Trademark & Copyright

Assignment of Trademarks

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Trademark is a form of Intellectual Property. It essentially refers to the brand name that allows for differentiation between similar goods. Trademarks can be in the form of numerals, a combination of colours, signature, name, or device. Companies spend a huge amount of money through advertising and product design to establish their brand value. The same is treated as an asset that can be transferred like any other type of property, in accordance with the Trade Marks Act, 1999 and accompanying Rules of 2017.

 

 

Assignment v/s Licensing

 

The assignment of Trademarks refers to the transfer of ownership of the Trademark to the buyer. The transfer can be with or without goodwill.

Licensing refers to a limited transfer i.e.; the transferee is allowed to use the Trademark (within the limits of the agreement entered upon) without having the ownership transferred to him. The Licensor(owner of the Trademark) usually generates loyalties while the Licensee gets the ability to expand his business using the appeal of the Trademark.

 

 

Types of Assignment

 

The following are the different types of Assignments allowed under the Act:

I. Complete Assignment: 

As the name entails, a complete transfer of all the rights pertaining to the Trademark is transferred to the buyer. The buyer would be empowered to sell it later on if he so chooses to.

II. Partial Assignment: 

Herein only restricted ownership pertaining to specific products or services is transferred to the buyer.

III. Assignment with Goodwill:

Goodwill is a term that is easy to describe but hard to define. It refers to the intangible value of (in this case) a Trademark. In this type of assignment, the owner transfers the rights and values related to the product or service.

IV. Assignment without Goodwill:

Trademark Ownership excluding Goodwill stands transferred. The buyer cannot use the Trademark for the same product or service as used by the owner. That is, the buyer shall be allowed to use the purchased Trademark for products other than those already being produced by the original owner, as the goodwill relating to that product is not transferred.

 

There exist certain restrictions on the assignment of registered Trademark so as to prevent creating confusion in the mind of the public or users.

  1. The restriction is placed on the assignment of a trademark that results in the creation of exclusive rights in more than persons that may lead to the production of the same goods/services or the same description or associated with each other.
  2. The restriction is placed on the assignment that results in the Trademark being used in different parts of the country by different people simultaneously.

 

 

Assignment Deed

 

While drafting an assignment deed, it is necessary to include the following:

  1. The name of the owner which needs to match the records present with the Registry if the Trademark is registered.
  2. Specificities like the territorial extent of the Trademark should be explicitly mentioned in order to prevent any ambiguity
  3. It is absolutely necessary to clearly mention whether the transfer of goodwill is taking place or not.
  4. The date of the assignment should be specified.

 

 

Process with the Registry

 

It is important to record the change in ownership with the Trademark Registry. According to Rule 75 of Trademarks Rules, 2017, Form TM-P should be filed with the Registry intimidating the changes to the ownership of Trademark. A flat fee is applicable - Rs.9,000 for E-Filing, and Rs.10,000 for Physical Filing. This has made the process of assignment streamlined and simpler.

 

 

Conclusion

 

Trademarks are valuable assets. They are a measure of a company's popularity and reputation in the market. Therefore, entities rather than investing a lot of time, effort, and money into creating a brand of their own sometimes prefer to buy it. It is advantageous for the buyer as through minimal effort; a customer base is handed over. Assignment deeds should be made with proper care otherwise, they might become a reason for litigation.

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Assignment of Trademarks
Trademark & Copyright

Assignment of Trademarks

Trademark is a form of Intellectual Property. It essentially refers to the brand name that allows for differentiation between similar goods. Trademarks can be in the form of numerals, a combination of colours, signature, name, or device. Companies spend a huge amount of money through advertising and product design to establish their brand value. The same is treated as an asset that can be transferred like any other type of property, in accordance with the Trade Marks Act, 1999 and accompanying Rules of 2017.

 

 

Assignment v/s Licensing

 

The assignment of Trademarks refers to the transfer of ownership of the Trademark to the buyer. The transfer can be with or without goodwill.

Licensing refers to a limited transfer i.e.; the transferee is allowed to use the Trademark (within the limits of the agreement entered upon) without having the ownership transferred to him. The Licensor(owner of the Trademark) usually generates loyalties while the Licensee gets the ability to expand his business using the appeal of the Trademark.

 

 

Types of Assignment

 

The following are the different types of Assignments allowed under the Act:

I. Complete Assignment: 

As the name entails, a complete transfer of all the rights pertaining to the Trademark is transferred to the buyer. The buyer would be empowered to sell it later on if he so chooses to.

II. Partial Assignment: 

Herein only restricted ownership pertaining to specific products or services is transferred to the buyer.

III. Assignment with Goodwill:

Goodwill is a term that is easy to describe but hard to define. It refers to the intangible value of (in this case) a Trademark. In this type of assignment, the owner transfers the rights and values related to the product or service.

IV. Assignment without Goodwill:

Trademark Ownership excluding Goodwill stands transferred. The buyer cannot use the Trademark for the same product or service as used by the owner. That is, the buyer shall be allowed to use the purchased Trademark for products other than those already being produced by the original owner, as the goodwill relating to that product is not transferred.

 

There exist certain restrictions on the assignment of registered Trademark so as to prevent creating confusion in the mind of the public or users.

  1. The restriction is placed on the assignment of a trademark that results in the creation of exclusive rights in more than persons that may lead to the production of the same goods/services or the same description or associated with each other.
  2. The restriction is placed on the assignment that results in the Trademark being used in different parts of the country by different people simultaneously.

 

 

Assignment Deed

 

While drafting an assignment deed, it is necessary to include the following:

  1. The name of the owner which needs to match the records present with the Registry if the Trademark is registered.
  2. Specificities like the territorial extent of the Trademark should be explicitly mentioned in order to prevent any ambiguity
  3. It is absolutely necessary to clearly mention whether the transfer of goodwill is taking place or not.
  4. The date of the assignment should be specified.

 

 

Process with the Registry

 

It is important to record the change in ownership with the Trademark Registry. According to Rule 75 of Trademarks Rules, 2017, Form TM-P should be filed with the Registry intimidating the changes to the ownership of Trademark. A flat fee is applicable - Rs.9,000 for E-Filing, and Rs.10,000 for Physical Filing. This has made the process of assignment streamlined and simpler.

 

 

Conclusion

 

Trademarks are valuable assets. They are a measure of a company's popularity and reputation in the market. Therefore, entities rather than investing a lot of time, effort, and money into creating a brand of their own sometimes prefer to buy it. It is advantageous for the buyer as through minimal effort; a customer base is handed over. Assignment deeds should be made with proper care otherwise, they might become a reason for litigation.

MSME Registration in India
Startup

MSME Registration in India

What is MSME Registration?

The Micro, Small and Medium-sized Enterprises Development Act allows MSMEs in the manufacturing and service sectors to register as MSMEs or SSIs. It is not compulsory to register as an MSME. But, you should still register as it provides several projects benefits such as tax benefits and protection against non-payment. 

 

Who is eligible for MSME Registration? 

Only manufacturers, producers, and service providers must use the MSME tag and register under it. Any manufacturer or service provider who meets the eligibility requirements may use the MSMEs single window registration system to register. The revised eligibility requirements effective from July 1, 2020, are applicable for the three types of Enterprises. This includes Micro Enterprises with Investment up to Rs 1 crore and turnover up to Rs 5 crore, for Small Enterprises with Investment up to Rs 10 crore and turnover up to Rs 50 crore, for Medium Enterprises with investment up to Rs 50 crore and turnover up to Rs 250 crore. Any form of business entity may obtain Micro, Small & Medium Enterprises (MSME) registration or Udyog Aadhaar registration. This includes Partnership Firms, Private Limited Companies, Public Limited Companies, Limited Liability Partnerships, Hindu Undivided Families, Self-Help Groups Societies, Co-operative Societies, Trust Others. 

 

Is Registration Compulsory for MSMEs? 

Registration under the MSMED Act is not compulsory for MSMEs and Small Scale Industries (SSIs). But, it is always better to register, because a registered SSI or MSME gets a lot of benefits. The procedure for registering is completely online and is very simple. You require your entity’s name, Aadhaar number, bank account and PAN details. After you fill in your details, a reference number gets generated and you receive your certificate after verification of details. 

 

MSME Registration Certificate

Once you are registered and the process of verification is complete, you will obtain an MSME registration certificate. This certificate is proof that your entity or company is now registered as an MSME. This MSME/SSI registration certificate is valid for your entire lifetime. If you want to get your registration cancelled, you would need to write an application to the nearest Udyog Aadhaar Registration Centre and specify the business and the reasons behind cancelling the registration. 

 

Can an Individual Register for an MSME Registration? 

Anyone who wants to start a micro, small, or medium business may use the Udyam Registration portal to fill out a self-declaration form with no need to upload any records, papers, certificates, or evidence. During MSME registration, business owners must provide correct personal information such as name, Aadhar, industry name, PAN, mobile number, and bank account details. Furthermore, for MSME registration, business owners are not expected to pay any fees. A permanent identification number, known as the Udyam Registration Number, will be given to the entity when it registers. On completion of the registration process, an e-certificate, also known as the Udhyam Registration certificate, will be issued. 

Udyog Aadhaar Memorandum - Online Verification process helps individuals figure whether the MSME’s are registered. With the help of the 12-digit UAM number, verification is possible through the https://udyamregistration.gov.in/UA/UA_VerifyUAM.aspx link.

 

How do I check if a Company is MSME Registered? 

MSME database is available on the website of Udyam registration. You can search if an entity is MSME registered or not by typing the name and product/activity of the MSME. The search yields result by activity/products manufactured. You can then further filter the search to find out of a specific company is MSME registered or not. 

 

Difference between Udyog and MSME registration

Udyog Aadhar is a government registration mechanism that provides the company with a registration certificate and a unique number known as Udyog Aadhar number. This programme is aimed specifically at small and medium-sized businesses. Udyog Aadhar aims to provide companies with the most access to government programs possible. However, on the other hand, The MSMED Act promotes a variety of schemes, subsidies, and benefits to support MSMEs, which are the backbone of the Indian economy. The MSME registration process is required to reap the benefit from governmental schemes, state schemes, and public services, although it is not obligatory. Further, The Udyog Aadhaar Memorandum Scheme, which the central government introduced, allows entities with an Aadhaar number, which is mandatory for MSMEs, to take advantage of easily accessible loans, credit, and government subsidies.

87% People found  Consultation with Lawyer very useful and quick about MSME Registration. 

 

Why is MSME Registration Important? 

MSME Registration is important because: 

  • It identifies medium and small-scale industries and provides them with the assistance which they require to grow and develop. 

  • It provides tax benefits to MSMEs and SSI. 

  • It provides protection against non-payment of dues. 

  • Even individuals and sole proprietorships can obtain an MSME/SSI Registration and hence, it formalizes the business activities being carried at micro, medium and small scale. 

The inception of this sector distinguishes medium enterprises and attempts to combine the three levels of these businesses, namely micro, small, and medium. This structure establishes a legislative consultative process at the national level, with a balanced representation of all stakeholders, especially the three types of businesses, and a broad range of advisory functions. Also, With the help of a policy structure and efficient steps taken by the government, the development of MSMEs in the Indian economy has seen tremendous growth and will continue to flourish at this rate of progress.

The Startup India Scheme
Startup

The Startup India Scheme

What is the Start-up India Scheme?

The start-up culture in India is booming. The recent news of Cred and Meesho becoming unicorns has spread a sense of positivity among the early-stage founders. The government of India, too, wants to capitalize on this high sentiment. To boost the further growth of start-ups, India's government started the Startup India Initiative on January 16, 2016. The start-up India initiative has three objectives: 

  • Create a uniform stage for the entire start-up ecosystem to come together. 

  • Facilitate and encourage entrepreneurship

  • Promoting entrepreneurship not only in metro cities but also in smaller regions of the country. 

Through this article, we shall explore the various aspects of the Start-up India scheme.

 

Who can Register in Start-Up India?

Eligibility for registering under the Start-up India Scheme depends upon the nature of the entity.  A Private Limited Company (Pvt. Ltd. Co.), a Partnership Firm under Section 59 of the Partnership Act, 1932, or a Limited Liability Partnership (LLPs) under the Limited Liability Partnership Act, 2008 can register under the Start-Up India scheme if they fulfill the below listed criteria:-

  • Not more than ten years should have passed since the date of business registration.

  • The entity's annual turnover for any financial year since its registration should not be more than INR 100 crores. 

  • The ais and objectives of the entity should be innovation and development. It should promote employment generation and wealth creation. 

  • Enterprise is not formed by splitting up or reconstructing an already existing business. 

  • Start-ups devising innovative solutions in sectors such as social impact, waste management, water management, etc. 

 

What is Startup India Registration?

Start-up India Registration Scheme is a flagship initiative of the Indian government to build a robust ecosystem for nurturing innovation and Start-ups in the country. The start-up registration process on the Start-up India platform involves a simple registration. Registering a profile on the start-up India hub is a relatively simple process. We can start by clicking on the "Register" tab on the top right-hand corner on the home page of the start-up India scheme, which will be directed to the "mygov" platform for authentication where the user will be asked to fill in details such as the name, email address, etc. This will give the user an OTP or a one-time password for verification and a link to set a new password. The user can then sign in using the login credentials he just created. This will direct him to the Hub to select and create the profile of a stakeholder that best defines his role.

You will need the following documents to register on the Start-up India hub: 

  • Certificate of incorporation/registration. 

  • PAN

  • Company details

  • Details of directors/partners

  • Pitch deck

  • Revenue model

Which Registration is Best for a Start-Up?

The most favored business structures for a start-up are Private Limited organizations and Limited Liability Partnerships ( LLPs ). A Private Limited organization has more credibility. Investors prefer putting their money in private companies, and the government too favours the setting up of such corporate structures. Limited Liability Partnerships are the next most-favoured structure chosen by the start-up founders. An LLP is a distinct entity, and the partners' liability is limited. It has lesser compliances than a private company, and hence, those founders who do not want to burden themselves with legalities opt for an LLP structure.

What are the benefits of the Start-Up India Scheme?

The Startup India Scheme provides various advantages to the start-ups registered under it. In any case, to avail these advantages, a firm should be set up by the Department for Industrial Policy and Promotion ( DPIIT ) as a start-up. 

Start-ups are permitted to self-declare their compliance with specific labour laws and environmental laws. This benefit of self-declaration is available for five years since the date of inclusion on the scheme. Start-ups are permitted three-year tax exclusion, as well as the best-licensed innovation administrations and assets exclusively working to assist start-ups so that it protects their intellectual property.

 

Can a Foreign Company Register Under the Startup India Hub?

Any entity that has its office registered in India can enlist itself on the Startup Scheme.  However, the scheme does not facilitate the registration of foreign-incorporated companies. If a foreign company has a subsidiary in India, such a subsidiary can register under the Startup Scheme, given it fulfills all the relevant criteria. 

For how long is a company recognized as a start-up?

Any business entity that has completed ten years from the date of its registration and has exceeded the previous years' turnover of 100 crores shall stop being recognized as a start-up under the Startup India Scheme on completion of 10 years from the date of its registration.

How do I know my registration is complete?

Once the application is complete and the start-up gets recognized, the applicant will receive a system-generated certificate of recognition. The applicants will also be able to download this certificate from the Startup India portal

People Also Consulted a Lawyer about Startup India Scheme. 

 

Impact of COVID-19 On Project Financing
Company

Impact of COVID-19 On Project Financing

The impact of COVID-19 (coronavirus) cannot be miscalculated in project finance, as this virus is considered as a global pandemic and has resulted in the closedown of construction work and its related operations. The consequences can be seen as slow production and manufacturing of necessary equipment in projects are delayed due to the outbreak of COVID-19 which means the supply chain will be disrupted worldwide. Moreover, in project financing, Project Company is usually considered as a special purpose vehicle (SPV), and pursuant to present critical situation lenders are having no recourse to sponsors where the project is not performing as per the expected plan. But considering the different scenarios as the government now is hacking interest rates and making banking rules more convenient at this time of financial crunch.


Due to lower interest rates, demand for financing the new upcoming projects will increase along with debt financing and this effect will operate for the long term from the present. However, this article provides a snapshot of FORCE MAJEURE clause activation in project financing, how to get through the force majeure risk, and what all are the necessary consideration for the purpose of force majeure. Along with the force majeure aspect this article will also focus upon other immediate impacts on project financing due to COVID-19.

 


ACTIVATION OF FORCE-MAJEURE IN PROJECT FINANCING

Force majeure clause comes into play when one party is unable to perform his contractual obligation which he needs to perform and due to natural circumstances i.e. unforeseeable circumstance’s which includes acts of war and natural disaster, he was hindered or delayed in performing the same. Force majeure is governed by Section 32 and Section 56 of Indian Contract Act, 1872 and is also considered as exception to what amounts to breach of contract. This concept is explained in detail in one of the celebrated Supreme Court Judgement titled Energy Watch Dog vs. CERC. Usually this concept of force majeure is prevalent in project financing and construction cases. In an epidemic or pandemic scenario, like of COVID-19 this clause gets into play by contractor in construction project because he is the first one to encounter the consequences because of disrupted supply chain. When the force majeure clause is invoked due to the COVID-19 outbreak there is no surety that the contractor will succeed because it will depend on contractual interpretation whether this outbreak will be considered as “epidemic” or not.

 


After invoking force majeure number of key considerations arose which are as follows:

  1. Project Company has to ascertain that whether force majeure will succeed as per the interpretation of construction contract and this has to be done with the limited time frame.
  2. Assessing the evidences and circumstances which will prove that due to COVID-19, project company/contractor is unable to perform their obligation. Also, on the basis of a contractual agreement between the parties, it demands the contractor to prove that he is being prevented by the force majeure event to carry on his contractual obligation. Furthermore, the contractor also needs to produce the evidence to prove his onus pertaining to the contract

 

Now in order to analyze the force majeure in the contract the contractor or say the project company has to establish connectedness between the qualifying force majeure event and the impact to its performance of contractual obligations, and in most of the cases this will be based upon factual circumstances which will differ from case to case basis. Due to government measures that are related to business lockdown, mandatory quarantine measures, which will directly affect the working of the project and contractual obligations can be considered as evidence for the activation of force majeure clause. Concerned expert feedback would be required for the collection and preparation of evidence for notices of force majeure.

 

This also requires the affected to take steps in order to mitigate the force majeure events and it is considered as an obligation upon the affected party to do so. Also, it was required to draft or take the alternative options in consideration to perform the obligations pertaining to the contract and it would be advantageous to take remedying measures to address the impact due to unforeseeable events like COVID-19. However, in order to ensure that the claim is not time-barred, time is an essential ingredient for the notice requirement for the purpose of force majeure claim.

 


HOW TO TACKLE FORCE MAJEURE RISK?

The loopholes in the force majeure clause should be taken into consideration and such gaps should be addressed when the project documents were subject to bankability due diligence. Bankable project documents will typically contain similar force majeure provisions and the contractor's notice of force majeure will form part of the project company's notice in the project documents. Also, if there is any discrepancy or say loophole is identified, then the force majeure will be tested through the COVID-19 outbreak.


Further, others get through consideration include the timeline for submission for force majeure clause. In practice, the contractor and the project company may be engaged in negotiations or discussions on the impact of force majeure and will, therefore, need to consider the timelines that are running in parallel. Usually, Project documents with future cash flows contain time which provides a sufficient amount of time to project companies to provide its notice of force majeure under the upstream project documents. Another important contemplation is the different governing laws for project documents. Offshore construction contracts will be governed by English law, but on the other hand, power purchase agreements should be governed by the local law. Therefore, if the risks associated with different governing laws are not mitigated when the project documents were being developed, contractual interpretation of force majeure provisions can be difficult.


Moreover, the party claiming force majeure has to prove that he has taken all reasonable circumstances in order to avoid or mitigate the risk and its effect. Thus, this will depend upon case to case basis and in project company case contractor has to prove the same. In project financing consideration under financial document needs to be taken care of, project lenders are widely analyzing the COVID-19 outbreak as they begin receiving notices related to force majeure and due to which they cannot wash their hands off this outbreak. This outbreak requires taking steps in financial documents that are in consonance to the terms of the project document. Furthermore, after receiving the notice of force majeure the project lender has to consider carefully the impact on the project and positions under the financial document. Also, prior consent is also required before agreeing to any relief obtained through force majeure and certain time constraints need to be undertaken by the project company in this case.

 


EVENTS WITH ITS NEGATIVE IMPACT

After considering force majeure scenario there are other events too which will be triggered due to COVID-19 outbreak in project financing and major of these defaults might extend to necessary parties involved in the successful completion of the project that is construction contractor, operator, and main manufactures of necessary equipment’s. Default events are as follows:

 

  1. Emerging Economies: COVID-19 outbreak affected economy drastically which would be clearly seen through interruptions created in supply chains, fall in exchange rates, limited support, or say financial support of government for projects as impacted by COVID-19 outbreak. Whilst it also includes travel restrictions, the lockdown of major working sites and financial covenants involved in the projects are also affected. Thus, this pandemic affected economy but it insurances should be taken into consideration to take up protection form this drastic effect and all these measures should be taken into consideration by the project company, lenders, and all sponsors, who may be coming under pressure due to this outbreak.
  2. On-going Projects: one should expect, that this outbreak already affected on-going construction projects due to hampered supply chain and labour availability worldwide. In India, labourers are going back home because of this outbreak and it is expected that this impact will be amplified in the future. Further, as the government has taken initiatives in lowering interest rates and baking measures which will benefit the upcoming projects in the future but presently debt financing and tax equity financing is going through a negative impact. Lack of funds would be witnessed pertaining to the on-going projects which will attract defaulting lending provision in loan documentation.
  3. Material adverse effect clauses: ongoing projects which contain Material adverse effect clause, will get triggered because of circumstances that arose due to COVID-19. Further, this clause will be activated when specifically the situation or say circumstances will affect the project. Thus, there should be material adverse effect and circumstances from case to case basis has to be administered and considered. In my opinion, this clause will get in activation mode because each and every project is hampered due to this virus outbreak. Also, the borrower should inform the lender about these circumstances from time to time.
  4. Financial ratios: The effect of COVID-19 as of now cannot be said to be accurate because it is still in action and according to the Health Ministry and government inputs it may extend for some more time. Due to which debt financing or tax equity financing will hamper but the project financing sector will surely bounce back with a boom in itself from this recession as it was earlier seen in the 1987 recession. The present slashing interest rates and tax incentive proposal will allow the project finance sector to recover.

 

Considering the impact, Project Company has to take the following measures:

 

  1.  A project-related review should be done by the project companies so that it can analyze the impact which the project has to go through due to the COVID-19 outbreak. As seen in normal circumstances the risk associated with the project will be the supply of necessary equipment, labour availability risk, financial covenant risk, and other lending and funding scenario. Whilst with the effect of COVID-19 these risks will get one level up and due to the slowing of economy financial crunch will also arise in project financing.
  2. Major contracts involved in project financing like an employment contract, shareholder agreement, the loan agreement should be critically analyzed in respect of termination, force majeure, and law jurisdiction and dispute resolution mechanism. Also, repayment covenants, information covenants, events of defaults should be critically reviewed.
  3. A detailed review of Supply chains should be done so that an alternate option can be finalized in advance by the project company. This step should be in respect to mitigating the losses and reasonable steps that can foresee.
  4. Expected outcome after inserting force majeure and list of events in which it can be invoked and other ways as stated earlier about how to get out of the force majeure and compliances which are necessary as per Indian Contract Act, 1872.
  5. Consider developments or impacts of steps taken up by the government pertaining to the COVID-19 outbreak with respect to project financing along with tax implication involved. Also, the Project Company should amend all it’s an important document well in advance so that it can save time and cost for the same.

 

 

CONCLUSION


COVID-19 outbreak is spreading at an alarming rate due to which economy is diversely affected and the project finance sector is also facing uncertainties through the hampered supply chain, labour availabilities, financial crunch, and unforeseen circumstances. This outbreak has also affected debt financing and tax equity involved in project financing. Further, continuous monitoring of government policies are required for project financing. So, at last, after considering the crucial aspects of force majeure, the negative impact of several defaults due to the COVID-19 outbreak is one of the worst nightmares in today’s economic sense for project financing.

 

Authored By: Vaibhav Chauhan

JEMTEC School of Law

 

Disclaimer: The content of this article is solely the author’s personal analysis and interpretation. In case you wish to act upon on the basis of the content of this article, please seek legal advice. The author shall not be responsible for any loss you may incur as a result of your actions relying upon this content. The content herein is the copyrighted material of the author and is informational and shall not be used for commercial purposes other than for personal reading.

Business Lookouts During COVID-19
Company

Business Lookouts During COVID-19

Businesses are experiencing unprecedented challenges and market disruption due to the Covid-19 pandemic and consequential economic meltdown seems inevitable. Economists predict that economy is now dealing with a situation far worse than the global recession of 2008. We are not prepared to deal with this situation since no business has anticipated or predicted menace to this extent, where globally national borders are locked down halting global market and business operations. 

 

Importantly, we are dealing with a war waged by the unknown, and nations are fighting to safeguard and protect their people and economy. In this context, businesses/ entrepreneur has to operate sustainably, and it is important to set up and administer certain proactive measures to mitigate financial and business losses. These special circumstances require special measures to sustain and thrive, and this article covers some measures that companies may imbibe to thrive over the crisis and to sustain. 

Pragmatic ideation and proactive resolution will mitigate the impact of impending problems”

 

 

WORK FROM HOME

Work From Home is not an exception but has become a Rule”

Legally, the success of a business and its sustenance depends on how well it protects its confidential information and trade secrets. Especially, in times like now, it has become imperative not only to have sustainable business modus operandi to thrive and succeed during bad market conditions but also to protect what has been already built through years of hard work. This sounds simple yet very difficult to implement and execute in the frontline. 

 

Employees are key to every organization. Their performance and conduct in operating the business decide the company's future. Good employees build a successful business and the bad ones ruin the organization. A simple claim or lawsuit will change the future of the company or drag the company into darkness (third party infringement and damages suits), so the company should explicitly set out the framework within which the employees have to function within the company. 

 

With a large number of employees working remotely at the comfort of their houses, the management is now grappling with the management of infrastructure to facilitate employees with work from home access and to keep the business running. While companies are dealing with infrastructure difficulties, protection of confidential information and trade secrets should be set on high priority in order to avoid future uncertainties and to govern the way the organization continues to operate within an uncontrolled environment of homes of the employees.

 

Measures: Implementing effective policies and conduct awareness training programs so as to how to operate and function while working at the comfort of home. Data Protection Policy, Information Technology and Security Policy and Work from Home Policy are few policies that companies should implement and effectuate measures for protection of data and confidential information.

 

 

STRUCTURE BUSINESS CONTRACTS

Businesses don’t operate in silos but are reliant upon clients, service providers, and customers (the list may vary business to business). It is important to evaluate and strategically secure and retain existing business connections. Practically, retaining old clients is a cost-effective measure, since securing new clients is a costly affair during this market meltdown. The business relationship with the client is regulated by a document called “Agreement” and this provides how to govern and operate during the subsistence of the agreement.

 

An agreement may be implied or express contract. Where the terms of the agreement are explicit, the business should evaluate the risks and be prepared for any foreseeable risks that may arise in the current market circumstances and protect itself from the unforeseen risks (Force Majeure Clause). For implied and unwritten business arrangement, the company will be operating in an uncontrolled and ungoverned territory and may cost the company irreparably, if things don’t operate the way they are supposed to, and legal binding of the implied agreement depends on external factors and burden of proving the transaction and losses are high. So, the management should focus on dealing with the governing business through the Agreements.

 

Agreement decides whether you have a falling business or scope to rise above the troubled water.”

 

It is imperative to work along with the legal team to overcome the uncertainties and to operate within a controlled business environment. In the interest of economies of scale of business, as a rule, litigation should be the last resort. When agreement provides for business certainty why take long shots with regard to company future.

 

As such, in case a client (or a set of clients) is important for the survival of a business, then the business should take proactive measures to re-negotiate, re-design, or structure the transaction to make it sustainable to both the business and the clients. If you are expensive to your client, your dealings with them are bound to fall to the ground. Importantly, be the first to make a proposal for restructuring a transaction before your clients make a decision against you and it’s too late.

 

Change is constant, adaption is a rule and knowing when to adapt will decide the success” 

 

Conventionally, business teams are oriented to gain business, finance to control costs and project profits, so they pay no heed to transactional risks. Inevitably, in order to succeed, the leaders have to make decisions that involve exposure to risk. However, it is important to take calculative and informed decisions with regard to such a risk exposure and the same has to be documented through an agreement to avoid uncertainties and ambiguity. Drawing up an agreement is not just a good-to-have measure, but it is a tool to resolve conflicts in case of disputes. 

 

To be triumphant, all teams should collaborate and structure a workable business transaction for the clients. Overpromising-Underperformance and low promises and overperformance both strategies kill the business, but a sustainable, performance and an achievable business agreement works well for all and leads business to a successful path. In this, the legal contribution would be to enlighten the business with unbiased views of the nature of risk and consequences that may arise therefrom.

 

Notably, business conglomerates are successful in a way they are, since they operate and function by making informed decision knowing their exposure and risks, and on the contrary, start-ups can’t afford legal costs and hence fall prey in the hands of business eagles who specialize in acquiring businesses at low cost (or no cost). As a result, start-ups rise and fall over-night. 

 

Measures: Evaluate your business agreement and understand the cost-value proposition as the deal/ transaction stands. In essence, restructuring your business agreement to current market will help companies to retain clients. This task also helps companies to evaluate high-cost clientele and to allocate funds to sustain the business or make the decision to let go of a client for the larger good.

 

 

SUMMARY

Pragmatic and proactive measures make to business sustainable and keep it afloat.”

This article outlines legal measures which the business managers have to evaluate and reconsider under the Covid-19 crisis. It aims to highlight the common areas of lacuna in business operations. Pragmatic and proactive measures make the business sustainable and keep it afloat. Introspection into business processes, models, operations, and business flow, and the results of such analysis helps to strategize and acclimatize to the current business environment. Change is inevitable so the factors are key to thrust and succeed. Having enforceable and sustainable contracts is vital to govern the way the business operates and to understand obligations and liabilities. This will help to plan, strategize, and execute business in an informed way during the time of change in the business environment, and to stay out of troubled waters. These measures may mitigate the disaster and help to survive and succeed in the long run.

 

Authored by: RAMYA KUNAPAREDDY

Corporate and Litigation Lawyer, Hyderabad

 

 

Disclaimer: The content of this article is solely the author’s personal analysis and interpretation. In case you wish to act upon on the basis of the content of this article, please seek legal advice. The author shall not be responsible for any loss you may incur as a result of your actions relying upon this content. The content herein is the copyrighted material of the author and is informational and shall not be used for commercial purposes other than for personal reading.

Legal Remedies for Termination of Contracts
Agreement & Contract

Legal Remedies for Termination of Contracts

A contract is typically a written agreement wherein the parties fix the terms and conditions of their relationship and transactions. Termination of a contract is very important as it provides parties with an exit option. Under the Indian Contract Act 1872, a contract can be terminated by the parties involved by giving legitimate reasons like frustration, repudiatory breach, termination by prior agreement, rescission, or on completion.

 

Such termination may occur by the mutual consent of the parties or by law. However, if a contract is breached or terminated without mutual consent, then the party other than the one breaching it can seek certain legal remedies on account of such termination. 

 

 

Following remedies may be pursued for if there is a termination of the contract: 

 

  1. Suit for breach of contract: A suit for breach of contract can be instituted when either party breaches an enforceable agreement. The remedies can be obtained in the form of damages, restituting the suffering party, rescinding the contract, or ordering the breaching party to perform the contract. These damages shall include the compensation given for financial losses caused by a breach of contract.
  2. Damages: Under Section 73 of the Indian Contract Act, any party can claim compensation for loss or damages caused to them in the normal course of business if the other party breaches it. The liquidated damages are pre-decided by the parties while forming the contract. The unliquidated damages are assessed and determined by the courts or appropriate authorities after the contract is breached. The general aim of an award of damages for breach of contract is to compensate the innocent party for the actual loss suffered and to put the party back in the same position as it was before the formation of the contract. The damages incurred are assessed as at the date of the breach of contract. These damages may be for the pecuniary loss, non-pecuniary, and nominal damages. 
  3. Specific Performance: Specific performance is an equitable and discretionary remedy given by the court in case of breach of contract, which compels the breaching party to perform a contractual obligation. It is generally awarded when the required obligation is unique and difficult to value. It may be ordered when the property is not an ordinary article of commerce or consists of goods which are not easily obtainable in the market. 
  4. Injunction: Injunctive relief is a legal order that either makes it mandatory for the defaulting party to perform specific obligations or prohibits the defaulting party from performing certain tasks. It is also at the discretion of the court and can be ordered on an interim basis or a final basis. A common instance of interim injunctive relief is an order restraining the party from dealing in certain property until the substantive dispute has been concluded. 
  5. Indemnity: Indemnity clauses are the contractual provisions that allow the parties to manage the risks attached to a contract by making one party compensate for the loss suffered by the other, due to specific events. An indemnity may be claimed for losses arising on account of the conduct of a third party. The damages, the amount paid under the terms of the agreement, legal costs of judgment, are some of the claims which Indemnity holders can include in its claims. 

 

 

Conclusion

It is important that a contract includes all these remedies in writing. It is advisable to approach a lawyer and assess which remedies to termination of the contract, maybe the most beneficial.
 

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