The Evolving Role of the Corporate Lawyer

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Written by Dr. David Wain, Chief Legal Officer AX Group 

A corporate legal office (CLO) can be generally described as the department within a commercial organisation which is vested with the responsibility of overseeing every legal aspect of the business. In the past, this role was generally incorporated within the ‘administrative’ function of an organisation, with specific legal services being farmed out in a reactionary manner. Today, the legal function within the organisation plays a far more critical role than it did in the past, given the greater scrutiny of the business overall and the continuous increase in oversight regulation.

From the perspective of the legal professional eyeing a career as a corporate lawyer, it presents challenges and opportunities for professional growth not normally faced by legal professionals regularly operating within law firms or by practitioners with an array of different clients – and it makes for a very interesting job!

IS A CORPORATE LEGAL OFFICE NECESSARY, OR EVEN DESIRABLE?

Both the local and the global business climates are changing rapidly, and an organisation has to demonstrate the required nimbleness to change strategy as required in order to survive and flourish. The inherent risks triggered by this necessary approach are both reputational and financial nature and are further exacerbated by the growing number of laws, regulations, data security considerations and an array of other matters.

Generally, given the greater scrutiny over business overall and the incessant increase in oversight regulation, one could argue that a corporate legal function is required notwithstanding the size of the business. Due to financial constraints, not all organisations will find an internal employed legal office viable. However, irrespective of whether the resources of an organisation command a ‘full time’ or ‘part-time’ function, it is key, in the context of the developing business reality we are living to be proactive rather than reactive. This has led to an increasing number of local corporations investing directly in legal talent. There is an increasing awareness of the fact that while external counsel may be extremely adept at fixing something once it has already happened, disentangling and solving a problem is generally much tougher and riskier than preventing one.

Enterprise risk management is an increasingly crucial part of the CLO’s role. The CLO must be aware of the potential risks facing the company and make sure appropriate procedures are in place to prevent these risks from arising and to address them in the event they do arise. The immediate and widespread availability of information (and misinformation) in today’s ‘Internet Age’ has increased the velocity with which a company can suffer material reputational and financial harm.

One of the most recent issues to capture the public’s imagination landing on CLO’s lap was the General Data Protection Regulation (GDPR), which entered into force in May of last year. For AX Group, which employs in excess of 1,000 people and comprises around 35 companies, the task towards ensuring compliance was complex and stimulating, with our Legal Office leading the process from the advisory stage all the way through to implementation.

The project started off with an analysis of the relevant legal provisions, following which an analysis of such provisions in the context of the extant procedures within the AX Group was conducted. Following the analysis, Legal Office offered recommendations for compliance, and finally project-managed the implementation of a framework meant to facilitate such compliance.

FROM LEGAL TECHNICIAN TO CORPORATE ADVISOR AND MANAGER

The creation of an internal legal function within an organisation opens up further the possibilities of obtaining value, as it departs from the idea of a lawyer being a ‘legal technician’ to one where he or she is considered as an adviser, who will advise the business when changes are made to the laws and proactively providing legal solutions to business quandaries which increases value. This is besides the more traditional ‘advocacy’ role which was traditionally carried out by external counsel.

Therefore, the legal professional heading a corporate legal office, the Chief Legal Officer or General Counsel (depending on the organisation) should be a strategic business partner on the senior executive team. This requires the development of a set of skills that a legal professional is not necessarily trained for. It will be difficult, if not impossible, for a corporate lawyer to recognise and assess risks to the company and its business if they are not adequately informed about the company’s business, strategies, etc, and do not have a good understanding of the markets within which the organisation operates.

Furthermore, business acumen is critical. The CLO is often expected to wear many hats – that of Company Secretary, Chief Compliance Officer, Chief Privacy Officer, Chief Corporate Adviser, just to name a few. Therefore the robust marriage between legal knowledge and business understanding is crucial to a CLO’s skills set. To acquire credibility in his or her organisation, the corporate lawyer must understand the business, know his or her industry, and be able to provide strategic alternatives and ideas on both legal issues, as well as business issues affected by material legal considerations. Raising awareness and sensitising senior management to legal risks in a fast-paced business environment requires the CLO to be trusted and recognised as a leader within the organisation, being patient and diplomatic, whilst persistent and unwavering whenever required.

The Law must Change

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Written by Mr. Angelo Xuereb, Chairman AX Group

The following are my comments on how we can improve the new construction laws for the benefit of all those concerned. They are based on my 45 years of practical experience in the construction industry.

Excavation adjacent to party walls

During my tenure as president of the Fede­ration of Building Contractors (FOBC), we had presented our concerns and published an article in the Times of Malta on January 7, 2007, with our recommendations. Most of its content is still applicable today, although the challenges now are more acute due to developments requiring deeper excavations.

For more than 12 years, we have been highlighting the need to change the law – specifically Section 439 of the Civil Code – stipulating a 76cm distance of excavation from third-party walls. This law came into force over 150 years ago (1868) with the purpose of protecting the stability of wells, not adjacent buildings, and has remained unchanged since.

The law states: “It shall not be lawful for any person to dig in his own tenant, any well, cistern or sink, or to make any other excavation for any purpose whatsoever, at a distance of fewer than 76 centimetres from the party wall.” In that era, developers would have had no real reason to cut rock to construct basements since in those days there was ample space for development.

Today, the circumstances have chang­ed, and it is imperative that structures are designed within the boundaries of each individual site while making the necessary allowances for the stability of nearby structures.

Ultimately, having a blanket requirement to leave a gap of 76cm from the third-party wall up to the neighbour’s foundation does not serve to protect neighbouring structures. This leads to the practice of either having the overlying structure supported by the dividing wall or creating a huge cantilever structure at ground level.

The problems usually present themselves when the adjacent property decides to repeat the same methodology, resulting in the foundation of the dividing party wall being left in a very weak and dangerous state. The fragile, narrow rock left in between the properties is prone to give way under heavy loads.

Similarly, the law – Section 407 of the Civil Code – regarding the thickness of the party walls, must also change. It does not make sense anymore to have 230cm- or 380cm-wide walls. These walls are being abused by irresponsible chasing horizontally on both sides.

In short, these two laws, namely Section 407 and 439 of our Civil Code related to the party wall, must be amended to reflect today’s realities.

The Site Technical Officer

While I agree that all sites must be supervised by a Site Technical Officer, I do not agree that there is a need to appoint an independent STO. I will explain the reasons for this further on.

Any development needs three entities – the developer, the architect and the contractor.

The developer is not expected to be technical, which is why an architect is appointed to provide direction on all technical matters.

The architect is responsible for the design of all the drawings and structures, including excavation, foundations and other technical matters. The architect may appoint other specialists such as geologists, structural engineers and interior designers, where necessary.

It is a known fact that architects are normally involved in several projects being developed simultaneously, which means it is impossible for them to physically attend each site every day. But the architect should have the obligation to visit the sites periodically and when needed.

It is hard to believe that a hawker dealing with a few hundred euro needs a licence to operate while a building contractor dealing in millions does not need one

The architect may appoint his or her representative to oversee a project and coordinate with the contractor to assure himself/herself that their design is being adhered to properly, with the ultimate responsibility still lies with the architect.

The contractor is responsible for the method statement, construction management plan (CMP) and the construction and supervision of all works related to their contract. This means they need to appoint an STO or a project manager to follow the design and other instructions from the architect.

The contractor’s role is to give a service to the developer based on the design and instructions of the architect.

No need for independent STOs

If the three aforementioned entities adhere to their responsibilities, there should be no need to appoint an independent STO. This additional role would create disagreement and confusion between the three entities that can easily end up with litigations, with the possibility of delaying the project time frames to the detriment of all those in­volved, including the neighbours.

Registration and licensing of contractors

It is hard to believe that a hawker dealing with a few hundred euro needs a licence to operate while a building contractor or an excavation contractor dealing in contracts worth millions does not need one! With immediate effect, the Building Regulation Office (BRO) should start with their registration, followed by their classification.

This would help inexperienced developers choose the right contractors that fit the size and expected quality of their development. It would be like the classification of hotels based on certain standards. If one chooses to stay in a 3-star hotel, they would not be expecting a 5-star service, and vice versa.

To develop large projects, the requirements are more intense, with more responsibility and a higher price to pay. In this way, the developer has the liberty to choose the classified contractor and receive the service for which he is paying.

In conclusion, developments involve many other trades, but I have kept my short comments only in relation to third party walls, construction/excavation and site responsibility during the construction phase, as well as licensing.

If these are adhered to, I am sure we can have more quality projects, more reliable methods of construction, excavation and, above all, more protection to the neighbours and the surrounding residents.

All We Have are Moments

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Written by Charmaine Attard, General Manager Hilltop Gardens and Simblija Care home
Elements of the “Butterfly Model” were included in the framework used for the Butterfly Unit in Simblija Care Home. The Butterfly unit is a memory support unit that houses residents who suffer from different degrees of dementia.

Dementia is not a specific disease. It’s an overall term that describes a group of symptoms associated with a decline in memory or other thinking skills. The condition can become so severe that it reduces persons’ ability to be themselves. Unfortunately there is no cure for Dementia. What we can do is help ease the symptoms and concentrate on giving person-centred care to individuals suffering from this disease which in turn would give them a better quality of life.

People are fundamentally emotional beings and although they might forget how to boil water or might forget the name of their child – they will react to the kindness they will react to something like a smile. The “Butterfly Approach” for dementia is based on empathy and activities that are focused on the moment.

It is a feeling of “being with” and not “doing to” the person.

One example that I would like to share is one of the resident rooms’ doors. Following the “Butterfly approach” which promotes individuality, we introduced the “memory box”. In n a regular unit the door would have a number however numbers might not mean much to a person with cognitive decline. A memory box is instead put outside of the client’s room with pictures the client may recognise, be it of them as a child, a picture of a parent, their wedding day, or a logo of their favourite team. These images act as wayfinding and help clients identify their room. Things like these touch people at the core of their emotions and in turn produce a reaction.

Another element used is colour and imagery on the walls. In all the rooms, the common room, corridors, and bathrooms colour is used to either colour-code a particular area, such as the toilets where the colour serves as a guide or acts as a trigger to elicit positive emotions. Doors of client rooms are made to look like front doors painted in the client’s favourite colour giving a sense of home and belonging.

Latest statistics show that there are around five thousand Maltese suffering from Dementia and this number will double by 2030. This means that measures to assist and care for people with Dementia have to receive wider recognition and use.  Nurses and carers need to be trained to think differently where dementia care is concerned and trained in giving person-centred care instead of the normal clinical care sometimes lost in bureaucracy, systems and procedures. In this way, dementia wards can portray real homes, heartfelt staff, engaging environments, and people really living good quality lives.

“As we become more emotional and less cognitive, it’s the way you talk to us, not what you say, that we will remember. We know the feelings, but don’t know the plot. Your smile, your laugh and your touch are what we connect with. Empathy heals. Just love us as we are. We’re still here in emotion and spirit, if only you could find us.” (Christine Bryden 2005)

The Answer is in the Balance Sheet

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Written by Michael Warrington, Chief Executive Officer AX Group

Business restructuring is tricky. There are a number of angles that can be adopted to turn a business around but the approach that I have always preferred is to start with a close examination of the balance sheet. It is there that many of the answers to the strategies that would be adopted will lie.

The balance sheet tells the story of what the business owns and what it owes. By delving into the numbers one begins to understand the challenges and opportunities that the business is facing.

Throughout my career, I have found business transformation exciting. I have been involved with numerous businesses in different industries varying from banking, travel and tourism, airline, construction, development, hospitality, healthcare, and financial services. In each of the businesses, I was always able to identify the key elements that made the business successful and then to look at the processes and identify ways to simplify and automate things.

I have been involved with the AX Group for almost 20 years and during that time I have seen the group grow and flourish. In the early days, the group was asset rich but like many companies in their growth phase, cash flow was challenging. I developed a good working relationship with AX Group chairman Angelo Xuereb. The combination of his entrepreneurial skill and my own financial acumen has served the AX Group well. One of the biggest tasks for the group was the transition from a family-run business to a corporation with a clear second-generation succession plan in place and strong management structures being implemented.

I think our prime objective now is to build clear structures within what is a very complex group of companies and to instil a culture of how structured decision-making should be undertaken. It is growing into a more formal and corporate structure than the one that existed in the past.

The group is also focusing heavily on its IT infrastructure to efficiently analyse market information and make informed decisions at all structure levels. I continuously ask myself questions about how we can improve things as there is always room for investment.

The group is asset rich and given the nearly 45 years of the company history, there are assets that are already in different stages of their ‘life’. AX Sunny Coast, which has been the first hotel investment is now 40 years old. One has to look at the property and ask if it stands the test of time or should be adapted? AX Group pioneered the timeshare market at the time. The self-catering apartments were big with large kitchens. Maltese and foreign holidaymakers alike travelled in big numbers. Perhaps families were bigger, perhaps the way people travelled was different. In either case, today people hop on a Ryanair for a weekend break and they don’t necessarily need large indoor areas for their leisure. These are the types of discussions and decisions that one has to make when looking at the business and its balance sheet. It will make me ask these questions and dig deeper to find the answers.

Spread the net wide but don’t spread yourself thin

The diversification from AX Construction to AX Development happened fairly quickly and was a natural progression. The Group built capital on the construction work that was contracted and started investing in the development of its own properties. The big jump was into hospitality. AX Group wanted to be involved in long term projects that would contribute to the economy of the country. We acquired land in Qawra that was ideal for hospitality development. With the right set of people managing the projects, we developed two properties that mark the beginnings of the AX Hotels chain. The next step was diversifying into care.

Before the AX Group decided to branch out into the care business, which in itself has certain similarities with the hospitality business, the management team carried out a gap analysis in order to understand the strategic assets that were essential prior to take this bold move. In this process, we learnt that we already acquired a number of them already namely the centrality and neighbourhood of the identified site, secondly the technical expertise required to develop a large scale project and thirdly an extensive experience in the four-star and five-star hotel industry. The gap analysis clearly identified an opportunity to acquire talent and expertise from the healthcare sector. We moulded it into the business and created a unique concept – the first retirement village on the island – Hilltop Gardens and Simblija Care Home.

Additionally, the reason for going into the care business was that unlike the construction and tourism sectors it isn’t characterised by cyclical fluctuations.

Work smarter not harder

Innovation more often than not is not revolutionary. It’s what they call creating a better mousetrap. Creating an evolution to what is already there but adding value to a process, to the operations in the restaurant, responding accurately to the market’s needs. These are very important mechanisms that improve the success of the group and the efficiency of my teams. When we acquired Luzzu a couple of years ago we knew that it was a very popular family place. We felt however that it didn’t address an important element that families encounter when going out with small children – entertainment. And so we created Luzzu with a dedicated large play area.

All I can say is that it’s been a very successful journey so far and I am looking forward to the exciting projects in the future with a view to delivering significant shareholder value and returns.

Don’t Put all Your Eggs in One Basket

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Written by Albert Bonello, Chief Financial Officer AX Group

One of the most difficult decisions that businesses face across the globe is whether to diversify or not. Business diversification can open up a number of opportunities, but the risks and uncertainty tied to this strategy can have long-term repercussions. So why do businesses opt for diversification?

The first thing that comes to mind is the concept of spreading the risk. It’s smart to hedge against fluctuations between industries, looking towards different audiences, evolving what the company knows about customers’ needs and their expectations.

Unfortunately, I have seen some businesses realise the need for diversification at a very late stage and hence the circumstances in which this critical decision is taken are generally rushed and not properly thought out. Managers and financial analysts are under pressure when asked to prepare projections, analyse market trends and look at competitive benchmarks. So what factors are to be taken into consideration to achieve a structured approach towards diversification?

Companies need to carry out internal analysis to identify the processes and abilities that generate sustained competitive advantage, which competitors cannot easily obtain. These are very often referred to as strategic assets. Such strategic assets may be a management team with strong entrepreneurial skills, the company’s superior purchasing power, or an extensive customer knowledge base in a specific industry. For instance, for the AX Group, the diversification from the construction industry into development happened fairly quickly. The Group built capital on the construction work that was contracted and started diversifying into the development of its own property portfolio.

Very often, companies fail with diversification because they assume that having some of the identified strategic assets is sufficient. Therefore, companies must ensure that a proper gap analysis is carried out to ensure that they have all the identified strategic assets in hand prior to moving forward with diversification. Any missing strategic assets can either be acquired externally, developed internally or be adapted to accommodate better customer expectations. Very often the strategic assets held need to be moulded and adapted to fit with the strategic assets acquired in order to create synergy and finally result in a successful diversification strategy.

A long-lived successful diversification strategy is one that is unique; not easy to imitate or substitute. How easy is it for competition to catch up by acquiring or imitating strategic assets built? Can competition create similar strategic assets that might be an alternative to customers? For example, Amazon had initially started as an online bookseller but eventually, the company became the largest retailer of consumer goods, even if it lacked a physical store network. Amazon was able to leverage its existing strengths by identifying and adopting the strategic assets necessary to create an alternative to the traditional retail industry.

Shareholders and investors alike would expect that a successful diversification strategy will give a competitive edge against other players. Before the AX Group decided to branch out into the care business, which in itself has many similarities with the hospitality division, management carried out a gap analysis to understand the strategic assets that were essential prior to take this bold move. Many of the strategic assets were already held by the Group. A few of these strategic assets were the centrality and neighbourhood of the identified site, the internal technical expertise on how to properly plan and develop the property and the extensive experience in the 4-star and 5-star hotel industry. Notwithstanding, a number of strategic assets and processes had to be adapted and acquired. For example, the Group had to acquire knowledge of the healthcare industry and eventually mould this knowledge with the existing hospitality and development processes to create a unique concept.

Above all, a structured approach towards diversification will lead to organisational efficiency that will enhance the internal expertise and knowledge for future diversification decisions. If planned well, diversification will lead to organisational growth and ultimately increase shareholders’ wealth.