Tuesday, October 28, 2008

Nomura offers up to 130% retention bonus to Lehman employees in India

Despite tough market conditions retaining talent is still a challenge, especially if you are one of the failed Investment Banks.

Ensuring business continuity is the biggest challenge in a situation as the one faced by Nomura after its takeover of Lehman assets. However, with Investment Banking itself going through a tough phase it does take a lot of conviction and foresight to be able to take the calls as the ones taken by Nomura. Hats off to them as despite all the gloom and doom the world is actually not going to come to an end and these assets would pay off big time over the next few years.

Friday, October 24, 2008

Bar Council now amenable to Opening up of the Legal sector

The Economic Times today quotes BCI member Jagdev:

“We have told the law ministry that we would consider applications of UK-based law firms only if they allow our lawyers to practice in their country. A stricter set of reciprocity rules would be laid out before we actually set out to start operations,”

The commerce Minister, Mr Kamal Nath, had spoken of this sometime back during his parlays at the WTO, however, there was no movement forward as the Bar Council was dead against it.

A number of UK based firms have already got a tie-up with Indian firms in the form of client referral arrangements such as Allen & Overy and Linklaters which have client referral arrangements with Trilegal and Talwar, Thakore & Associates, respectively. Others like Clifford Chance have liaison offices in India.

However, for the above to actually happen on the ground, it would need a legislative change, but now, it seems, it is only a matter of time.

Thursday, October 23, 2008

India is the highest recipient of remittances from abroad

The Minister of Overseas Indian Affairs, Shri Vayalar Ravi told the Rajya Sabha today that India is the highest recipient of remittances from abroad. About 40% of this is the estimated remittances received from overseas Indian workers including from semi-skilled and unskilled workers in the gulf.

The remittances from Overseas Indians for the year 2007 were estimated at US $27 billion. These are in the nature of private funds transferred by individuals for various purposes including to meet consumption expenditure of their families back home. The data in this respect is maintained by the Reserve Bank of India.
With the Foreign Exchange reserves rapidly dwindling due to the rapid increase in demand for dollars (owing to the FIIs selling and taking their money out of the country as well as the high cost of fuel), this could be a blessing in disguise and a route that should be encouraged by the government so as to balance the outflow of foreign exchange.

Finally, some movement on the Limited Liability Partnership Bill

As reported across several papers, Shri Prem Chand Gupta, Minister of Corporate Affairs, in the government on Tuesday introduced the revised Limited Liability Partnership Bill, 2008 in the Rajya Sabha. The Bill provides for the formation and regulation of limited liability partnerships and for matters connected therewith or incidental thereto.

With the imminent opening up of the accounting and legal and other professional services sectors this Bill will play an important role in creating a level playing field for the professionals of India. The Institute of Chartered Accountants of India, has already made the necessary amendments allowing its members to partner with members of other professions. The other professional bodies are also making similar amendments to facilitate the process. This will help in creating larger multi-disciplinary firms which can service clients across domains.

Limited Liability Partnership (LLP) as proposed in the Bill, 2008 is a new corporate form that enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner. In India, this need has long been recognised for businesses which may require a framework that provides flexibility suited to requirements of service, knowledge and technology based enterprises.

Services sector is playing a major role in the national economy and there is a growing diversity in the range of services being offered. The services sector would also find this form very useful. The advantage of the LLP form would be that it will not impose detailed legal and procedural requirements intended for large widely held companies on such enterprises. In this way it will also be useful for small enterprises.

The need for LLP legislation has been recognized for a very long time. Various committees and Expert Groups have, from time to time, recommended introduction of LLP legislation in India.  In the last decade itself, Abid Hussain Committee (1997) had recommended this legislation in the context of SSIs. The Naresh Chandra Committee on Regulation of Private Companies and Partnerships (2003) and Dr. Irani Committee on New Company Law (2005) had also made recommendations for a separate  LLP Legislation.

However, it is the recent initiative of the Ministry of Corporate Affairs that has enabled this legislation to be finalized and tabled in the Parliament.

Government had earlier introduced the Limited Liability Partnership Bill, 2006 in the Rajya Sabha on 15th December, 2006. It was later referred to the Department Related Parliamentary Standing Committee on Finance for examination and report. The Committee submitted its recommendations in its report to both Houses of Parliament on 27th November, 2007. The present Bill, 2008 has taken in view the recommendations made by the Standing Committee and other relevant inputs.

The salient features of the LLP Bill, 2008 are as follows:

(i)         The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

(ii) The Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

(iii) While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

(iv)        LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs. Since LLP shall be in the form of a body corporate, it is also proposed that the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.

(v) An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs shall be addressed in that Act.

(vi) Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.

(vii)       While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.

Prior to introducing the LLP Bill, 2008, Shri Prem Chand Gupta withdrew the earlier Limited Liability Partnership Bill, 2006.

Wednesday, October 22, 2008

Crystal ball gazing, where are we headed from here?

"Your next-door neighbour can likely predict what is going to happen as accurately as we can." - Steve Jobs

This accurately sums up the debate today. In India everybody has an opinion about everything but the fact is that nobody knows where we are headed and what’s in store over the next couple of years. Today, on TV, there is a story of a couple killing themselves due to a set back suffered in the market. One day the market jumps 600 points and promptly the next day there is selling pressure bringing it back to the same or lower levels. The pundits who, at the beginning of the year, were talking of the sensex hitting 25,000 (some had even started talking of 50,000) are now asking ordinary investors to ‘have faith’ and keep invested for the ‘long run’. Try explaining this to a guy who had put in his life’s savings in the stock market and his corpus is now down 70%. What a mess, and we still have no clue as to where the bottom is, as we really don’t know how many more skeletons are yet to pop up across the world. Who all are guilty for this is another story, but as Jack and Suzy Welch said, quoting Agatha Christie, in Murder on the Orient Express, I guess, everybody is guilty in one way or another.

The only saving grace of being in India is that we are nowhere near a ‘recession’ and should grow between 6-7% even this year despite the global crisis. All of us who are getting regular calls from NRIs in the west should brace up for handling a greater influx of returning Indians this year, the only catch being – are these returning Indians capable of delivering under the Indian conditions? If not, just like a number of others, they will soon be going back to the west as soon as things improve a bit.

PS. Wipro has just announced its numbers and has cautioned about the future but TCS is still gung ho!

Tuesday, October 21, 2008

Section 79 of the Income Tax Act definitely needs to be amended!

Was again faced with a situation where another client incurred the wrath of Section 79 and is loosing the right to carry forward substantial genuine business losses just on account of taking on a new (majority) shareholder.

Till 1989, before clause (b) was deleted from Section 79, there was the possibility for a genuine loss making company to take on a majority partner/ shareholder and still claim set off of losses in subsequent years so as to mitigate some of the hardship suffered earlier. The object of clause (b) was to ensure that the assessee was not deprived of the benefit of carry forward of losses unless the change in shareholding had been made with a view to avoid or reduce the tax liability. However, as the section stands to day, there is no discretionary power in the hands of the assessing officer to do anything in the matter and in all cases where there is a 51% or greater transfer of beneficial shareholding the right to carry forward and set-off previous years’ genuine losses is lost. This is downright unfair, and hard, on genuine entrepreneurs who have, firstly, lost a lot of their money in the venture and have to now doubly suffer on account of this stricture of law.

It just goes to show the lack of trust that the government has in its own administrative machinery and instead of trying to plug the loopholes for the misuse of Section 79, it has simply taken the easy way out and done away with the discretionary powers given to its officers, in the process putting all genuine business owners at loss. Looking at it in the context of the overall direct tax collection of the government, I don’t think this kind of set off would have had any material impact on the same, however, from the company’s point of view the impact is huge on each such company that is put to a genuine hardship (loss) on this account.

Monday, October 20, 2008

Circumventing the Takeover Code

Kudos to the CNBC reporter, Sajeet Manghat, who has correctly analysed the scheme adopted by RIL to effectively circumvent the SEBI Takeover Code. The transcript, from the CNBC website, is as under:

“Delivery-based selling in RIL has gone up to 57.4% from 22.3% on Wednesday and there is also an increase in delivery volumes. The main reason why the stock is under pressure is because RIL has reclassified promoter shareholding ahead of warrant conversion. RIL has nearly 14% of its equity under treasury stock and classified under promoter and PAC. The treasury stock is held under petroleum trust and eight corporate bodies. RIL has converted eight corporate bodies into its subsidiaries. Subsidiaries lose promoter status and voting rights under regulations. RIL promoters converts warrants at Rs 1402 per share and infuses Rs 15141 crore. Promoter stake has fallen to 44.8% from over 51%. Post warrant conversion, RIL promoter stake has gone up to 49%. RIL promoter voting right also goes up to 52%. Warrant conversion has infused over Rs 15,100 crore into RIL funds”.

As per Section 42 of the Companies Act a subsidiary cannot hold shares in a holding company, however, a company which is not a subsidiary at the time it purchases the shares of the holding company and becomes a subsidiary later, due to the acquisition of its shares by the holding company, is exempt form the provisions of Section 42 (sub section 3). However, such a subsidiary then looses its voting rights (which in any case is irrelevant for a promoter who is already holding a high stake). Further, the subsidiary also looses its promoter tag under the Takeover Code and thus creates space for the promoter to acquire additional shares.

Would definitely like to someday connect with Sajeet and get more of these inside stories!

Monday, May 05, 2008

Shortage of labourers plagues India's construction industry

The Wall Street Journal carried a timely story on the current shortage being faced by the India Construction and Infrasructure Industries. Till now it was the middle and senior level managerial personnel who were being wooed back and in what was labled as a 'reverse brain drain' but now we can see it happening at the bottom of the pyramid where some skills are in such short supply that the salaries have more than doubled!

Wednesday, September 20, 2006

What's the Secret of your Success?

An excellant summation by Micheal Hyatt. We all have heard of (and experienced) what a positive attitude can help achieve, however, in today's times I would add another trait - curiosity, as I believe that in a Knowledge economy unless you have an inquisitive nature and are constantly seeking answers or trying to look into the future you would lag behind. This is what Mr Hyatt has to say on what he considers is the single most important trait -responsiveness.

As a CEO, I get asked this a lot. And, I'm always a little embarrassed by it. For the most part, I get the question from people who are in their twenties. They want to know “the secret path to the top.”

This past weekend, I received an email from one of my readers. He started, “I have an MBA, but I must have missed the course on Fast-Tracking My Career. If you had to boil it down to one thing, Mr. Hyatt, what would you recommend to a young, aspiring person such as myself?”

I'm not sure I could boil it down to one thing. Life isn’t usually that simple. But if I really, really had to boil it down to one thing, I would say this: responsiveness.

So many people I meet are unresponsive. They don’t return their phone calls promptly. They don’t answer their emails quickly. They don’t complete their assignments on time. They promise to do something and never follow through. They have to be reminded, prodded, and nagged. This behavior creates work for everyone else and eats into their own productivity. Sadly, they seem oblivious to it.

When I was a kid, we used to play “Tag.” The objective was simple: keep from becoming “It.” If someone tagged you (touched you), you became “it” until you tagged someone else. Whoever was “it” when the game ended, lost.

Business is very similar. People “tag” us in countless ways every day. They place calls. They send emails. They mention something to us in a meeting. Suddenly, we are “it.” And, just like the game, if you stay “it” too long, you lose. The only winning strategy is to respond quickly and make someone else “it.”

Reality is that we live in an “instant world.” People want instant results. They don’t want to wait. And if they have to wait on you, their frustration and resentment grows. They begin to see you as an obstacle to getting their work done. If that happens, it will begin to impact your reputation. Pretty soon people start saying, “I can never get a timely response from him,” or “When I send her an email, I feel like it goes into a black hole,” or worse, your colleagues just roll their eyes and sigh at the mention of your name.

Yet, these are the very people who will push you up or pull you down. You cannot succeed without the support of your peers and subordinates. (Go back and re-read that sentence again.)

As I was making my way to the top, my former boss, Sam Moore, used to ask everyone I worked with, “What’s it like to work with Mike?” “How’s he really doing?” “Do you think he could take on more responsibility?” In responding to him, all they had was their experience with me. If I hadn’t been responsive to them, how do you think they would have responded to his questions? “More responsibility? Are you kidding me? He can’t handle what he has now!” It wouldn’t take too many candid responses like that to tank my career.

And yet this happens to people all the time. I can’t tell you how many meetings I have sat in where people are complaining about someone else’s work habits. “He always waits until the last minute.” “She never plans ahead.” “I can never get him to respond to my emails.” You may think that the people who are making these comments are too far down the food chain to matter. I can assure you they aren’t. They have a way of bubbling to the top where the decisions about your career are made.

The truth is, you are building your reputation—your brand—one response at a time. People are shaping their view of you by how you respond to them. If you are slow, they assume you are incompetent and over your head. If you respond quickly, they assume you are competent and on top of your work. Their perception, whether you realize it or not, will determine how fast your career advances and how high you go. You can’t afford to be unresponsive. It is a career-killer.

My basic rule is this: respond immediately unless there is a good reason to wait. Obviously, this isn’t always possible, especially since I spend so much time in meetings. Nevertheless, I rarely let messages sit longer than a day. Twenty-four hours is the outside edge. If you can’t respond now, then at least acknowledge that you have received the message: “I received your message. I don’t have time to give it the attention it deserves right now, but you can expect to hear from me before the end of the day tomorrow.”

The great thing about being responsive is that it will quickly differentiate you from your peers. People love doing business with responsive people. Nothing will advance your career faster than this.

Monday, September 18, 2006

Warren Buffet on Value

 

Price is what you Pay, Value is what you Get

                                                                                 Warren Buffet