Thursday, November 5, 2015
Bankruptcy is a legal proceeding in which you put your money in your pants pocket and give your coat to your creditors.
The nexus between better insolvency laws and economic growth is forthright. It has been established beyond doubt that the fierce and detrimental bankruptcy laws which ensures to protect the rights of borrowers and lenders, promote predictability, clarify the risks associated with lending, and make the collection of debt through bankruptcy proceedings more effective and pragmatic.
India witnessed an era of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and Board for Industrial and Financial Reconstruction (BIFR) as a failed mechanism for regulating bankrupt companies. The Indian laws are often termed as the toughest laws for the running of businesses in India.
The World Bank has ranked India at 142 out of 189 countries in 'resolving insolvency,' estimating that it takes 4.3 years on average in Mumbai to settle a case. In reality it takes much longer than that. To improve business condition in the country, Bankruptcy Law Reform Committee was setup by the government in Aug, 2014
I. Key reforms
The Bankruptcy Law Reform Commission headed by former law secretary TK Viswanathan has proposed the following key reforms:
1 Early recognition of financial distress in company and timely intervention by the government to rescue the organization. The first important suggestion is one that allows secured creditors to initiate rescue proceedings if a borrower fails to make good on any of its dues within a month of such a demand being made. The current rules under the Companies Act say that a borrower should be unable to repay 50% (or more) of its debt before debtors can initiate rescue proceedings. As the committee argues, waiting for a stage where a company has defaulted on 50% of its debt is probably waiting too long. By such time, the company would probably have turned unviable and a rescue would be unlikely. Act early, is the message.
2. One of the most prominent and paramount feature of The Bill is that it proposes insolvency resolution within 180 days and a new regulator to oversee the process. It's also laid down a clear and speedy system for early identification of financial distress and revival of companies. The prescribed resolution timeline of 180 days can be cut further to 90 days from the trigger date for key categories. The proposed insolvency regulator will cover professionals and agencies specialising in the field.
3. Liquidate non viable company at the earliest.
4. Permitting secured creditors to apply for the rescue of the company, as per the current law it was filled after the company had defaulted by 50 per cent of its outstanding debt.
5. Another feather in the cap was introduced by allowing unsecured creditors representing 25 per cent of the debt to initiate rescue proceedings against the debtor company.
6. The committee has been prudent enough to recommend individual solvency. The report incorporates provision on individual insolvency, a crucial area covering sole proprietorships and small and medium enterprises in India.
II. Crucial benefits
1. Improve the rank of India on ease of doing business
2. The Bill has proposed a number of changes to the liquidation regime, including changes for increased protection of creditor rights, maximisation of asset value and better management of the company in liquidation. Simplifying exit policy is one of the criteria considered by entrepreneurs before setting any organization.
3. It is also proposed that an early intervention by the government could salvage the entity from liquidation.
1. We have witnessed that several provisions which deal with the early intervention by the government to save organization from being defaulted are already available under various laws and have failed to resolve the issue further, ineffective implementation of existing laws are major problems.
2. There is lack of awareness, knowledge and information pertaining to the laws amongst the people who run and manage small businesses and micro enterprises, further they are managed by people who do not have much knowledge about laws and are largely illiterate thus, without required knowledge of existing laws, proper implementation seems to be a distant dream.
3. We anticipate that in lieu of getting subsidies and tax benefits through state intervention, there will be an tendency amongst the entrepreneurs to show a well running organization as a sick organization.
4. Although this may sound like an good news for creditors, on the flip side one needs to tread cautiously in giving the creditors unbridled power and leaving companies with fewer options to protect themselves.
The Industry sentiments about the proposed law seems that it will create a robust and globally competitive insolvency regime.
However lets not get carried away as if one recollects substantial opinions were offered about the state of the debt recovery tribunals. On paper, these were meant to speed up recoveries, but in practice, have done anything but that. Until this judicial bottleneck is cleared, little may change on the ground.
The present laws do not either help a sick industrial unit to revive itself or assist financial institutions to recover their money. A transparent bankruptcy law is overdue, getting a new bankruptcy law in place is critical in sending a message to promoters that the erosion of the sanctity of the debt contract, as it’s been termed by the RBI governor, must be reversed.
Further a new bankruptcy law, coupled with practical changes, removal of judicial bottlenecks and curbing delays will be crucial to the reform process.
Friday, October 30, 2015
Directors have been described as a company’s ‘directing mind and will’. Success of a company largely depends upon the proficiency, veracity and integrity of its directors.
Directors are the trustees for the enterprise, it is indispensable that management of companies should be in proper hands and thus it becomes obligatory to choose your board wisely.
The new Companies Act’s stipulates that every listed company or public company with a minimum paid up capital of Rs.100 crore or a minimum turnover of Rs.300 crore needs to appoint at least one woman on its board.
Further, SEBI has directed that, all listed companies must have at least one woman director on the board. One person cannot be a director on the boards of more than seven listed companies.
Reaction by the Industries:
Reaction By Women
Points in favour of Reservation
The extent to which your board is diversified board is directly proportional to the company’s success. That is true even with gender diversity.
Experts believe that companies with women directors deal more effectively with risk. Not only do they better address the concerns of customers, employees, shareholders, and the local community, but also, they tend to focus on long-term priorities.
Companies with women board members make more money. That’s the defining finding of a TOI-commissioned study on the relation between companies with women on their boards and profitability.
We can attribute one more advantage to the argument in favour of reservation, higher female representation may further lead to the empowerment of women and better representation of women in the corporate sector In India.
The Flip side
A recent case study revealed that few years back the Norwegian Government directed companies to increase the number of women directors by way of 40%. Many corporate reached this margin through window – dressing. The Norwegian companies, in order to comply with the norms of reservation promoted many women with much lesser experience than the directors before them to the position of the directors. This led to deterioration of business of such corporate. The Indian companies in current market scenario afford such a situation?
One really needs to be pragmatic and consider that if finding nearly 1000, women to have at least one chair on the BOD in companies is proving to be such a difficult task for Indian companies that out of the 242 women directors appointed last year, at least 45 seats were filled by women belonging to the promoter group companies? This effectively means that Corporate India is more interested in meeting the norm than being an actual driver of change and diversity.
Our point of view
The initiative to bring in more women in the Board is no doubt comes with an optimistic motive behind it.
The very idea of a unblemished BOD derives from the concept of corporate governance reflecting on to the better management of the company along with securing the interest of all the stakeholders. The reservation fails to assure such a move, however, what it assures is better and a sounder social parity and structure.
Let the boards be the quintessence of the economic growth of the company, let the boards be free from the clutches of reservation, let the board be custodians of efficiency and accountability of the investment made by the shareholders.
Wednesday, October 14, 2015
Thursday, September 24, 2015
In a complex and competitive world, every successful business needs access to lawyers who can bring experience, commercial acumen and legal ability to bear on the various corporate, commercial, regulatory and taxation issues which affect them. The critical question faced by most of our potential clients, is the choice between a law firm over an individual lawyer?
Hiring a lawyer is not just a black and white, huge or diminutive decision. It doesn’t have to be an alternative between a renowned big law firm and a single lawyer show.
Not to dispute the fact that big law firms offer host of legal services and often have complete section committed to different areas of the law which permits them to focus on the specific requirement of the client, yet their laid back culture, inefficiency and the reputation of overbilling not to mention the disbursements and out of pocket expenses included in the bill frustrates the clients as they do not see value for the fees they end up paying.
As against choosing an individual lawyer with limitations, who can make manoeuvring the legal system much less taxing for you can be a real task. One would need a lawyer who can not only support the organization's growing needs but also ensure an outcome that is fair and also constructive to you. Whether big or small, businesses can get the best of both worlds by finding a mid-path in form of boutique law firms.
A boutique law firm is a collection of attorneys, typically organised in a limited liability partnership or professional corporation, specialising in a niche area of law practice. While a general practice law firm includes a variety of unrelated practice areas within a single firm, offering multiple services to the client, a boutique firm specialises in one or a select few practice areas.
These new firms are choosing to focus the work of the entire firm on lesser areas of law rather than try to maintain the general practice culture of the big law firms. The logic is in sickness, you visit your general practitioner who in turn directs you to a specialist depending upon your need. The same is true in the law: go to a specialist, that is, the boutique law firm.
We as a boutique law firm work on the following five principles:
1. Client Centric. Each Client Matters. You are not a number or a pay-check to us. Your success is measure of our success and we take that seriously. In a small pond there is no such thing as a small fish. Every client to us is a "big Fish". All of our associates are familiar with your case and knows you by name, and we are proud of that. We believe reputation is everything and we have been practicing that almost a decade, with a proven success track record.
2. Accessibility. We make our selves accessible day and night. Ready to help when you need it all, our client have our office number, personal email and mobile numbers. We chart out the work group list with contact details of all associates working on the project and appoint a point person at the beginning of any assignment along with a proposed timeline.
3. Efficient. We ensure every penny paid by you as fees is valued by us. We understand that wasted time is, wasted money.
4. Personal Touch. When you call our law firm you will always be working with the same associate who has a thorough understanding of your organisation. This personal relationship with clients sets our associates apart.
5. Focus. We are focused on our niche areas of practice. Our focus is to build long-term relationships. As we believe that lasting association is directly attributable to growth, success and client satisfaction. We listen, we lead and we communicate with honesty and integrity.
Ensure to deal with a boutique law firm which gives outstanding quality work, consistency, support, ease and flexibility. Lastly, have an enduring relationship with the law firm and have a safe business.
Tuesday, September 1, 2015
“When will mankind be convinced and agree to settle their difficulties by arbitration?” Benjamin Franklin.
Historically, arbitration was successfully used by the ancient Greeks and the Vikings to solve interstate and intrastate conflicts. In more recent history, arbitration played an important role in solving international border disputes. Currently, negotiation and mediation are the widespread mechanisms for resolving international conflicts and arbitration continues to be an efficient tool for conflict resolution, particularly for international and national commercial disputes.
Though historically significant for the resolution of disputes, in India, arbitration is not often used correctly in that way. The sluggish judicial system, led to delays rendering arbitrations inept and unappealing. With an eye to make India an Arbitration hub, the Government of India has now approved number of amendments for making Arbitration a preferred mode for settlement of commercial disputes. This will not only lead to expeditious disposal of cases but also be more user-friendly, cost effective and enhance the efficiency of arbitration.
To start off on the right foot, an application for appointment of an Arbitrator shall now be disposed of by the High Court or Supreme Court as expeditiously as possible and an endeavor to dispose of the matter within 60 days. Further, Arbitral tribunal will now make its award within a period of 12 months where parties may extend such period up to 6 months and shall be extended by the court only on sufficient grounds. The court while extending the period might also order reduction of fees of arbitrator(s) not exceeding five per cent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. As an incentive, additional fee shall be paid to the arbitrator, if the award is made within six months. Also, disputes be resolved through fast track procedure and award in such cases shall be given in six months period.
The Arbitral tribunal shall now grant all kinds of interim measures which the Court is empowered to grant, and such order shall be enforceable in the same manner as if it is an order of Court. Further, an application to challenge the award is to be disposed of by the Court within one year and mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the Court passed any specific order on an application filed by the party. 
One of the most significant amendment is of Section 34 relating to the grounds for challenge of an arbitral award, to restrict the term 'Public Policy of India" (as a ground for challenging the award) by explaining that only where making of award was induced or affected by fraud or corruption, or it is in contravention with the fundamental policy of Indian Law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the Public Policy of India. 
In order to avoid frivolous and meritless litigation/arbitration, a new Section 31A is to be added for providing comprehensive provisions for costs regime which will be applicable both to arbitrators as well as related litigation in Court. Further, in order to ensure neutrality, the amendment mandates the arbitrator to “disclose in writing about existence of any relationship or interest which may give rise to justifiable doubts about his neutrality”. Any person in the position of conflict of interest would be ineligible to be appointed as an arbitrator. Lastly, amendments in Sections 2(1)(e) , 2(1)(f)(iii), 7(4)(b), 8(1) and (2), 9, 11, 14(1), 23, 24, 25, 28(3), 31(7)(b), 34 (2A) 37, 48, 56 and in Section 57 are also proposed for making the arbitration process more effective.
Thus, India did put in place a progressive piece of legislation which is essentially based on the Model Law and the United Nations Commission on International Trade Law (UNCITRAL ) Arbitration Rules which had an effective law in place and the Government of India is certainly committed to improve its legal framework relating to Arbitration. All it needs now is inculcation of the culture of arbitration within the bar, the bench and the arbitral community. The gear of the past needs to be dropped so that India, undeniably, not only will have an attractive arbitration mechanism on offer which could fairly be proclaimed that Arbitration is fair, effective, expedite and legally binding but also could be recognized as an favorable international venue for arbitration proceedings.
Thursday, August 20, 2015
Moral policing has become increasingly common in India. Are we restricting individual rights in the name of Indian culture and safety? We are still pondering over whether there's life after death, we can add another question to the cart. What has happened to democracy? Has it been emptied of meaning and scooped out? Are we mutating into a totalitarian state?
Being the largest democracy in the world, it is a matter of great offence and disgrace if the Government suppresses or controls the ideas, public communication and information within a society. The Government's order to the internet service providers to block access to 857 websites hosting pornographic content being socially disparaging and advance violence against women was one of such attempts. Few days later, Mumbai police arrested 13 couples and 35 others following raids at hotels and a beach for indecent behavior in public. What have we turned democracy into? The need of the hour is the Government's long term vision and not its dependency upon immediate and extractive short term gains.
Let us glance at the pitiable state of affairs of our nation. We cannot provide food and water to our people. Our Government policies have created a population of 800 million people who live on less than 20 rupees a day. India has the largest number of malnourished children in the world. India's demographic dynamics are such that even humdrum projects, such as constructing a road, dislodge thousands of people let alone large dams and mining projects. In 2012 alone, around 14,000 hapless farmers committed suicide in India. These villages are completely resource less, barren and dry as dust. India is home to the largest number of poor with one-third of the world's 1.2 billion extreme poor living here.  In the name of development, the rivers and forests are destroyed. In the name of progress of the nation, land is destroyed by dam reservoirs and thousands of homes are bulldozed. India is suffering from problems like poverty, illiteracy, racial discrimination, famine and drought which needs immediate solution. Where basic education, health care and survival is a task, our Government's major priority is the desire to distribute Unique Identification cards(UIC) to all of its citizens and moreover do moral policing. In short, we are a state incessantly at war with its people.
Further, what did the Government formulate of these many corruption exposes? Does the Government see major scams like Commonwealth games, 2G and Coal-gate as a vigorous development of the nation? It is indeed an essential development as it helps a ordinary man know the politics of the current process of political and economic destruction and the other innumerable things that make India’s engine work, or not work—all through the contracted, frail lens of corruption but the worrying thing is that each scam pushes the last one out of the way, and life goes on.
We live in a civilized society. Creating havoc over a movie poster spreading vulgarity and trying to smear the purity of the Indian culture, vandalizing Valentine's day celebrations to safeguard morals, banning beef to protect our religion, banning porn or raiding hotels intruding someone's privacy to safeguard morals and values will not help our nation develop or progress or evolve in anyway. Let the police do only policing and value education be the means to learn the difference between good and bad.
India is certainly not yet the worst place on the Democracy issue but the state needs to focus of its development and leave moral policing aside. Having said that, the anarchism in our people, the fact that it is such an insurmountable country and though the institutions of democracy are of their way to corrosion, there is a revolutionary sprit among the people. They know that they have to preserve energy and how and when to deploy it. They have apprehended that they are on their own and have to fight their own battles.
 ,TNN Jul 17, 2014, 04.19 AM IST