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Bracing the Emerging Paradigm

The presentation dealt with insights on the economic and business landscape, regulatory change, client response, changing client needs and the expected role of lawyers. Growing competition, rising complexity in client’s business requires some new ideas which law firms should consider to stay relevant in the legal arena. Mr. G. Chemburkar mention that stream of law has undergone a transformational change globally, and with the domestic barriers appearing to go, local firms will have to “shape up – reinvent themselves” or ship out.

While DEMONETISATION will surely help resolve the issue of a parallel economy in the long run, the “slump in liquidity” did impact “consumer spend” has consequently the industry “demand and profitability”. The Demon process has been a good exercise in unearthing Black Money and draining out Terror Funding. India’s cash to GDP ratio of 13% compared to China’s 9%, USA’ 7% and Norway’s 2% needed correction to rationalise the high-30% share of its Informal Economy. However, most companies retreated in a cautious “wait-and watch” mode trying to grapple with the double-whammy of “failing business” and “rising pressure from Tax department”. A refreshingly positive fall-out of this has been the much needed stimulus for the “digital wallet industry”.

GST rolled out as a “virtuous and inclusive platform” to streamline tax collections. However, the “confusion around input credits” along the “unorganised Indian value chain”; flip-flop on applicable rates and filing obligations; and formula to recompense states loss of tax share have all bred a lot of ambiguity and confusion. While the accounting firms with latent strengths on IT and team sizes may have monopolised the GST advisory space, tax lawyers too have found sufficient opportunity clarifying such ambiguities and concerns.

• The BANKRUPTCY CODE promises to help clean up the legacy of NPAs in an unprecedented manner, but the reluctance and apathy of Banks to lend that has set in is drying up credit for the industry. Distress M&As is likely to see change in promoter control and the policy decision on bank recap is surely a silver lining around the dark cloud. Most law firms had a role on debt restructurings in the last 3-4 years and have been able to farm this opportunity across stakeholder segments.

• Indian REAL ESTATE that was symptomatic of a seriously unorganised platform now seems to be on the verge of much needed institutionalisation, better empowering the consumers. This has meant a good opportunity for law firms to help clients pre-empt impact of RERA and reorganise projects appropriately. Weak enforcement of contracts has always cast a shadow on FDI investment. The emergence of NCLT, Commercial courts, and some recent SC judgements on foreign arbitral awards alters the dynamic on improved and faster recourse on disputes. The judgement on the long pending Docomo case has set the tone on several other cross-border arbitration awards that have since been able to resolve objectively. The topic of GOVERNANCE, transparency and propriety has never been tested as in the last 12 months and has lent a clear discipline on entrepreneur instincts and minority interests. The discussion on ESTATE DUTY was majorly rife around March this year, and people were speculating the re-introduction of a 50% tax on the wealth of deceased. While that anxiety seems to have died down after April, a recent announcement has revived that topic and is causing considerable heartburn. The era of AIFs has meant an interesting new financing window for cross-border inflows and the flexibility on structures puts a lot of the uncertainty around regulatory constraints to rest. The issue of SEBI concerns around legitimate fund sources and flexibility of deployment are causes for concern.

How are Clients Reacting to the new situation?

The companies which have strong balance sheets have resorted to spin-off’s to enhance shareholder value. The weak companies seek long term capital or proceedings in the Insolvency Board. Also companies look forward to multifaceted services from the law firms, like consultancy to raise capital from various sources and strategic management solutions. Therefore plain vanilla law firms will have a very tough time in the days to come. Most blue chip companies now resort to having their own law department for most day to day regulatory issues and approach the law firms only when a litigation arises. This again reduces employment chances in law firms.

Also, many of the top companies in India have inducted their senior Company counsel into their boards. Artificial intelligence is also expected to reduce a lot of employment opportunities for new law graduates.

The important fields in law in future would be:

• Ideation: Analysing a business or IP idea from a viability and protection standpoint operating model: Advice on business model from ease of doing business and contract enforcement perspective
• Structure: Investment structure that is regulatory compliant and financially optimal Financing: Facilitating financing structures from a risk, return and security standpoint
• Tax: Advice on structures and strategy to optimize tax efficiencies and safeguards

Legal services are gradually evolving in the following specialised fields:

• Mergers & Acquisitions
• Corporate & Commercial Advisory
• Competition Laws
• Intellectual Property
• PE, SWF & Pension Funds
• Labour & Employment
• Dispute Resolution
• Fund Raising & Capital Markets
• Banking & Finance
• Direct & Indirect Taxes
• Infrastructure & Real Estate
• Environment Laws
• Data Privacy & White Collar Crime
• Insolvency & Bankruptcy and it would serve the students well to study the aforesaid subjects in-depth.

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