What is the Role of the Legal Department within a Company?

Therefore, it is fair to ask why legal departments are so important within companies. What are the functions and responsibilities of the legal team? What is its strategic role? 

The legal department within a company is responsible for ensuring that the organization operates in compliance with applicable laws and regulations. It is composed of legal professionals, often referred to as the company’s in-house lawyers.

In daily operations, legal monitoring takes up a significant portion of the department’s work. Lawyers must stay continuously informed about all laws and regulations relevant to the company’s activities. Since legal norms are constantly changing, this task requires a high degree of diligence to identify potential impacts on business operations at an early stage.

At the same time, the legal department serves a consulting and awareness-raising function within the company. It works closely with other departments to ensure the correct application of legal requirements, especially when rules are new or have changed.

Key responsibilities of the legal department include:

A good lawyer should ideally embody all of the following qualities and skills:  

• Mastery of corporate law: solid knowledge of all relevant legal aspects for the company
• Comprehensive knowledge of the business area: understanding the connection between law and the company’s operations
• High diligence and attention to detail: precise work and risk identification
• Good interpersonal and communication skills: clear, easily understandable presentation of complex issues
• Synthesis ability: capability to consolidate information and support decision-making processes
• Diplomacy and written communication skills: essential for contract drafting, negotiations, and legal disputes

The risks managed by the legal department can vary depending on the company’s business sector. Most of the regulations and disputes they deal with are industry-specific (banking, real estate, online services, food and drink, etc.).  

However, some risks are more general and remain the same even between sectors. They mostly tend to evolve along with technological innovations and societal shifts.  

According to a 2021 study by Cercle Montesquieu, the most common risks managed by legal departments are:  

• data protection, which is an issue for 82% of legal departments
• corruption and money laundering, tackled by 62%
• corporate social responsibility (CSR), a common challenge with 62%

These are followed by human and social issues, such as respect for human rights and diversity. All of the above are generic, in that they apply to all business sectors; however, a company’s concerns can always shift and evolve over time.  

For example, interest in data protection risks surged in 2018 following the introduction of GDPR (General Data Protection Regulation). In the U.S., compliance with Freedom of Information Act (FOIA) requests may also fall under the purview of the legal department in certain industries.

All companies have various types of contracts to manage, such as internal, the most common being employment contracts , and external, with suppliers and, of course, clients. These contracts are crucial documents, often processed in large volumes and handled by multiple parties and departments: purchasing, sales, human resources, finance, and of course, the legal department.  

Whether the contracts are related to purchasing, business negotiations, or even standard recruitment contracts, all of these documents must strictly comply with all the relevant standards. Why? Because even the slightest mistake can prove very costly, both legally and financially speaking, not to mention the issue of the company’s reputation if the dispute becomes public. For all these reasons, the role of the legal department is paramount when it comes to contract management.  

For all these reasons, the role of the legal department is paramount when it comes to contract management. Lawyers provide legal advice, help draft clauses, and ensure regulatory compliance. They also search for legal precedents and regulatory updates to ensure contracts meet current standards.

On a day-to-day basis, lawyers are responsible for ensuring that all contracts are compliant and that their performance is in line with all clauses. They also contribute to the process before the contracts are even signed, during the drafting and negotiation stages. This requires meticulous monitoring and regular discussions with other departments within the company.  

DiliTrust’s Contracts module is a Contract Lifecycle Management solution. In other words, it is a tool that automates the management of contracts throughout their lifecycle. As the brainchild of former lawyers, this tool makes legal professionals’ daily workload a great deal lighter and simpler, freeing up their time (and mental space!) for high-value-added tasks: providing legal opinions, giving advice, and making key decisions. 

The Contracts module helps legal experts do away with all the time-consuming tasks involved in contracts: drafting (copying/pasting clauses), searching for information, carrying out all manner of checks, and so forth. 

Thanks to algorithms that use artificial intelligence, contract management is not only easier than ever but also more secure, from drafting to signing, as well as the ongoing execution monitoring phase.  

The result is improved control over contracts not just for lawyers, but for all employees involved: the risks of disputes, mistakes and financial losses drop dramatically, while the speed at which contracts can be processed is much faster, allowing the company to sign more than ever before. 

Want to know more about our CLM solution?  

Find out more:

• How the Legal Profession is Using Technology to Thrive
• Your First 100 Days as General Counsel: Everything You Need To Know
• Digitalizing your legal department: three questions to consider before you get started