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PLAYBOOK TEMPLATES

Operating Agreement

An Operating Agreement governs internal management and ownership rights of a limited liability company. This playbook highlights voting procedures, capital contributions, and dissolution mechanics.

Regulatory Compliance

Why This Matters: Non-compliance can lead to fines, sanctions, and reputational damage, impacting the transaction and long-term viability.

Negotiation strategy

If you're the Company:

Ensure that compliance clauses are comprehensive and cover all necessary legal and industry standards. Negotiate for strong audit rights to verify compliance.

If you're the Members:

Focus on limiting the scope of compliance obligations to what is reasonable and achievable. Seek to include provisions that allow for notification and remedy of non-compliance issues.

Essential elements

1

Compliance with Laws

Adherence to all applicable laws.
2

Audit Rights

Rights to verify compliance.
3

Notification of Non-Compliance

Obligation to notify of non-compliance.

Action framework

ACCEPT

Propose edits when compliance obligations are too broad or lack clarity.

EDIT

Reject clauses that do not include audit rights or indemnification provisions.

ADD

Add clauses for industry-specific compliance and detailed audit rights.

PRO TIP

Always ensure compliance clauses are tailored to the specific industry and transaction context.

Example clauses

FAVORABLE

Preferred Compliance Clause

"The Parties shall at all times comply with all applicable federal, state, and local laws, regulations, and ordinances in the performance of their obligations under this Agreement."
NEUTRAL

Audit Rights

"Each Party grants the other Party the right to conduct audits, at reasonable times and upon reasonable notice, to verify compliance with the terms of this Agreement."
UNFAVORABLE

Unfavorable Compliance Clause

"Clauses lacking audit rights or indemnification provisions require approval."

Fallbacks

High-Risk Projects

In high-risk projects, ensure compliance clauses are more stringent and include frequent audits to mitigate potential risks.

International Transactions

For international transactions, include compliance with international laws and standards, and consider local legal advice.

Technology Agreements

In technology agreements, ensure compliance with data protection and cybersecurity regulations is explicitly covered.
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