Two Step's Private Company Equity Management Blog

Recently a Corporate Focus customer posted an interesting comment on our LinkedIn Discussion Group. In her opinion, there should be a special "Twelve Step" program for people looking to break their years-long addiction to paper documents and go electronic with their minute books. This poster shared that she herself wants to "go paperless," but is finding it difficult to make the switch.

Although I don't actually have 12 steps to offer you, these 10 steps will help anyone looking to take their corporate records and minute book documents online. If you can think of any steps I've missed, I welcome you to add them to the comments.

1. Take a deep breath and admit that you are powerless over your paper documents and, as a result, your work has become somewhat unmanageable.
2. Write down exactly why you want to go paperless.
   • To help you get started, here are some reasons I've heard from our customers:
     • They want easy access to their documents from home and at work.
     • They want to provide access to their clients.
     • They want attorneys to have easy access to critical documents.
3. Determine which minute book-related documents you want to scan.
   • I recommend scanning a company's articles of incorporation/organization, the ongoing minutes for the company, and stock certificates and option agreements.
   • Depending on your situation you might want to scan more or fewer items than this.
4. Buy a high-quality scanner.
   • If you don't have a simple way to scan documents as you receive them, you will find it too easy to skip the scanning process.
   • I recommend the ScanSnap S1300, which is small and easy to use. We use it here at Two Step and are very impressed by it.
   • Ignore this step if you have someone who will do the scanning for you (and if you do, consider yourself lucky!).
5. Find yourself a consolidated online system that allows you to easily store and view your scanned documents.
   • There are many systems available that may fit your needs.
   • If you need to scan minute books and other entity and ownership records, check out this short slide show featuring Corporate Focus sample screens.
6. Start with a reasonable goal.
   • After you've found the right system, begin by scanning only new documents that come across your desk, or initially select only certain key clients.
   • The trick is to not let the work overwhelm you; that will prevent you from scanning documents consistently.
7. Expand to more documents.
   • Once you've achieved your initial goal, such as scanning all new corporate documents, start going back and scanning historical minute book documents.
   • Schedule at least one hour every week to scan your historical documents. Put it on your calendar as a recurring event so that you don't forget. In no time, all of your minute book documents will be online.
8. Show off and share your work.
   • If you are taking the time to make your minute book documents paperless, be sure to show your boss and let her know where she can access the documents.
   • When others are able to open a document electronically in seconds for the first time (compared to hours of searching for physical documents), the time you spent scanning in all of the documents will have paid off.
9. Review, review, review.
   • Every 3 months, review your scanning process. During this review, check to see if there are any additional document types you want to scan.
   • You might also want to see if your system has any upgrades that make the process even easier for you.
10. Help others.
    • Going paperless takes a lot of work and commitment. As soon as you've achieved success, why not share your experiences by posting your thoughts to our discussion group or writing your own blog post? I'm certain others will appreciate your help.

If you have not yet started moving toward paperless corporate records and minute book documents, the time is now. Our Corporate Focus customers have done it for thousands of entities and, without a doubt, they are all glad they did. Want to hear some real feedback from lawyers who have already gone paperless--and are reaping the benefits every time a client calls? Just read one of our user stories.

Earlier this year, one of our law firm customers, Andrews Kurth, LLP, came up with the novel idea of adding a fixed-fee "Start-Up Organization Package" to its legal service offerings. According to Alan Bickerstaff, a partner in the firm's technology and emerging companies group, the package provides a comprehensive set of legal services designed for "young entrepreneurs who want to start a new company, typically technology-related." The complete set of services is described at www.andrewskurth.com/startup.

At Two Step, we were pleased to see that some of the services listed in the start-up package relate directly to Corporate Focus - such as tracking entity records, ownership administration, preparation of capitalization tables, and online minute books. In fact, one section of the description notes:

Capitalization Matters

• Entry of all initial capitalization data and corporate records into capitalization tracking software and corporate records database.
• Software provides the capability on an ongoing basis to:
• Track all stock and option issuances and cancellations
• Maintain copies of corporate records and minute books
• Produce a wide variety of capitalization reports
• Provide start-ups access to their capitalization and corporate records via the Internet

The list even mentions direct client access to online corporate records, which seems to be offered by an increasing number of firms today.

Fixed-Fee Package for Start-Ups Offers Capitalization Tracking

If a law firm is to provide such an expansive set of legal services for a fixed fee, they must possess a high degree of confidence in their ability to work efficiently. The key to this confidence is having a centralized, secure platform for managing entity and ownership records, online minute books, and capitalization tables. Such a system ensures not only that all information is accurate and up-to-date, but also that no time is wasted searching for it.

While Andrews Kurth has certainly broken new ground, many other firms are testing the waters in a similar fashion and exploring ways in which they can serve their corporate clients better.

So, is this the dawn of a new trend for law firms serving the emerging company and technology start-up marketplace? It certainly makes sense; after all, this is one of the most important and profitable client segments for any firm, since start-up clients lead to financing, merger and acquisition, and public offering work down the road. As a partner at one of our law firm customers recently said, the broader you cast your net in the start-up sea, the more likely you are to find exciting clients who need high-value transactional work.

Scott Glickson from McGuireWoods, LLP (another client of ours) puts it best: "Corporate Focus streamlines activities so that we create a more favorable impression with the client, which leads to more business, more referrals, and more value all around ... We all have access to the same information, and we can access it at the same time."

As law firms increase their use of productivity tools such as Corporate Focus they are better positioned to offer cost-effective legal services to start-ups that are cash-strapped and trying to prepare for their first round of venture financing. If firms serve them well in the early years, these budding companies are destined to become satisfied clients who will one day require more sophisticated and profitable legal services.

Watch an online demonstration of Corporate Focus if you'd like to learn more about how to make your firm more productive.

OK. We can all agree that organizing your files is no fun. In fact, if it doesn’t affect your work, you might want to put it off as long as possible (like cleaning your closet, flossing your teeth, or losing 5 pounds). But if you’ve already determined that getting organized is essential to your success, how do you take that first step - especially when there’s really no end in sight?

The lawyers who use Corporate Focus have not only taken the first step; many now have every minute book document and stock ledger record fully organized in a centralized system - and it’s paying off in greater productivity, better client service and fewer headaches.

If you didn’t spring to action when you heard it was National Organize Your Files Week, let me take this opportunity to give you a little nudge in the right direction. Whether you think of it as the first of 12 steps to recovery - or just choosing an apple instead of chips - here are three simple things a corporate paralegal can do that will start you on the path toward having your minute books and ownership records meticulously organized.

Organize Your Way to Better Productivity - Step 1

Warning: Any one of the following activities may cause you to be more efficient and effective in your legal work.

1) Inventory Your Minute Books: Use a spreadsheet and make a list of the name of every company for which your firm has the minute book. List the name, the date you located it, its location, and who is the primary contact at your firm for the minute book. Also, note (for Item 2 below) whether the stock ledger records are kept in the minute book or kept separate.

Tip: If that seems overwhelming, try to make a list of just 25 minute books. Now that you have the process, another 50. Then, another 50...you get the idea. 2) Inventory Your Stock Ledgers: Same process as above, but this time, make a list of the stock ledgers for each company where the stock ledger records are kept separate from the minute book.

2) Inventory Your Stock Ledgers: Same process as above, but this time, make a list of the stock ledgers for each company where the stock ledger records are kept separate from the minute book.

Tip: Keep in mind that you need to know where a ledger is and who is responsible for it, since you will need to look through the stock ledgers later on and fill in gaps.

3) Inventory Your Capitalization Tables: Same process as above, but this time, make a list of those companies for which your firm maintains a capitalization table in a spreadsheet file. This may be a small percent of those companies for which you have the minute book or stock ledger. Only those companies with more complex ownership records or different classes of stock or options will typically have a cap table.

Once you’ve completed these small tasks, let us at Two Step Software know when you’re ready for Step 2. Getting organized might seem challenging, but it’s just a matter of taking it one step at a time.

Imagine what you might get done before July 4th, when we’re encouraging everyone to stop organizing their files for the entire summer. And how great would it be if you could be more productive, organized and effective when you get back to the office after Labor Day. Before you know it, you’ll be ready to transition to an online system like Corporate Focus. Once you do, you’ll be spending National Organize Your Files Week on vacation.

Watch the Corporate Focus video to learn what it would be like to have all your entity, ownership, minute book and compliance information and documents in a centralized, online repository.

When Brenda Johnson was taping together the burned and tattered pages from a client's many minute books - after a fire destroyed the building that housed the client's business records - she thought, "Thank God this can't happen to our other clients." This is because her law firm, Bingham McHale, now has over 1,500 client minute books stored safely online in Corporate Focus.

For more than 10 years, this 140-lawyer, Indianapolis-based firm has been using Corporate Focus to centralize and standardize its corporate client records. As Brenda puts it, "It makes our attorneys more efficient and responsive to our clients, since from any one of our five offices, an attorney can pull up the minute book online right from their desk."

For Brenda and her fellow paralegals, Corporate Focus eliminates the need to have to first find the minute book - and then go through the tedious process of taking the document out, removing the staples, copying it, sending it to the client, re-stapling it, and putting it back in the minute book. Now, they can just open the document in their browser and send it to a client in a few clicks. Without a doubt, Bingham McHale's attorneys and support staff can work faster, smarter and more accurately as a result of having centralized their minute book records.

Some Bingham McHale clients have direct access to their minute book information and documents - and some do not - but they all understand the numerous advantages of using Corporate Focus. Recently, the firm sent out a letter to every client along with a copy of the Corporate Focus data sheet. The letter notified clients that their data had been centralized in the firm's system, and asked for any updates for the purpose of keeping the information current. Corporate Focus not only impresses clients with its productivity benefits; it also encourages them to take on the responsibility of advising their attorneys about any changes in their legal status.

In advance of her annual review at the firm, Brenda checked her statistics related to how much she had accomplished with Corporate Focus over the past year. She found, to her amazement, that she had entered almost 100 new companies, updated more than 400 companies, and scanned in more than 7,000 documents.

We at Two Step Software are equally impressed. That's why we've made Brenda Johnson one of our Corporate Focus Superstars.

Our friend Brenda is only one of the many Corporate Focus Superstars out there who are using this system to make their lives (and those of their clients) a little bit easier every day. Let us share your success story with others - and of course, we'll add you to the roster of Corporate Focus Superstars.

Great work, Brenda!

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. 

A few days before his inauguration, Barack Obama told John King on CNN: 

 "Here's the good news ... we have a lot of investment in making the health care system more efficient. Just a simple thing like converting from a paper system to electronic medical records for every single person can drastically reduce costs, drastically reduce medical error, make not only health care more affordable, but also improve its quality." 

When I heard this, I imagined for just a moment that he had said "electronic legal records" instead. For years, law firms and medical practices have been slowly migrating their voluminous paper client records to online systems that can be easily searched, tracked and recalled—whether one is searching for the date of incorporation or the last measles shot.

And “slowly” is the key word here.

Historically, administrators and IT personnel have had a heck of a time getting the highest-paid professionals—doctors and lawyers—to use computers or even type prescriptions and client notes. In fact, the age-old joke is that the worse a doctor’s handwriting is, the better the doctor. (My father and two brothers are doctors and I'm a non-practicing attorney, so I know from whence I speak).

About 5 years ago, I noticed that my dog's veterinarian had all of his doggy records entered in a computer system. Every X-ray, shot, cough, bark, and poop sample was recorded and up-to-date. As the proud parents, my wife and I had online access to our pooch's entire medical history. The same was true for my dentist and for my son's pediatrician. None of them could answer a question without consulting the computer in the examination room.

However, my own physician had to flip tediously through a folder when I asked him a question about last year's physical. And when my wife went in for a procedure that required general anesthesia, the doctors were running around looking for the misplaced three-ring binder containing information on her allergies as well as our consent forms. I was shocked that these reputable practices were still stuck in the dinosaur age of client information management.

Sadly, these same examples apply to 90% of the attorneys in the country, despite the fact that unlike doctors or veterinarians, attorneys are charging $400-$1,000 per hour and can well afford to implement a modern electronic records system.

Having worked with hundreds of law firms over the past decade, I've never heard an attorney disagree with President Obama's basic premise that converting from a paper system to electronic records would drastically reduce costs, reduce errors, and improve service quality. For instance, Philip Beck of Bartlit Beck, The American Lawyer Litigation Boutique of the Year Firm, explains their use of technology: "In the office, we have immediate access to whatever information has been stored on the computers, and we can sort it and analyze it instantaneously, without waiting for help from support personnel."

Yet despite the fact that the benefits of an electronic records system are crystal clear—for law firms and their clients—it’s simply not happening in most mainstream practices today.

So what will ultimately entice these firms to make the switch? The transition process itself takes a good amount of time and effort, even if the actual costs are minimal. Will it be the sagging legal market that is crying out for greater efficiency as firms lay off attorneys and staff? Will it be partners watching profits drop or competition for new clients grow? Will it be clients that are demanding lower legal fees and 21^st-century service capabilities, such as self-service portals and 24/7 access to information? 

Imagine the impact on corporate America's legal bills over the next decade if every in-house counsel, CFO and board member for every venture-backed and public company could find all of their minute books, capitalization tables, contracts, due dates, and invoices online—from anywhere, at any time and without paying a single dollar in legal fees.

I'm just asking all the lawyers in America to think about what their doctor friends are about to be mandated to do—and then think about the millions of paper legal records sitting in their offices, growing more cumbersome by the minute.

It may be a challenge for an industry that has typically been a technology laggard, but in the spirit of change, why not practice a can-do attitude when the next technology project is proposed? Think about the positive impact on your bottom line: "Yes We Can." Think about the greater efficiency and productivity: “Yes We Can.” Think about being able to offer exceptional service to your clients in an increasingly competitive legal environment: "Yes We Can."

Susan L. Preston, Of Counsel, from the Strategic Planning and Development/ Corporate Finance Group of Davis Wright Tremaine LLP once said to me:

“…Our clients expect us to do everything we can to maintain and preserve their important records.  It is imperative that we take the necessary precautions …in order to protect them from events that would interfere with their doing business.  Anything less would be unacceptable….”

What if a client needed to immediately inform an investor how many stock options were granted at the end of last year?  Could you give them the answer in minutes or would you need to tell them you would have to get back to them because you needed to search through your Excel files or some of the original minute books?  What if, at the last minute, you couldn’t find the original minutes that granted 10,000 stock options to the CEO on Dec. 1st and you were concerned that the number in the spreadsheet was 1,000 and you think that’s wrong?

Protecting your client’s business is a big responsibility and it means you need to have all the information and documents that are currently contained in your minute books available in their entirety, in a single location, so that you no longer need to find the original documents to do your work.  That’s why a shelf, or even a room, housing all those three-ring binders will just not suffice anymore.  You need an online minute book system. Whether it’s for information management, information sharing, or business continuity, “… Anything less would be unacceptable ….”

If you’d like to learn more about electronic minute books, I’ll be teaching an online seminar on the basic implementation steps for online minute books for Estrin LegalEd's TeleSeminars on July 10, 2007.  Estrin Legal Ed is a training organization tailored to meet the needs of legal professionals.  You can sign up for their online seminars at Estrin’s website: www.estrinlegaled.com/virtual_seminars.

If your law firm or company doesn’t have online and immediate access to all your clients’ governing documents, ownership records, and minutes and consents … for all your clients or subsidiaries, then you’re not protecting your business.