Rudra Kumar Pandey and Bani Brar forecast emerging regulatory trends and opportunities for in-house counsel to be business leaders.
The International Monetary Fund in its recent report (October 2016) forecasted that India would continue to grow by 7.6% in the financial year 2017. Although the Modi government’s recent demonetization policy has impacted overall private consumption and caused speculation about this growth rate, the government’s commitment to increasing ease of doing business is likely to sustain India’s position as a key market for growth and expansion in 2017.
Some of the major initiatives which will impact businesses in 2017, are the implementation of the goods and services tax; the new Insolvency and Bankruptcy Code (IBC); amendments to companies law and arbitration law; the setting up of the National Company Law Tribunal and commercial courts; and the liberalization of foreign direct investment (FDI) in various sectors.
It is expected that mergers & acquisitions (M&A), which hit an all-time high of US$69.75 billion in 2016, will become the favoured route for FDI inflows in 2017, owing in part, to the dominant trend of consolidation in sectors such as e-commerce and telecommunications. The government has also increasingly begun awarding railway, defence and “smart city” projects to Indian and foreign private players, through innovative models of public-private-partnership and new procurement and bidding approaches.
These trends should help in addressing the challenges which businesses currently face in India such as regulatory complexity and delays, judicial backlogs, corporate governance failings, and corruption. For in-house counsel of board-managed companies, the greatest challenge will lie in keeping abreast of changing regulatory developments and responding positively to practical issues that may arise as a result. For instance, the IBC allows insolvency and liquidation proceedings for a minimum default of ₹100, 000 and companies may avoid insolvency proceedings only if they can prove the pendency of a suit or arbitration proceedings in respect of the default amount. In such cases, in-house counsel may be required to assist and advise their companies on avoiding insolvency proceedings, especially for defaults involving disputed amounts.
Another concern for companies is that the Civil Procedure Code (CPC) now allows courts to dispose of commercial disputes solely through documentary evidence based on prima facie determinations. Although this will result in speedy dispute resolution, facing summary judgments which dispose of companies’ commercial claims without detailed trial proceedings may be against companies’ interests. With an increase in the regulation of businesses in India, through laws targeted at anti-money laundering, anti-corruption, antitrust, data protection and privacy, fine-tuned and strategic solutions will be required for running businesses in 2017.
These anticipated challenges, along with others, offer opportunities for a change in the role of in-house counsel from being typical legal advisers to being strategic partners who are involved in commercial decision making and maximizing their companies’ business objectives. For instance, in order to avoid detrimental summary judgments under the CPC in-house counsel can actively encourage their companies to adopt alternative forms of dispute resolution such as arbitration and can assume leadership roles in such proceedings.
In-house counsel may also consider specializing in areas such as antitrust or data protection so that they can advise companies on unique aspects of their businesses. Aligning a company’s business practices with such new laws is even more important for companies which intend on expanding and competing globally.
In order to assume a dynamic and specialized role in the Indian business environment, in-house counsel should be exposed to continuous systems of learning such as being regularly de-briefed by legal and business professionals and attending knowledge sharing workshops. They should bear in mind the value of specialization while recruiting and staffing their legal departments. This will also help in-house counsel to work and liaise with external counsel as and when required in the interest of their companies.
Increasingly, we may see companies restructuring their in-house legal departments to create more synergistic systems, where lawyers interact and collaborate with other verticals within the company such as the business and finance teams, in order to better understand and achieve the company’s business objectives. Thus, overall, the emerging regulatory trends provide multiple opportunities for a positive change in the role of in-house counsel which may facilitate their transition into being strategic advisers and partners for businesses in India.
RUDRA KUMAR PANDEY is a partner at Shardul Amarchand Mangaldas & Co, where BANI BRAR is an associate.