Legal As Shaping The Future Of Commerce

Is the GC the new-age Chanakya? Is he/she the new CEO? Legal Era spoke to a cross-section of industry to know their take on the evolving role of in-house legal teams and what the industry thinks...

With a pro-business government at the Centre, India Inc. is optimistic about future investment and growth. However, strong laws and regulations in sync with the times are a prerequisite for creating an enabling business environment.

Needless to say, practitioners of law, especially in-house counsel/legal teams, must function as both trusted business partners and guardians of the ethics and reputation of an enterprise.

Today, in-house counsel are playing multiple roles, including advising company boards and senior management, meeting compliance and disclosure obligations, structuring transactions, conducting internal investigations and managing disputes, outsourcing legal services and so on. They are doubling as business development teams even as they walk the tightrope between business compulsions and ethical dilemmas. In so doing, they are helping redefine the contours of corporate India.

In Conversation with S. Ramaswamy

LE: What is the role of legal teams in shaping India Inc.?

S. Ramaswamy (SR): Legal teams are shaping the destiny of a new corporate India where the mantra seems to be clear - Business Enablers with an eye on Minimising Litigation Cost.

LE: On are legal teams pillars to the foundation or stepping stones to success

SR: One of the profit centres of the company would be an appropriate way to address the role of the present legal Team in the new environment.

LE: On are legal counsel - the new CEO

SR: Yes definitely. The GC has truly laid and staked his/her claim to occupy the C-Suite or Corner Office.

LE: On GC as strategist/the new age Chanakya

SR: GC has always been a strategist. Earlier, he was operating from behind but given the new world in which we do business, he is now visible upfront and also leading the corporate strategy whether in new business, acquisition, takeovers, litigation, mediation, IP, etc.

LE: On legal teams saving a lot of money through strategy:

SR: Legal has an unique ability to smell or visualise trouble. Having said that, the Due Diligence Process which a GC or Legal team carries out for their respective organizations paves the way to mitigate risks in the long run.

LE: On whether legal teams should be more valued

SR: The Indian industry has finally started reposing more faith in both GCs and Legal teams and realising their importance, there is greater focus now on strengthening the in-house Legal team vis-à-vis dependence on outside law firms.

It is more than clear that today, legal teams/GCs have a multi-faceted role where they not only have to walk hand-in-hand with company boards and senior management to help grow the business but also prevent the ethical/reputational capital of the firm from eroding.

In Conversation with Amit Vyas

LE: What is the role of legal teams in shaping India Inc.?

Amit Vyas (AV): In the shortest of terms, the role is 'paramount' or even fit to be called 'indispensable'. Today, no corporate (whether MNC or Indian) can survive without a sound legal team. There are many reasons for this:

(i) ever-increasing compliance requirements under a plethora of laws in India

(ii) sudden awakening of regulators to non-compliant companies

(iii) daring, business threatening moves by business competitors and the resultant corporate wars

(iv) ever-increasing 'vigilante' consumerism and judicial adventurism

(v) shareholder activism

(vi) ever threatening actions of environmentalists and conservationists

(vii) ever increasing public interest litigations

(viii) trial by the media

LE: Why does business today need the legal function?

AV: Today, business is dependent on legal for:

(i) ensuring compliance with tonnes of applicable laws and thereby avoiding adverse regulatory action which could endanger the directors and other top brass of the company besides exposing the company to risk of adverse media publicity. In the absence of a strong legal and compliance function, any such regulatory action can seriously threaten/jeopardise business prospects of the company besides eroding the confidence of investors, lenders, banks, financial institutions, investment companies, mutual funds, private equity investors etc.

(ii) ensuring safety of business by proper drafting, management and custody of critical legal instruments. In the absence of a good legal function, the company would be at the mercy of external lawyers, who may have the expertise but not the time and dedication which are hallmarks of an inhouse legal team. Only a vibrant in-house legal team can properly advise the company on drafting of contracts, registration (in respect of real estate), payment of stamp duties, etc. It is worth noting that any miss in complying with any of these steps can expose the company to risk of litigation and make it vulnerable to action by regulators. This is apart from the major risk of business loss if documents have not been given an evidential value by in-house dedicated legal professionals. Even drafting of a basic contract requires careful vetting by in-house legal teams since it could have implications under any of the laws i.e. Competition law, labour laws, environment protection laws, administrative laws, corporate laws, securities laws etc.

(iii) protecting the company's interests by taking legal action or defending legal proceedings in courts. Today, a corporate faces threat of litigation from competitors, shareholders, investors, workmen, consumers, debtors, lenders and regulatory bodies. While external law firms appear on behalf of the company before various courts, it is only a strong in-house legal team which can keep track of the hearings, brief senior counsel and ensure that they attend (instead of taking adjournments) the hearings on fixed dates. Unless the in-house legal team is strong, external lawyers may not understand the gravity of a legal matter from the business point of view. A truly vigilant in-house legal counsel can only absorb the business pressure and strike a balance between the business needs and compliance with the law. In event of litigation, external lawyers take their own time to understand the matter since they do not closely understand the specific business of their client. However, a strong in-house legal counsel can guide the entire legal course basis his/her close understanding of business.

LE: Are in-house legal counsel the new CEO?

AV: This is too adventurous and superlative. This cannot be practically possible since legal professionals are very apt and good at the legal profession, but may or may not have the business acumen and flair to become CEOs.

LE: Do you agree that legal teams should be more valued?

AV: This is absolutely the need of the hour since given the indispensability of the legal function for survival and success of a business, it should no longer be reckoned or treated as a 'bottleneck' in business or be called a department with its members using only 'may', 'could be' etc.

In Conversation with Debolina Partap

LE: What is the role of legal teams in shaping India Inc.?

Debolina Partap (DP): On the larger role of legal teams:

It is commonplace to discuss the growing role of the legal department and general counsel. To summarise, a few big picture items are:

• legal department as value enhancer
• GC as tomorrow's CEO
• legal department as business partner

and so on and so forth.

But very rarely do we go to the roots and ask why "legal cell"? The roots tell us that necessity of the legal cell is part of human social jurisprudence. The legal cell was and is the conscience keeper of social well-being in society - be it individual, corporate, animate or inanimate. Every thing or body has the right to life, liberty and expression. And when these get into trouble or grey areas, the legal people come to rescue to enable solutions and decisions and protection of social, commercial and human rights.

On the objectives of the legal department:

To provide counselling for those infected and affected in order to access and avail legal remedies. To protect and promote human rights of those living. To mobilise lawmakers to adopt effective laws and to take legal remedies and establish committees to address legal and ethical issues. To provide best corporate solutions and implement best practices. And finally, to uphold rights and duties of various stakeholders.

Typically in India, the legal department plays a larger role in the field of rights and remedies and helps in regulating healthy implementation and justification of:

Under Article 21 of the Constitution of India - Protection of Life and Personal Liberty; Article 47 - of the directive principles of state policy; Article 12 - Universal Declaration of Human Rights vis-à-vis the state.

Article 17 - of International Convention on civil and political rights

Thus, we can see that the larger role of the legal department is not just bound by corporate barriers but extends to society on the whole.