Taking Stock of Taking Stock
71 Pages Posted: 6 Oct 2009
Date Written: November 7, 2002
Abstract
This Article critically analyzes the practice of lawyers taking equity in their clients as compensation for legal services. First, it explains that equity billing can provide significant private benefits to law firms and clients, and can also provide indirect public benefits. Second, it argues that equity billing can be usefully analogized to contingency fee arrangements. Third, it addresses ethical issues raised by equity billing. The Article concludes that a case cannot be made for prohibiting equity billing or capping the amount of equity that a lawyer can take in a client, and that the most appropriate form of regulation is heightened disclosure of equity billing arrangements, coupled with the pre-existing regime of ethical rules and fiduciary principles.
Keywords: Equity billing, Silicon valley law firms, taking stock, financial risk, bearing risk
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