Updated November 24, 2020:

The dictionary definition of the word ‘ancillary' means subordinate, subsidiary, or supplementary. An ancillary business works on the same concept: they supplement the revenue and activities of the law firm.

It's a business enterprise created by a law firm or a lawyer that offers a range of law-related services. These services are not just limited to clients of the law firm, even folks who are not clients of the law firm/lawyer can avail these services. Essentially, ancillary businesses provide additional income and strengthen client relations.

Typically, ancillary businesses offer consultation services in areas like health care, education, and environment. They have also been involved in government relations or lobbying for clients.

However, ancillary businesses do bring a certain set of problems. Firstly, clients who avail non-legal service would have to waive their attorney-client privilege — lawyers can share certain information related to you. Secondly, there might be a conflict of interest where the attorney might recommend actions that benefit them financially but may not be in the best interest of the client.

To ensure that ancillary businesses do not create problems in the future, the American Bar Association implemented Rule 5.7 of the Model Rules of Professional Conduct in the mid-'90s. It stipulates:

  • Law firms and ancillary businesses run by non-lawyer owners may not advertise together along with prohibiting law firms to share legal fees with these owners.
  • Lawyers need to make it clear to clients that they would not be entitled to attorney-client privilege for services offered by the ancillary business.

What Is an Ancillary Agreement

Ancillary Agreement means any agreement (except this agreement) executed by parties or the members of their respective groups in relation to separation, distribution, and other transactions mentioned in the agreement. Ancillary agreements also cover any employee matters agreements, tax sharing agreement, the Transition Services Agreement, and more.

Examples of Ancillary Agreements

Here a couple of written examples for ancillary agreements that may show up in a document:

  • The article, paragraph heading mentioned in the ancillary agreement and this agreement are for reference purposes and shall not misinterpret the meaning of this agreement or any ancillary agreement in any way.
  • The ancillary agreement shall be executed and delivered by each party Parent, Sub REIT, REIT Merger sub or partnership Merger, respectively.

Overview of Ancillary Agreements

Ancillary Agreements are largely created by the buyer's counsel which is executed between the signing of the principal purchase agreement and the closing.

In most cases, conditions are listed in the principal purchase agreement or the closing. As a result, it sets forth documents, also known as practice notes, and the actions to be taken at closing.

Here are a few of the types of practice notes that might be helpful for such transactions:

  • Voting Agreements. It lists the voting rights of the shareholders in an acquisition transaction.
  • Confidentiality Agreements. It prevents parties in an acquisition transaction to open a competing business post-closing.
  • Intellectual Property Assignment Agreements and Licenses. It lists the points that involve the seller transferring intellectual property rights to buyers.
  • Employment and Consulting Agreements. It ensures employees work for the business during an acquisition transaction for a certain period of time in exchange for monetary compensation and other perks as described in the agreement.
  • Transition Services Agreements. It list downs the services a seller is going to provide to the buyer. Administrative, personnel, accounting, legal, technical are some of the services that are offered to the buyer for a definite period of time.

Types of Ancillary Documents

Here are the different types of ancillary documents :

  • Power of attorney. It allows someone to make decisions on your behalf. These include financial decisions, medical decisions.
  • Declaration of Guardian. It helps you specify who you want or don't want as a guardian of your estate or personnel.
  • Estate planning. They are supplementary documents that are attached to the main will.

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