Why use a solicitor to prepare Corporate Governance Documents when you can use Generative AI?
AI tools are readily accessible, produce instant results, and can create documents which appear professional and accurate at first glance. However, appearances can be deceptive. The rise of generative AI tools such as ChatGPT, Claude, Copilot and Gemini have seen some business owners and directors consider using AI as a first step when preparing corporate governance documents.
As a firm, we are increasingly being asked to review documents which have been generated, in whole or in part, using AI. AI generated documents are often significantly shorter than would be expected, omit key provisions, and fail to address important practical and legal considerations. While they may look ‘polished’, they can leave businesses exposed to risks which only become apparent when a dispute arises or a transaction is being scrutinised.
Why quality prompts are crucial for Generative AI
One of the main challenges is that the quality of AI generated output is heavily dependent on the quality of the prompts provided. To obtain a robust document, a user must be familiar with the legal issues which need to be addressed and the provisions to be included. The absence of the foundation of legal knowledge and experience can mean crucial elements are overlooked. Even carefully drafted prompts can produce inconsistent results, with AI placing greater emphasis on some instructions while overlooking others.
Data protection risks with Generative AI
There are also important data protection and confidentiality concerns. Entering personal, commercially sensitive or confidential information into publicly available AI platforms may expose businesses to risks, particularly where the handling and retention of data is not fully understood.
Generative AI "hallucinations"
Furthermore, generative AI can produce inaccurate or misleading information, often referred to as "hallucinations". The challenge is that these errors are frequently presented by the chatbots with confidence and authority. Without the benefit of specialist legal expertise, it may be difficult to identify where the document departs from the law, omits a necessary provision, or includes drafting which is unclear or unenforceable.
Why effective drafting of corporate governance documents matters
Bespoke articles of association, shareholders' agreements, employee share plans and other governance arrangements need to reflect the specific objectives, ownership structure and future ambitions of the business. Effective drafting requires an understanding, not only of the law, but also of the commercial realities and relationships between the individuals involved.
We help our clients with an initial consultation, focused discussion and questioning, where we can identify issues which may not have been considered and help ensure the end result supports your business’s long-term objectives. This understanding of your business means we may recommend future-proofing articles of association to accommodate alphabet shares, or implementing provisions which facilitate external investment, or succession planning, or ensuring an employee share incentive arrangement can be introduced efficiently at a later date.
While AI can undoubtedly be a valuable tool, assisting with research, generating initial ideas and helping businesses understand unfamiliar concepts, it should be viewed as an aid or assistant rather than a substitute for professional legal advice.
The cost of obtaining properly drafted governance documents is often modest when compared to the potential consequences of relying on documents which are incomplete, inaccurate or unenforceable. In our experience, investing in expert legal advice at the outset can save significant time, cost and uncertainty in the future.
Generative AI is a powerful assistant, but when it comes to the documents that govern your business, human expertise, commercial judgement and legal experience remain indispensable.
How Hamlins can help
Our Corporate team acts for entrepreneurs, SMEs and larger organisations, providing corporate, commercial advice and business expertise, both in the UK and internationally. To find out how bespoke corporate governance documents can help protect and support your business, please get in touch.