If you are considering offering fractional general counsel services to a client, you must be aware of two material issues which determine how that service can properly be structured and delivered. The first is a tax issue. Under the off-payroll working rules, sometimes referred to as IR35 or disguised employment, there is a risk that an individual who is in substance performing the role of an employee, but who is not taxed as an employee, may be treated for tax purposes as being in an employment relationship. If that risk materialises, the entity through which the individual's services are provided, which in this case may be the Firm, could become liable for tax and National Insurance which would otherwise have been accounted for by an employer.
That risk is most likely to arise where the individual is working inside the client's organisation in a way which has the trappings of employment. Examples would include being given a client email address, laptop, internal title or reporting line, being held out by the client as a member of its business, being expected to attend internal management meetings as part of the client's team or being treated as the person who will pick up whatever legal or business issue the client requires. A particularly important factor is mutuality of obligation, meaning that the client is obliged to provide work and the individual is obliged to undertake it. Those features would be common in an employed general counsel role, but they must be avoided in any fractional general counsel arrangement provided by the Firm. The service must be structured as the provision of external legal advice by the Firm, not as the supply of an employee-equivalent resource to sit within the client's organisation.
The second important point is professional independence. Even if the client would like to think of you as its internal general counsel, your duties remain those of a solicitor acting through the Firm. You must act as a reasonable solicitor would act. That means taking instructions, advising the client on the relevant legal and practical risks, explaining the options available, giving the client time to make an informed decision, and then acting on the client's instructions once that decision has been made. An employed general counsel may often be part of the client's own decision-making structure and may, as part of that role, decide that certain legal or commercial risks are not material to the business. That is not the role of a solicitor providing external legal services. The decision whether to accept, discount or reject a risk must remain the client's decision.
Accordingly, any fractional general counsel service should be provided through defined instructions or workstreams, even where those instructions sit within a periodic retainer or fixed-fee arrangement. There must be a conflict check where required, the client's instructions must be identified, and the advice must be given in the ordinary solicitor-client way. It is permissible, and often helpful, to reflect your knowledge of the client's business and risk appetite when giving advice. For example, you may explain that a particular risk exists, but that, based on your understanding of the client's previous approach, the client may well regard that risk as immaterial or as one it is prepared to accept. However, all risks must still be identified, and the final decision must still be taken by the client. You could provide in the scope of your Engagement Letter certain exceptions to your duties, eg to discount certain lower impact factors. Be cautious if doing so, this is not advised, as it's better to flag everything for the client or to craft any limitation around the scope of your service in a specific way to that specific piece of advice. What might be immaterial to one piece of advice, might be material to another, so best be specific each time. You must never make a business decision for the client or act as part of its management.
There is no separate issue with creative pricing. Fixed fees, capped fees, monthly retainers, discounted matrices or other alternative pricing structures can all be used, provided they do not change the underlying nature of the relationship. The client must still be engaging the firm for external legal services, and not acquiring the services of someone who is, in substance, operating as an employee or internal office-holder. For that reason, any engagement letter for fractional general counsel services must be drafted very carefully. It should make clear that the services are provided by the firm as external legal advisers, that the solicitor is not an employee, officer or member of the client's internal team, that the client remains responsible for all business decisions, and that instructions, conflicts, scope and supervision will be dealt with in the ordinary way. Before any such engagement letter is sent to a client, it should be run past the firm's General Counsel.