Thought Leader – Corporate Law – Lakshmikumaran & Sridharan (U.K.) LLP

The modern corporate world is pitted with potential legal pitfalls. It takes a skilled and experienced legal professional to guide companies through the challenges involved, challenges which vary from country to country. Here Lawyer Monthly hears from Sumesh Sawhney, Global Head of Lakshmikumaran & Sridharan Attorneys’ Corporate and M&A practice, on issues surrounding the corporate world in India and the UK and the relationship these countries share.

Sumesh Sawhney is Global Head of the Corporate and M&A practice at India’s premier law firm, Lakshmikumaran & Sridharan Attorneys (L&S), and Head of the firm’s UK office. In a career spanning over 25 years, Sumesh has expertise in India-related cross-border investments, M&A and corporate advisory matters. He is qualified as a solicitor in England & Wales but does not practice as such, and is a member of the Bar Council of Delhi, India.

Established in 1985, L&S has a pan-India presence and is amongst the few Indian law firms to establish its international presence in London and Geneva. The firm specializes in corporate and M&A, competition, international trade, intellectual property and taxation.


How would you describe India’s current corporate market and its involvement with UK companies?

India is gaining momentum as a vibrant emerging market under the current political regime and is increasingly outperforming other BRICS economies. With the Government-backed ‘Make in India’ agenda, India is now rebalancing its growth plans from a services-driven outlook to an export-oriented manufacturing outlook. On the other way, as the third largest foreign investor in the UK, India invests more in the UK than the rest of the European Union combined. Likewise, the UK is the third largest foreign investor in India. There is growing interest from both countries to tap previously unexplored funding avenues – the latest being the Indian Rupee-denominated debt securities market. Pursuant to changes in India’s External Commercial Borrowing framework in 2015, this year witnessed the historic issuance of the first offshore ‘masala bond’ by an Indian corporate on the London Stock Exchange. I am positive that Indian and British businesses will continue to engage closely and that this trend shall expand in scope as well as have an upward trajectory.


How do you envision this relationship evolving throughout 2017?

Naturally, the past few months saw intense speculation from the international business community and the economic roadmap ahead for India and UK depends greatly on the bilateral Free Trade Agreement negotiations proceeding favourably. Uniquely, Indian investors are spotting lucrative financial opportunities in post-referendum Britain. To illustrate, the British Pound’s decline relative to the Indian Rupee has translated into significant gains for Indians– especially first-time buyers – in London’s immovable property market. In the wake of an impending ‘Brexit’, Britain needs to send strong signals to its trade partners that it is committed to providing a conducive environment for foreign capital, foreign-owned businesses and international talent. India and UK already share a robust economic relationship – at a glimpse, total bilateral trade in goods and services touched a staggering £16.55 billion last year. Given the mutual political will being demonstrated by both countries’ leadership, there is good reason to be optimistic about bilateral trade further strengthening.


You are highly involved in UK/Europe – India M&A and joint venture transactions; what particular challenges do these present?

India’s foreign exchange, securities and corporate governance regimes were historically known as cumbersome and restrictive. However, these regulatory frameworks are undergoing transformative changes in order to attract foreign capital. The Foreign Direct Investment Policy is being progressively liberalized with each passing year – permissible investment limits and sectoral conditions have been lifted altogether or greatly relaxed and many industry sectors have already been brought under an ‘Automatic’ investment route from their erstwhile ‘Government Approval’ route. The new Companies Act, 2013, is a landmark piece of legislation that has replaced the out-dated framework of Companies Act, 1956. Such reforms have been instrumental in boosting merger and acquisition activity in India – between January to September 2016, M&A deals have already touched $46 billion in value. Nevertheless, there still remains scope to make India’s investment climate more favourable.

To give you an example, under the Companies Act, 2013, issuance of equity shares with differential rights is permitted inter-alia only if a company boasts a consistent track record of distributable profits for the previous three years. This limitation dampens the participation of private equity and venture capital investors into early-stage enterprises. Absence of a single-window mechanism for obtaining business licenses/approvals had long made it difficult for domestic and international entrepreneurs and investors alike. Now, necessary clearances, licenses, mandatory tax registrations and regulatory filings can be applied for and obtained on a single-window ‘e-Biz’ platform. Pendency and long-drawn litigation proceedings in Indian courts is also a deep-rooted problem.

Though efforts to facilitate speedy redressal of disputes are underway – the most recent being establishment of special commercial courts to settle high-stake commercial disputes as well as constitution of the National Company Law Tribunal and its appellate body – I encourage parties to have in place a strong mechanism for international commercial arbitration, at the outset. Then there are legislations that can vary from State to State coupled with the absence of digitized records in the public domain, which can slow down the due-diligence process.


What type of clients do you regularly work with and what makes you their first choice of representative?

In my experience, clients – whether multinationals, small and medium enterprises, individual entrepreneurs or institutional investors – place heavy premium on legal advice rooted in commercial pragmatism as much as in the knowledge of local market trends. Having successfully executed cross-border transactions when the Indian economy has been liberalizing, I’ve had the opportunity to understand foreign businesses’ key concerns when engaging with Indian entities and vice-versa. Of course, all successful relations are built on the classic foundation of trust, work ethic and appreciating clients’ unique business goals.


How can India expand its appeal in terms of FDI and corporate presence?

Sweeping reforms aimed at increasing transparency in corporate affairs, reducing stringent compliances and promoting ‘ease of doing business’, have been implemented lately. Government initiatives of ‘Start-up India’ and ‘Digital India’ are stimulating a culture of innovation and entrepreneurship and to encourage inflow of foreign funds, alternative investment vehicles such as Infrastructure Investment Trusts and Real Estate Investment Trusts have been permitted. The Companies

(Amendment) Bill, 2016 – which seeks to amend the Companies Act, 2013 – when enacted, will rectify omissions and contradictions in the legislation and harmonize it with the Central Bank and securities market regulations. On the other end of a company’s life cycle, the Insolvency and Bankruptcy Code, 2016, has been recently enacted to provide a streamlined mechanism for debt restructuring and address systemic challenges such as the multiplicity of bankruptcy regulations and the long-drawn nature of winding–up proceedings.


What thought leadership assets would you say previously working at Clifford Chance and Jones Day has brought to your current role?

At Clifford Chance and Jones Day, I led the India corporate practices and advised multinationals through the lifecycle of their India-entry, business development/growth and exit strategies. L&S recognizes the value addition that international transactional experience, crossover legal knowledge and inter-cultural sensitivity can bring to clients at the negotiating table, and has entrusted me with the privilege of establishing its second international office in London and of charting the firm’s future vision for its global corporate and M&A practice.


As a thought leader, what significant legislative developments do you think are still necessary in India’s corporate law sphere?

Every jurisdiction poses peculiar regulatory challenges. India is battling a poor image of corruption with Transparency International ranking India 76 out of 168 countries in its latest Corruption Perception Index. When enacted, the Prevention of Corruption (Amendment) Bill, 2013 will align India’s anti-corruption legal framework in conformity with international best practices laid down by the United Nations Convention Against Corruption.

India’s public sector banks are currently straining under the burden of non-performing assets, making it critical for an alternative source of funding to be made available, especially to finance large infrastructure projects. In light of this, efforts to accelerate the development of India’s nascent corporate bond market are underway and the Securities and Exchange Board of India has framed a set of implementable recommendations.

The indirect tax regime of India is characterized by taxation rates and structures differing from State to State. The Government looks set to meet its target for implementing the ground-breaking ‘Goods and Services Tax’ (GST) reform on April 1st, 2017. GST shall subsume various Central and State-level indirect taxes and unify India into a single, common market. For industry, GST promises easier compliance, removal of hidden costs of doing business and a system of seamless tax-credits across the value chain as well as across regions. This will translate into efficiency gains and enhance the competitiveness of India’s manufacturing sector.

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