A candid interview with Ashima Obhan, Partner of the Corporate law and Mergers & Acquisitions practice at Obhan & Associates, on the impact of COVID – 19 on India Inc. and how the firm is servicing its clients in the changing scenario.
- What is the firm's take on the impact of COVID -19 on India Inc.?
The impact of Covid-19 has been far-reaching and not witnessed in modern times and many have compared it to the 2008 recession. Covid-19 has brought uncertainty to the present and the future. Indian businesses cannot begin to consolidate their losses without knowing how they will be placed once the pandemic becomes milder. It will leave in its wake, companies with higher debt, while profitability and accumulated earnings take a hit, and much lower cash reserves. Several abandoned arrangements and considerably muted demand may be witnessed as the consumer base itself will take time to recover from the economic ramifications of the virus. The Government has and will continue to have a huge role to play in ensuring it provides the necessary support and introduces policies and regulations that support the rejuvenation of the businesses. It will also be integral for the Government to help MSMEs survive the lockdown as they are one of the largest employers in the Indian market and have considerably less reliant operational capital which implies that the risk of them going under during times of turbulence is higher, an eventuality that should be avoided.
- As a firm, what are the steps you have been taking to service your clients in these challenging times?
As the global Covid-19 public health emergency continued to spread and create challenges for businesses worldwide, Obhan & Associates made sure that there are systems in place to avoid any interruption in services to the clients despite travel restrictions, government orders, and other challenges that impact traditional ways of doing business. At the same time, due care and precautions were taken to minimise the exposure of the Firm's employees to the virus.
To start with, the Firm made sure that its employees were equipped with secure and sophisticated technological resources to allow for seamless remote working as needed and appropriate. All scheduled client meetings are being done over skype or telephone rather than in-person. Hearings are being conducted with different forums through video conferencing.
The Firm has taken this as an opportunity to thrive and explore new ways of doing business. We are confident in our ability to continue providing uninterrupted and high-quality services to our clients.
- What are some of the legal points you find yourselves advising your clients frequently on in regard to contractual obligations and employment laws?
The nature of the pandemic has sent individuals and businesses alike in a frenzy of loss and risk mitigation. The biggest concern across industries has been the preservation of liquidity. In the last six weeks, we have been frequently advising clients on:
Termination of Agreements: Clients have approached us to know if and how their agreements can be terminated with the least financial damage and at the earliest time. This ties in with the shift towards saving margins rather than the performance of deliverables. Clients have also approached us for advisory on deference in payment of lease rents and/or termination of leases.
Force Majeure: An often overlooked and mostly succinct clause has gained prime importance and clients want to know exactly if and how 'Force Majeure' can be invoked to allow them temporary/permanent exemption from performance under agreements. The Firm has been advising the clients on implications of claiming relief under force majeure clauses and the due process for doing so, by taking into account each Client's business needs.
Payment Terms: Clients have also questioned and sought advice on the payment terms in various services agreements and the necessity of continuing to do so in the absence of the performance of services.
Reduction of wages: Clients also reached out to us to understand the legalities of reducing the wages of their workers/employees in the wake of the advisories issued by the Ministry of Labour and Employment and the Ministry of Home Affairs.
Laying Off/Termination of employees: Multiple clients have also sought advise on the legality of laying off or termination of employees owing to the Covid-19 situation.
- We know that you advise quite a few start-ups. How optimistic is the scenario from venture capital funding perspective for the start-up community?
We do work with several start-ups and have in the past advised and assisted them through their fund-raising rounds. The countrywide lockdown imposed by the Government due to Covid-19 has brought a majority of funding to a halt. Venture capitalists themselves are dealing with the constraints of the outbreak and the primary objective of preservation of liquidity has contributed to lower funding activities. In the current Covid-19 scenario, exits to VCs have also taken a massive hit.
We as a Firm, however, believe that in the near future there will be a turnaround. Investors having access to capital will always be on the lookout for good deals which will be many, even in tough times. We may, however, witness a shift in the trend in where such funding is coming in from - especially given the change in the Foreign Direct Investment Policy with respect to government approvals required for investment from India's neighboring countries including China.
- Can you elaborate a little on your firm's initiative – Think Wings?
'Think Wings' is an initiative started by the Firm to help start-ups to kick start their journey in India. The initiative is meant to offer a helping hand to start-ups for everything that requires our assistance. With a stark rise in start-ups in India, we wanted to provide a gateway to these businesses where they could seek answers to the legal questions relating to the implementation of ideas, with an aim to maximise leverage in their businesses.
The Firm conducts knowledge management sessions on the last Friday of every month, to answer queries that start-ups may have pertaining to Intellectual Property and Corporate Law. Our team of intellectual property professionals and corporate lawyers addresses all questions that are raised, and regular follow-ups are done to ensure smooth implementation of our advice.
All that the start-ups need to do is fill out a simple form available at https://www.obhanandassociates.com/think-wings/ and the Firm takes care of the rest.