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  • What Is an Enforceability Legal Opinion

What Is an Enforceability Legal Opinion

Legal advice should be taken into account whenever a transaction involves a foreign element on which UK lawyers cannot advise. A legal opinion confirms a party`s ability to enter into and perform its obligations under the transaction documents. Like other transaction documents, legal advice is generally “negotiated”; That is, drafted by one party (the opinion giver), subject to the review and opinion of the other party (the lawyer representing the recipient of the expert opinion). Most businesses start with their own standard form. Significant deviations from the standard typically require further discussion and additional internal approvals from the office. The assumptions and qualifications used in opinions have evolved through industry habits and are usually quite long (several pages are not uncommon), but generally not controversial. Most often, questions arise about the scope of the notice, including what documents should be covered and what comments are requested from the recipient. The “golden rule” is that lawyers should not ask others for opinions that they would not give themselves. When this rule is followed, expert opinion work usually goes smoothly, although sometimes there are real disagreements about the appropriate opinions in a particular company. Problems are likely to arise when the lawyer asks the opinion giver to comment on factual rather than legal issues, as legal advice should not be used as a substitute for a borrower`s statement of facts in transaction documents.

A legal notice identifies the legal risks and issues that the recipient should address in connection with the transaction. For example, a statement can identify certain documents that were not executed effectively and are therefore unenforceable. The beneficiary may use the problems mentioned in the notice to make further requests and, depending on the results of these investigations, to decide whether other forms of protection (e.g. B, warranties and indemnifications) are necessary. Late requests for expert advice that require the borrower`s advice to perform additional work are often problematic due to time constraints. In addition, the due diligence of opinions sometimes reveals problems with organizational documents or credit documents that need to be resolved before the notice can be rendered and the transaction can be completed. For these reasons, it is best to agree on the scope of a statement and complete the opinion diligence as early as possible in the transaction process. Although the forms vary widely, most legal opinions contain the following: Legal opinions are often sought on cross-border transactions, especially in transactions involving the acquisition of companies, credit and securities transactions, and transactions involving the sale and purchase of real estate. For example, if a transaction involves a Luxembourg company, the lender may seek legal advice from a law firm in Luxembourg to confirm (among other things) that the Luxembourg company is legally constituted and registered and that the documents it concludes have been validly executed and are binding and enforceable. Legal advice is often obtained as part of a banking transaction, but its importance is often overlooked.

This blog will explore the purpose of a legal opinion and when a lender might need to get one. The purpose of legal advice in a transaction is to provide an additional layer of security to the party receiving the notice. In lending transactions in the United States, it is common for the borrower`s lawyer to give an opinion to the lender (but not the other way around). The borrower`s opinions generally include (among other things) statements that, in the opinion of the borrower`s legal counsel, the loan documents are enforceable, the liens are perfected, the loan documents do not conflict with other specified documents, and the borrower is authorized by the borrower`s board of directors to enter into the transaction. The borrower himself usually makes similar insurances and guarantees in loan documents, but the legal opinion provides confirmation from an additional source – the borrower`s lawyer. If the borrower`s lawyer gives legal advice to the lender, the lender is entitled to rely on it, even if the borrower`s lawyer does not represent the lender. In addition to the work done by the lender`s lawyer, the lender may rely on the borrower`s lawyer, in addition to the work of the borrower`s lawyer, to review the loan documents and UCC financing statements, review other documents specified in the statement, and perform due diligence with respect to the borrower`s organizational documents and board resolutions. A legal opinion usually contains the following: lawyers can only give legal advice regarding the law of the states in which they are licensed to practice. As a result, in some cases, e.B. if the borrowing companies are organized in more than one state or if the real estate guarantees are located in more than one state, additional advice from local attorneys in those other states is warranted. These costs can add up quickly, so lenders and borrowers should consult with their lawyers and consider their respective arguments to determine whether the added value of these opinions outweighs the costs. The question sometimes arises as to whether or not notice should be required.

Parties should always consider the costs and benefits of taking advice when making such a decision. For the recipient of the opinion, it is better to get an opinion than not to get an opinion because of the extra security, but opinions are often laborious and expensive. Since these costs are usually borne by the borrower, this threshold decision is often the result of discussion and negotiation. Transactions involving large sums of money, unusual collateral, or borrowers with complicated organizational structures are the best candidates for required legal advice. In some transactions, such as. B in the context of syndicated lending operations, opinions are always awaited due to market practice. Legal advice can be a valuable document to protect the recipient by: (i) informing the recipient of the legal effect of completing the proposed transaction; (ii) identification of legal risks; and (iii) confirmation that a party is able to enter into and perform its obligations under the transaction documents. Also known as an “opinion letter”, legal advice is given in the form of a letter from a law firm expressing legal conclusions and/or analyses of a particular transaction.

The recipient of the notice will then rely on its content as the basis for concluding the transaction. A legal notice informs the recipient of the legal effect of the closing of the proposed transaction […].