Balancing conflicting interests while maintaining a semblance of transparency can be a thankless task. It often draws more brickbats than bouquets
For, while public participation in the process of policy making is on the rise, scepticism about whether India’s regulators and bureaucrats can get it right persists. This is in part thanks to the internet, which lays bare the pushes and pulls exerted by interest groups and so reveals the undercurrents that sway policy decisions.
The recent rewriting of rules for the takeover of listed companies was preceded by a public consultation. Indeed, one of the first tasks of a committee set up to suggest improvements to the regulations was to ask the public for their views. But what is curious is that while this committee, the Takeover Regulations Advisory Committee (TRAC), proposed regulations that “recognize and accord primacy to the goal of protection of the interests of the public shareholders in takeover situations”, there is little talk of that now that the regulator, the Securities and Exchange Board of India (SEBI), has finally revealed its hand. Were SEBI and TRAC moving on parallel tracks? And do public consultations really count for much?
An in-depth look at the new takeover regulations in this issue’s Cover story (Surveying the field, page 17) reveals that the changes may embolden predators circling India’s listed companies. Does this mean the rules are pro-acquirer with not much in them for public shareholders, or for that matter for groups that currently control India Inc? If so, these groups will do well to take note of advice from Vijaya Sampath at Bharti Enterprises: “Promoters with low holdings may need to be watchful since the new limits allow the acquirer a 51% stake.”
The new rules enable significant players to increase their shareholdings in listed companies and this could see them scrambling for funds. Madhurima Mukherjee at Luthra & Luthra sees the new thresholds as good for private equity investors, while Sandip Bhagat at S&R Associates believes the changes will prompt more foreign direct investment.
This issue’s first Spotlight (Risky Business, page 24) offers a look at another side of the securities market: what happens when a trade fails. This timely article examines India’s payment and settlement systems and what can be done to lower risks associated with events such as the bankruptcy of a counterparty or intermediary. As recent global events have shown, no risk can be ruled out.
This is just the kind of eventuality that investors work hard to avoid. As a result, and as highlighted in this issue’s second Spotlight (What lies beneath, page 27), today’s savvy investor demands a “more nuanced and sophisticated due diligence product”. Can firms that provide these services deliver? And if so, does the information they provide give investors the insights they really need? Our report reveals that they can, and while some of the risks they detect may be “legally remote”, they may also be difficult to repair. Evidently there is a lot to be said for looking – as deep as you can – before you leap.
Writing in this month’s Vantage point (Opportunities beckon, page 16) India’s ambassador to Argentina, R Viswanathan, urges Indian investors and businesses to turn their sights to the new Latin America. He points out that the region’s markets have become more resilient and less vulnerable to external shocks and that Latin American policymakers have become more pragmatic and pro-business. This, combined with a natural synergy in spirit between the new mindset of Indians and Latin Americans, provides tremendous scope for investors.
But maintaining investments in several countries comes with the responsibility of complying with laws and rules in multiple jurisdictions. This can be a challenge. In What’s the deal? (Keeping up with the competition, page 30), we provide practical tips on how to simultaneously comply with competition regulations in the UK, the US, the EU and also India. A case study written by Suzanne Rab, a partner at King & Spalding, demonstrates how this balancing act can be achieved.
India Business Law Journal has long sought to lift the shroud of secrecy that often surrounds law firm billing practices, and as the response to our fifth annual billing rates survey demonstrates, we are having some success. Forthy four firms – a record high – consented to have their billing rates published in this year’s survey (page 35). This is a 10% increase on the number of firms that agreed to participate last year and 76% more than in 2007, when our first survey was first conducted. Yet, once again India’s largest law firms are conspicuous by their absence. We hope this will not be for much longer.
Our survey reveals that billing rates for most categories of lawyer have plateaued. The prevailing “fee sensitivity” has even triggered modest drops in billing rates for some lawyers, including senior partners and managing partners. This is the first drop in rates for senior partners since India Business Law Journal started its billing rates survey.
Interestingly, the decreasing rates for top-level lawyers have been offset by an increase in the rates for junior lawyers. What will this do for their lot? We hope it will mean more bouquets.
