will improve paralegal productivity across each of these emerging legal trends.
Faster electronic filings
Many law firms and corporate counsel have insisted upon electronic filing, or e-filing, of important legal records and documents for many years. Health protocols over the past three years enforced lockdowns and remote work mandates on a global scale, accelerating this shift to e-filing of legal records.
Using e-filing solutions like entity management software, paralegals can e-file incorporation documents without ever leaving the platform. Gone are the days when legal talent must visit government offices to manually complete the filing process. Simply create the filing record within the platform, and the registration process is automatically completed on your team’s behalf.
Automated document management
Paralegal professionals spend the bulk of their time on clerical and administrative work. Creating, filing, sorting, documenting, and updating minute book records is a necessary process to protect the legal interests of clients and your firm. But it’s a tedious workflow that cannibalizes the time of your legal talent, and that time could be used in more productive ways.
Using platforms like entity management software, the documentation process is entirely streamlined and automated. The platform uses logic-based systems to create and modify legal documents with additional bodies of text or sensitive client data. The automated nature of the platform transforms document management into a more efficient workflow that saves valuable working hours for your legal team.
Improved client communications
Clients have an abundance of questions about their legal matters. Addressing client concerns and providing satisfying answers to probing questions is an important aspect of any paralegal’s job. Faster and more concise answers alleviate client concerns and increase satisfaction rates.
Legal technology like cloud-based entity management software enables your legal team to provide faster, efficient, and straightforward service to your clients. Since the platform is cloud-based, anyone with administrative credentials can access the records from any location.
No longer must your paralegals coordinate time in multiple calendars to schedule meetings about minute book records. If clients have questions, simply open the platform and virtually guide them to the record in question. Your team can provide direct answers and satisfy client concerns, which will go a long way towards helping you earn repeat business from those clients.
Efficient administrative workflows
The average law firm across Canada and the United States operates with fewer than three full-time employees. This limited headcount means paralegals are often responsible for managing office administration tasks to help the firm function from day to day.
Using entity management software, your firm will drastically reduce the number of physical minute book records stored in the office. With fewer paper files on-hand to manage, paralegals can streamline their office administrative workflows and dedicate more time towards client-facing duties that support the financial and reputational growth of the firm.
Use legal technology to hire the best paralegals at your firm
When growing your firm, you want to hire only the best and brightest legal talent to represent your interests to clients. Obviously, this expectation applies to the lawyers and partners who will oversee various cases. But high expectations for talent extends to the paralegals and legal support staff who will assist lawyers with those cases.
Give your firm a leg up by using legal entity management technology like MinuteBox to show paralegals that your firm:
- Embraces innovation
- Encourages efficiencies
- Supports career-mapping
- Makes legal workloads fun
Join the MinuteBox revolution today and give your paralegals an efficient and innovative approach to modern entity management.
Corporate maintenance refers to the legal responsibilities of a business entity to remain in compliance with federal or provincial/state laws. Corporate maintenance allows a business to protect its own interests, avoid incurring legal or financial liabilities, and shield directors or shareholders from stiff legal penalties.
Most corporate maintenance work is very clerical, very administrative, and very repetitive. Despite the mundane nature of the work, it is essential work that must be completed to maintain compliance with the laws.
Entity management software is a modern solution to help streamline outdated tedious workflows. Legal entity management technology makes clerical and administrative workers more efficient, and the platform functions as a single source of truth for all legal entity data.
What are examples of corporate maintenance tasks?
Corporations are legally obligated to, one, provide documentation of key business decisions and activities, and, two, provide up-to-date information to government registries. These are the general corporate maintenance responsibilities that all legal entities must uphold.
Those are the primary obligations, but what do the actionable tasks look like to complete those respective responsibilities? Here’s a breakdown of those tasks and legal duties.
Maintaining minute book records
Business documents supplied to government regulators are compiled using minute book records. These records transcribe key takeaways from executive meetings, shareholder meetings, corporate by-law amendments, articles of incorporation documents, and any new issuances or transfers of corporate shares.
Amending management and ownership certificates
When new executives are appointed to positions of leadership, a record of these appointments must be filed with government regulators. Similarly, new investors who acquire shares in the corporation must be reported to the appropriate authorities. Updates must be made to corporate organizational charts, and the announcements are often cited in annual meeting records.
Managing licenses, permits, and contracts
Some industries require corporations to acquire licenses and permits to operate within the legal jurisdiction. Managing and updating those documents is a crucial part of corporate maintenance to avoid inadvertently operating without the proper credentials. Similarly, any contracts to affiliate with third-party vendors must be managed in an ongoing capacity.
Enforcing corporate governance and compliance protocols
Corporate governance and compliance protocols are a series of internal workflows and procedures to enforce corporate responsibility. Documenting governance and compliance protocols provides a framework to enforce the policies across the entire business. Maintaining these documented protocols is especially helpful when enforcing across a global entity with satellite offices across multiple jurisdictions.
Entity management software assists corporate maintenance
All the prerequisite administrative tasks and clerical duties of corporate maintenance are vital to protect the legal security of the corporation. But as previously noted, corporate maintenance work can be very mundane, repetitive, and time consuming.
Entity management software streamlines corporate maintenance workflows, saving invaluable time for the departments tasked with completing these responsibilities. All corporate documents and legal entity data are compartmentalized in one location, and the intuitive nature of the platform makes it easy for workers to insert, edit, or present data.
Benefits of legal technology and corporate maintenance
By using legal entity management technology to modernize corporate maintenance workflows, your legal and/or compliance departments can more efficiently perform their duties. They can earn back valuable working time that can be used to support other aspects of the business.
Most importantly, entity management software allows your respective departments to ensure corporate maintenance is upheld. This will keep the business and its chief stakeholders legally secure by maintaining compliance with the laws.
Legal technology organizes all minute book records
One of the biggest benefits of entity management technology is organization. All minute book records can be scanned into the platform, creating one single source of truth for all legal entity data. Since the platform is cloud-based, the records can be viewed and amended from any location, creating more flexible opportunities to conduct corporate maintenance.
Legal technology creates more efficient workflows
Another huge advantage of entity management software is how it helps workers save valuable working time. Since the platform is intuitive, it automatically generates PDF style documents from all uploaded entity data. Workers are no longer tasked with manually creating those documents. The platform does the work on their behalf.
Legal technology has simplified reporting
Since the platform is cloud-based by design, entity management software makes it easier to report all entity data for internal and external audits. Platform managers can grant access to all internal stakeholders, allowing each executive to transparently review corporate data of their own volition. Similarly, workers can conduct virtual meetings with external auditors and use the platform’s advanced search capabilities to present any additional data under query.
Legal technology’s compliance framework protects corporate interests
Finally, corporate compliance with jurisdictional laws protects the business from any legal or financial penalties incurred from non-compliance. Using legal entity management technology, you have a built-in compliance framework that uses modules for all administrative tasks and requirements to maintain compliance with the laws. It simplifies corporate maintenance and protects the business from unwanted penalties.
Entity governance refers to the internal policies, procedures, and ethical principles that guide how a corporation conducts its business and serves its stakeholders. Compliance, on the other hand, is how a business entity aligns its operations with external laws and regulations. While both are essential to running a responsible organization, they serve different purposes and require different approaches.
Governance and compliance are two umbrella terms that are part of the global corporate lexicon. Many legal professionals use these terms interchangeably, but should they?
While there are many similarities between corporate governance and compliance, there are profound differences that distinguish the two. When discussing strategies to enforce governance and compliance, it’s important to understand the distinctions between these two frameworks.
Entity Governance vs. Compliance: Key Differences
Before diving deeper, here’s a quick comparison of the key differences:
- Source of rules: Governance comes from internal stakeholders (board, executives); Compliance comes from external authorities (governments, regulators)
- Nature: Governance is ethical and voluntary; Compliance is legal and mandatory
- Focus: Governance focuses on “how we choose to operate”; Compliance focuses on “what the law requires”
- Consequences: Governance failures damage reputation and stakeholder trust; Compliance failures result in fines, penalties, or criminal charges
- Timeframe: Governance supports long-term strategic planning; Compliance often requires immediate remediation when laws change
What is corporate governance?
Let’s begin by defining corporate governance. As a practice, corporate governance refers to a set of internal policies and procedures that ensure a legal entity conducts itself in appropriate fashions. The entity’s Board of Directors is ultimately responsible for setting the corporate governance framework.
Corporate governance frameworks compile a series of ethical principles that guide how an entity’s leaders conduct their business. The purpose of a corporate governance framework is to ensure business leaders act in the best interests of their stakeholders. An entity’s key stakeholders include the employees, the shareholders, the customers, the suppliers, and any creditors to whom the corporation owes outstanding debts.
Examples of how to implement a corporate governance framework can include things like:
- Protocols to enforce accountability across the organization
- Transparent communication policies throughout the entity
- Reporting controls to enforce governance protocols
What is corporate compliance?
Corporate compliance is how a business entity aligns its own operating procedures with the laws and regulations that apply to the corporation. Corporate compliance frameworks are formalized policies to:
- Prevent violations of those laws
- Train employees on regulatory processes
- Implement compliance procedures
- Monitor and report on any violations of compliance protocols
The purpose of a corporate compliance framework is to minimize risk and prevent legal liability that threatens the integrity of the corporation. Failure to abide by these protocols leaves your entity at risk of financial calamity, similar to the collapse and bankruptcy of FTX that led to numerous criminal charges against senior leaders of that business.
Governance Failure vs. Compliance Failure: A Real-World Example
To understand the practical difference between governance and compliance failures, consider this scenario:
Governance Failure Example: A corporation’s board of directors approves executive bonuses without proper disclosure to shareholders. The company followed all legal requirements for compensation disclosure, but the board failed to communicate transparently with investors about the bonus structure. While technically legal, this erodes shareholder trust and damages the company’s reputation. The stock price drops as investors lose confidence in leadership.
Compliance Failure Example: The same corporation fails to file its annual return with the corporate registry by the deadline. This is a clear violation of corporate law. The company faces late filing penalties, potential administrative dissolution, and the directors may be held personally liable for the oversight.
In both cases, the corporation suffers—but the nature and consequences differ significantly. Governance failures are about broken trust; compliance failures are about broken laws.
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How are governance and compliance similar?
Governance and compliance frameworks both refer to rules of conduct and controls on operational behaviours. The purpose of both frameworks is to establish guidelines to conduct business and hold everyone in the organization to a high set of standards.
Governance and compliance are also essential pieces of any entity’s Governance, Risk Management, and Compliance (GRC) agenda. As a concept, GRC was first established by the Open Compliance and Ethics Group (OCEG) in 2002. GRC is an integrated system that enables organizations to operate at principled performance.
How are governance and compliance different?
Now we get into the key distinctions between the two frameworks. Here’s what you need to know about the disparity between governance and compliance. These insights will help inform how GRC protocols are implemented throughout your organization.
Ethics vs. the law
The most important difference between governance and compliance is the legality of each framework. Corporate governance is a series of ethical principles that determine how key stakeholders of a business entity operate from day to day. Corporate compliance is bound by the law and jurisdictional regulations that enforce how a company must operate to avoid incurring criminal or financial penalties.
Internal policies vs. external mandates
This is another key distinction between governance and compliance. Corporate governance refers to the policies and procedures created within the organization by key stakeholders like executives, directors, or shareholders. These are internal rules and regulations that enforce business ethics and operational procedures across the organization.
Corporate compliance is a set of laws and regulations dictated by governments and regulatory bodies within the jurisdiction where an entity operates. Compliance guidelines are established by external authorities. The onus is on the entity to establish protocols that ensure the corporation remains in compliance with those established laws.
Optional vs. obligatory
Most legal entities choose to create corporate governance frameworks to abide by an ethical set of principles. However, corporate governance remains an optional policy. While it is highly common, there’s no mandate that forces companies to adopt corporate governance frameworks.
On the other hand, corporate compliance is a legally binding obligation. Corporations must follow the letter of the law in order to conduct their business and engage with customers. Failure to follow the laws will result in civil or criminal liabilities levied against the corporation.
Long-term planning vs. short-term remedies
Corporate governance can be as much of a strategic playbook as it is an ethical set of operational guidelines. An effective governance framework can form the basis of a long-term strategic plan that helps drive the growth and evolution of the business as a whole.
Corporate compliance is also part of a long-term strategy. However, if there are changes to jurisdictional laws or by-laws, the company must adapt with quick fixes or remedies to remain in compliance with the laws. Often, compliance is more of a reactive stance to these regulations.
How MinuteBox Supports Entity Governance and Compliance
Now that you have a better understanding of the differences between governance and compliance, what’s the best way to establish both frameworks to help protect the interests of your business entity?
MinuteBox is entity management software built by legal professionals for legal professionals, including compliance officers whose mandate is to enforce protocols that keep the corporation in compliance with the laws.
MinuteBox helps your organization manage both governance and compliance through:
- Automated compliance calendars — Never miss a filing deadline with automated reminders for annual returns, renewals, and regulatory submissions
- Organizational charts — Maintain clear visibility into corporate structure, officer appointments, and reporting relationships
- Document management — Store and organize board resolutions, shareholder agreements, and governance policies in one secure location
- Compliance tracking — The platform highlights errors, statutory non-compliance, and date-based compliance tasks that may be lacking
- Audit trails — Maintain complete records of all changes and approvals for regulatory review
Entity management systems are designed to automate workflows and streamline the process of enforcing governance and compliance. Establishing governance and compliance frameworks requires an arduous amount of administrative and clerical work to create effective protocols. Entity management software saves invaluable working time by streamlining the workflows.
Governance and compliance are important requirements for any business entity. Using an intuitive entity management platform like MinuteBox, you can ensure your corporation abides by these frameworks and functions at the highest standards of excellence.
