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Bar & Bench spoke to Neeta Sanghavi, Country Counsel, UBS to get a client’s perspective on the role of law firms in capital raising initiatives, challenges faced by in-house counsels and various criterion that form the basis of appointment of law firms. This conversation is an excerpt of the detailed PDF report. To download click here.
Issues a company’s General Counsel faces with the changing trends in the Indian capital markets
With investors ready to invest in the Indian markets from all around the globe, capital raise initiatives have become a lot more complex and cautious. Investors are seeking various disclosure mandates and there is a growing awareness to identify and mitigate risk at the earliest. Although law firms assist the General Counsel, the law firms identify the risks. The General Counsel thereafter has to assess the risks laid out by the law firms, identify mitigation steps and take a decision based on the risk reward analysis. Therefore, to that extent, the buck stops at the General Counsel’s table.
How are law firms chosen for IPO / QIP transactions
Quality of the Team and not the ‘star partner’ – We look at the team involved in the transaction and not just the ‘star partner’ who makes for the pitch. Most of the times, the team that is executing the transaction is different from the team that had come to pitch for a transaction. Also with the hectic activity in the Indian capital markets, we definitely see the bandwidth of the capital markets group in a law firm and then decide.
Knowledge, experience, value additions and not only statistics – While market share and experience of law firms in similar kind of transaction helps, I would also factor in the “time and attention” promised by partners. The most important factor is quality of service and timeliness on a consistent basis.
Fees – The fee is one of the big differentiators in the capital market transactions. Although there is some gap between fees charged by the domestic law firms and ILCs , cost effective transactions and value addition are important to companies and promoters.
Quality of Closing opinion – Some leading Indian law firms have started this trend to scale down their closing opinions. Investment Banks have to provide a due diligence certificate to the regulator whereas certain domestic law firms shy away from delivering a holistic opinion. This leaves investment banks exposed to a large degree as there is no back-to-back comfort, unlike in developed countries where back-to-back comfort is the norm. The purpose of a holistic closing opinion is two fold: (i) it serves as a risk mitigation tool; and (ii) it serves as a solid due diligence defense, in the event of any allegations of a lack of due diligence.
Foreign Law Firms vs. Indian Law Firms
The legal profession in India has undergone a significant change in the recent past and is emerging as highly competitive and ready to move along with the wave of globalization in recent times. Therefore, it is not surprising that foreign law firms are keen on increasing their operations in India through best friends/ tie – ups with domestic law firms and offer a full range of legal services. Indian lawyers are extremely intelligent and technically sound but sometimes need to hone their specialized skills, sector knowledge and adopt a more business like approach.
Indian law firms are working towards this and have changed themselves significantly over the last few years. International law firms these days have team members who have Indian experience and hence can bring to the table the India – expert.
As a General Counsel….
I have had the benefit, joy and privilege (as well as faced intense pressure) on working on some of the most complicated, complex and landmark capital market transactions. I also enjoy discussing complicated issues with some of the best lawyers in the world and I am working with lawyers from different jurisdictions. On a current deal, I am trying to understand the property laws of Serbia, as the client is developing a large real estate project in Serbia. This global exposure is a fantastic experience, often complex and nerve-racking.
Sometimes issuers/promoters come with their ‘legacy’ law firms who may be excellent corporate lawyers but may not have relevant experience on capital market transactions. It then becomes challenging to get the deal done.
General Counsels have become a strong source of support in business decisions and their role has over a period of time increased to become a strategic and management role.
It is enormously complex to sift through the complex web of several laws and regulations in India and overseas, while assisting a company to take it to the public. Adherence to law is enormously complex. It’s enormously complicated to assess your risks, what kinds of risk abatement processes you’re going to have and all the points where the law intersects with those processes.
To download the PDF report covering Indian Law Firms, International Legal Counsels, Top 25 IPO transactions, Interviews with Cyril Shroff, Neeta Sanghavi, Manoj Bhargava and Rajiv Gupta and a detailed table of capital market rankings Click Here