Key Malpractices in Legal Departments of Holding Companies

Below are the most prominent practices that should be avoided:

First: Limiting the legal role to formal review
One of the most common mistakes is viewing the legal department as a post-decision function, consulted only at the time of contract execution or after a dispute arises. This approach deprives the company of early legal prevention and turns the legal function from a decision partner into an error-correction mechanism. An effective legal department participates in shaping decisions, not just justifying them afterward.

Second: Absence of legal governance between the holding company and its subsidiaries
When subsidiaries operate without a unified legal framework, conflicts of obligations and inconsistencies in compliance levels arise, negatively impacting the holding company before regulators and investors. The solution lies in unified legal policies that respect the specific nature of each subsidiary without compromising the overall governance framework.

Third: Weak contract management and documentation
Failure to update contracts in line with business needs and operational developments, reliance on verbal change orders, or the absence of a centralized contract management system are among the most serious causes of loss of rights during disputes. Documentation is not an administrative formality; it is the first line of defense for the company’s interests.

Fourth: Overreliance on external legal advisors
Excessive dependence on external law firms without building internal legal expertise leads to higher costs and weaker institutional legal decision-making. The optimal equation is: a strong in-house legal department plus specialized external support when needed—not a permanent substitute.

Fifth: Treating compliance as a reactive function
Waiting for violations or fines to occur reflects a weak legal culture. Effective compliance is proactive, based on continuous monitoring of legislation and regulatory updates.

Sixth: Isolating the legal department from risk management
When the legal function is excluded from risk assessment, investment or operational decisions may be taken without adequate legal evaluation. Legal input is a core element of any risk matrix, not a subsequent stage.

Seventh: Weak management of disputes and claims
The absence of a clear dispute management policy leads to hasty decisions—whether escalation or settlement—without proper assessment of financial impact or legal reputation. Smart dispute management is based on analysis, not emotion.

Eighth: Neglecting legal awareness for operational departments
Recurring violations and disputes are often not due to bad faith, but rather to limited legal awareness among operational teams. Investing in legal awareness programs reduces disputes more effectively than any corrective action taken afterward.

Ninth: Absence of legal performance indicators
Lack of KPIs makes it difficult to measure the impact of the legal department or demonstrate its value to senior management. A modern legal department is measured by its ability to reduce risks, accelerate decision-making, protect the company’s reputation, and prevent disputes before they arise.

Conclusion
The legal department in holding companies is not a reactive function, but a strategic partner in decision-making, a guardian of governance, and a preventive tool before it becomes a dispute-resolution mechanism. The earlier the legal involvement, the lower the cost of risks, and the safer and more sustainable the decisions.