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Getting one¡¯s act together

From capital-raising to outsourcing, the nation¡¯s leading lawyers and top international India practice groups are honing their skills to meet new business challenges and stay ahead of the pack

The harsh winds of economic obsolescence and international competition are exposing the shortcomings of until-recently tried-and-tested ways of doing business ¨C be it in capital markets vehicles or the structure of service providers such as outsourcers ¨C and even law firms.

Our Cover story?examines the sudden emergence of private equity in India as an increasingly attractive financing tool. Driven by the waning allure of the capital markets, private equity is earning its spurs as a viable fund-raising route. With over US$6 billion invested in India through private equity in the first half of this year alone, and total investment forecast to reach US$50 billion by 2010, increasing understanding and appreciation in India of the merits of private equity appears inevitable.

With so recent a provenance, private equity internationally enjoys a modern regulatory infrastructure. Perhaps unsurprisingly, this is less the case in India, particularly given the caps on foreign ownership, complex tax rules, unavailability of limited liability partnerships and the implications of new competition legislation.

If a relatively new kid on the block such as private equity encounters difficulties adapting to the Indian legal environment, imagine the archaisms, absurdities and restrictions that would arise if a major piece of commercial legislation had remained unchanged for over half a century. Yet that is exactly the state of affairs prevailing in the case of º¬Ðß²ÝÉçÇø architecture of corporate law, governed as it is by the Companies Act, 1956.

This issue¡¯s What¡¯s the deal features a detailed analysis of the JJ Irani report. Published in 2005, this is but the latest in a number of surveys commissioned to review the act and suggest modifications. Without hesitating to pinpoint the report¡¯s shortcomings, our distinguished commentator, Bhawna Gulati of Reliance Industries, examines its recommendations regarding insolvency, M&A, independent directors and more.

While setting a timetable for the reform of this voluminous, exhaustive but outdated piece of legislation is not possible, change must come. When it does, lawyers, in-house or in private practice, will stand or fall by their readiness for the new law.

But understanding laws is only half the challenge. As our coverage of public interest litigations (PILs) forcefully illustrates (Abusing the public interest), preparedness for dealing with abuses of the legal system is equally important. Empowering individuals with the right to file petitions on issues affecting the public at large has unleashed a spate of frivolous cases that have overburdened º¬Ðß²ÝÉçÇø courts and threatened legitimate corporate activities. Often launched by disgruntled employees or rivals with vested interests, PILs have paralyzed businesses that are relying more than ever on legal assistance to prevent unnecessary delays to important transactions.

The Supreme Court has dealt with the abuses by imposing fines on petitioners who file cases with no merit. However lawyers must position themselves to identify such attacks from a distance to prevent their clients from entertaining costly, time-consuming cases without a legitimate base.

Of course, not all petitions are unfounded, and those that are proven genuine ¨C as well as those that whip up sufficient media attention ¨C can tarnish a company¡¯s reputation for years. Allegations against multinationals like Coca-Cola offer pertinent warnings that well-publicized accusations of corporate irresponsibility ¨C even if unproven ¨C have the potential to cause deep and lasting damage to corporate finances, reputation and goodwill (see The cost of behaving badly).

Law firms play a crucial role in mitigating these risks, but while helping clients keep their corporate houses in order, they must not neglect problems closer to home. Writing in this month¡¯s Vantage point, business consultant Manoj R Dani argues that Indian law firms must improve their internal communications and foster greater trust among their staff if they are to survive the threats posed by the internationalization of their profession.

And as one of the world¡¯s most established professions grapples with the complexities of a changing world, it may find welcome assistance from one of the youngest. Our Intelligence report this month surveys the transformation of º¬Ðß²ÝÉçÇø outsourcing sector from low-cost service provider to knowledge-based business partner.

Yet from behind the shroud of acronyms and jargon with which the industry defines itself (BPO, KPO, LPO, RPO smartsourcing, customer life-cycle management, etc.), growing pains are beginning to be felt. In common with their corporate and legal cousins, outsourcing providers face the challenge of sharpening their skills and adapting to a new economic reality.

Their continued growth may well depend on it.