Commercial Insurance: What every in-house counsel should know

http://www.sdvlaw.com/images/Commercial%20Insurance-%20What%20every%20GC%20Should%20Know.pdf

In-house counsel to Business counsel

Read this article to know how in-house counsels are expected to become more of business counsel:

http://www.nabarro.com/downloads/from-in-house-lawyer-to-business-counsel.pdf

Lease Vs Leave and License : Which is better?

Leave and Licence Agreements are preferred by the parties to get out of the rigours of landlord-tenant relationship. Many types of agreements are made for the occupation  of  property  like  lease  deeds,  lease  or  tenancy  agreements,  rental agreements  etc.  Despite  these  agreements,  most  owners  prefer  to  give  their premises on leave and license basis rather than tenancy or lease basis. The process of eviction of tenants is generally difficult. The law is tilted in favour of the tenant for various purposes. Generally it is being witnessed that a person having a vacant apartment will never rent it out fearing what if the tenant decides not to vacate and makes the apartment his own. That is why tenancy has been put on the backburner and Leave and Licence is now the most popular option.

The word “leave” has many meanings. In Leave and Licence Agreements, it is used to indicate “permission”. The occupancy is in essence a permission granted by the landlord or owner to use and occupy the property concerned. 

Mention should be made that the practice of entering into “Leave and Licence Agreements” was adopted in Mumbai. In Mumbai, the provisions contained under the then Bombay Rents Hotel and Lodging House Rates Control Act, 1947, popularly known as the “Bombay Rent Act” were considerably in favour of the tenants. Further, Tenancy or  Lease  Agreement had to  be stamped and registered.  Even if the Agreements were duly stamped and registered, the eviction of tenants was still a very tough and time consuming procedure.

With the hope of getting over the stamp duty and registration requirements and also with the view of not creating any tenancy, that will be covered by the said Act, a practice of entering into “Leave and Licence Agreements” was adopted. 

Lease, Licence and Rental Agreements

The licence is not a lease. The lease and the license both are different. The word “licence” under Section 523 of the Indian Easement Act, 1882 is a grant by one person to another or to a definite number of persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful. If the right granted as licence does not amount to an easement or an interest in the property, then it would be a licence.

A lease of immovable property as per Section 105 of the Transfer of Property Act is a transfer of a right to enjoy such property. It may be for a specified period, express or implied. The price or payment of money is usually referred to as the “rent”.

In a Leave and Licence Agreement, the juridical possession of the premises is deemed to remain with the licensor and the licensee is said to be in constructive possession of the said premises. Thus a leave and licence does not create any interest in the premises in favour of the licensee but gives the licensee the mere right to use and occupy the premises for a temporary period.

A Rental Agreement between the landlord and tenant sets down the terms which will be followed while the tenant lives in the rental unit. Month-to-Month Agreement is commonly called a "Rental Agreement". This agreement is for an indefinite  period  of  time,  with  rent  usually  payable  on  a  monthly  basis.  The agreement itself can be in writing or oral, but if any type of fee or refundable deposit is being paid, the agreement must be in writing.

Lease and Licence: Distinction

The cardinal distinction between a lease and a licence is that in a lease there is a transfer of interest in the premises, whereas in the case of a licence there is no transfer of interest, although the licensee acquires a right to occupy the premises. When premises are given out on lease or tenancy basis the legal possession of the premises in these cases is also deemed to be transferred to the lessee and tenant 

respectively.

Whether an agreement to occupy the premises between the landlord and tenant is allowed to occupy was an agreement to lease or an agreement of leave and license has been a subject of many Supreme Court & High Court rulings. In a number of judgements various High Courts as well as the Apex Court have distinguished the lease and the license. 

Factors to be Considered While giving out Premises on Leave & Licence Basis 

In deciding whether to give out premises on leave & licence basis some of the factors to be considered are as follows:

—   Possession: In a leave and licence agreement, the owner is deemed to be in
       legal or judicial possession of the premises and the licensee is in constructive
       possession of the premises.

—   Income Tax: In a leave and license agreement the owner has to pay the
       applicable rate of tax.

—   Municipal Tax: In a leave and license agreement the Municipal Authorities may charge taxes as applicable in the area and if there is a security deposit amount sometimes the Municipal Authorities may calculate a notional interest on the   securities deposit amount and charge tax thereon. 

India: Pledge Vs Hypothecation: did you know?

HYPOTHECATION AGREEMENT

Hypothecation   is   a   form   of   transfer   of   property   in   goods. 

Hypothecation agreement is a document by which legal property in 

goods passes to the person who lends money on them, but the 

possession does not pass. This form of transfer is not regulated in 

India by any statute.

Neither the Transfer of Property Act, 1882, nor the Indian Contract Act, 1872, nor the Sale of Goods Act, 1930, recognize the non-possessory hypothecation of immovables and the rights and remedies of the parties are regulated by the courts according to the general law of contract.

In hypothecation, there must be an intention of the parties to create a security on the property on which the money has been lent. If that intention can be established, equity gives effect to it.

A hypothecation not merely of moveable existing on the premises at the time but also in respect of moveable which might be subsequently acquired and brought there, is valid though it is not governed by the Transfer of Property Act or by the Indian Contract Act, 1872. An oral or written hypothecation is permitted under the law in India.

Hypothecation is an extended form of pledge. Pledge has been codified by the Indian Contract Act. Sections 172 to 176 deal with pledge of goods. Under Section 172, a pledge is a bailment of the goods as security for payment of a debt or performance of a promise. Section 172 entitles a pawnee to retain the goods pledged as security for payment of a debt and under Section 175 he is entitled to receive from the pawnor or the pledger any extra-ordinary expenses he incurs for the preservation of the goods pledged with him. Section 176 deals with the rights of a pawnee and provides that in case of default by the pawnor the pawnee has the right to sue upon the debt and to retain the goods as collateral security and to sell the goods after reasonable notice of the intended sale to the pawnor. Once the pawnee, by virtue of his right under Section 176 sells the goods, the right of the pawnor to redeem them is extinguished. However, the pawnee is bound to apply the sale proceeds towards satisfaction of the debt and pay the surplus, if any, to the pawnor. So long the sale does not take place the pawnor is entitled to redeem the goods on payment of the debt. Therefore, when a pawnee files a suit for recovery of debt, though he is entitled to retain the goods, he is bound to return them on payment of the debt. The right to sue on the debt assumes that he is in a position to re-deliver the goods on payment of the debt and, therefore, if he has put himself in a position where he is not able to re-deliver the goods, he cannot obtain a decree.

As against pledge of goods, the transfer of legal title in the goods in the case of a hypothecation, the rights of the lender and the borrower are strictly governed by the terms and conditions of the hypothecation agreement executed by the parties. No assumptions can be drawn in such a case. Hypothecation is resorted to mostly by banks and other financial institutions for securing their long-term and medium-term loans and limits of working capital, bill discounting, letters of credit and guarantees to limited companies, partnerships etc. Alongwith the hypothecation agreements, the

loaning institutions including banks have a plethora of other documents executed by the   borrowing   companies   e.g.   demand   promissory   note,   collateral   personal guarantees of managing directors, directors and other persons having substantial interest in the borrowing entities, second charge on fixed assets like land and building 

and plant and machinery permanently attached to land by legal or equitable mortgage and so on and so forth.

Hypothecation  agreements  usually  cover  moveable  machinery,  equipment, stocks  of  finished  and  semi-finished  goods,  raw  materials,  consumable  stores, present and future available in factories and godowns of the borrower and also enroute to the borrower's factories and book debts. While these items as moveable assets, remain in the possession of the borrower and he has absolute right to convert them, sell them and deal with them in any manner the borrower likes in the course of his  business,  the  legal  title  vests  in  the  lending  institution  by  virtue  of  the hypothecation agreement. Pledge, which is regulated by the Indian Contract Act, 1872,  as  stated  above,  technically  speaking,  cannot  exist  without  bailment  or possession. Though not accompanied by delivery of possession, the validity of hypothecation of moveables has been recognised in India and it has sometimes been enforced   even   against   a   bona   fide   purchaser   without   notice.   Since   such hypothecation is not governed by the Transfer of Property Act, 1882 or the Indian Contract Act and even the Sale of Goods Act, 1930, the Court is thrown back upon principles of equity and justice. 

In-house counsel tips

Source: http://www.acc.com/legalresources/publications/topten/wikntiwikt.cfm

 What do you know now about being an in-house attorney that you wish you knew then on Day 1 of your corporate counsel career? Here are the Top Ten pearls of wisdom shared:

1.  Build credibility by understanding the business inside and out.

How best to become an expert in the business? “Learn the business deeply through experiencing the product or service,” shares Michelle Banks, General Counsel of the Gap, who spent some time on the floor and in the back storage room folding shirts and clothing at Old Navy to truly understand her retail business. In a similar vein, Tanya Avila, associate general counsel of the e-commerce software company, Volusion, recommends understanding “how the technology works, who the players in the industry are and where your company fits in the ecosystem.” Not only will this give you credibility with your business partners, but the happier they will be to not only give you a seat at the table, but “actually listen when you have something to add to the conversation,” says Ms. Avila. 

2.  Know the players within the company.

Not only is it important to understand the business, it is also critical to understand “how (and through whom) it makes decision,” advises Deirdre Stanley, General Counsel of Thomson Reuters. Over time, focus on a few select groups within the company and find time to meet with them to learn about what they do: marketing/sales, finance, new product development, strategy and finance, are top of mind. When meeting with any key players, learn how their work impacts the company and generates revenue. Consider finding a mentor from outside the legal department and understand how the company looks from their side of the house; this type of partnership will only increase your overall business-savvy.

3.  Listen and don’t over-lawyer.

The art of communication and the value of active listening is especially important for the new in-house practitioner. “Attend every meeting you are invited to at first,” recommends Ms. Banks, and “listen to, empathize with, and invest in relationships with your business partners.” Learning how to listen and convey your message with the appropriate tone and urgency is critical to working with business people. Warns Ms. Avila, “a brain dump of what you know isn’t impressive; it’s annoying and it may burden [your business partners] with knowledge they don’t need and don’t want. This isn’t law school; and no one wants a legal memo.” 

4.  Eliminate “no” from your vocabulary and replace it with “how-to.”   

Most business issues are neither black nor white, but rather shades of grey. “To be relevant,” cautions Susan Hackett, Chief Legal Officer and CEO of Legal Executive Leadership LLC, in-house counsel must “speak the language of grey.” But what does the ‘language of grey’ entail? The grey refers to the business risk every company faces. Legal risk is simply one of many types of risk a company faces, including the “risk of doing nothing,” says Ms. Stanley, adding, “So your job is not to say ‘no’—unless something is obviously illegal—but to describe ‘how-to’.” Accordingly, corporate counsel must develop an understanding of a company’s level of risk tolerance and chart a path forward. As Ms. Banks further advises, “Save ‘no’ for the rare occasion that there is no legal and ethical solution to get to yes.” 

5.  Leave your fear of numbers behind (Part 1- Data and Metrics).

For many lawyers, law school was a safe haven from numbers and calculations. But for in-house counsel, it is important to collect data and key performance metrics to demonstrate your individual and department’s overall value to the business enterprise. Only by collecting data can improvement, efficiency and value be measured. What performance metrics might be meaningful to you and your department? Perhaps measuring cost-savings from better management of outside counsel or from the implementation of an alternative fee program? How about the turn-around time for certain serial contracts? Identify, collect and report on the key performance indicators that are meaningful to your CFO and CEO. Finally, consider technology resources and aggregated data that might help you compare your legal department’s performance to similarly situated companies, either by legal department size, company size by revenue, or industry. 

6.  Leave your fear of number behind (Part 2- Accounting).

Remember that great accounting and microeconomic course in law school that prepared you for your in-house position? Probably not, if you are like most attorneys. However, a newly minted corporate counsel will quickly discover that both are intertwined in the in-house practice. In fact, at a recent Chief Legal Officer conference, many of the CLO panelists predicted that more general counsel will have MBAs and other business training. In order to better serve the business, pick up some basic accounting courses; understand how to read a balance sheet and understand Generally Accepted Accounting Principles (GAAP). Finally, ask your accounting team whether there are particular tax or accounting issues that should be considered in your legal advice.

7.  Meet with outside counsel and elevate the relationship by introducing project management techniques.

Transitioning from counsel to client can be challenging; and like many responsibilities in-house, law school doesn’t prepare you to manage outside counsel. In some cases, outside counsel will know more about the company and its legal affairs than you; accordingly, set up meetings with your outside counsel as soon as possible. Understand who is on your bench and the competencies and expertise of the different partners and associates doing work for you. Review any retention letters that may be in place, or establish your own retention agreement in the absence of one. Consider introducing project management techniques to the relationship: are you receiving early case assessment, budgets and periodic status reports? Is there an established means to evaluate outside counsel and the legal services provided and provide that feedback to the firm? How are invoices received and reviewed? Initially, corporate counsel may find it uncomfortable to talk about invoices with outside counsel, however this discomfort should never undermine in-house counsel’s responsibility to manage outside counsel and legal spend. Technology, like e-billing and matter management, can help you better collaborate with outside counsel.

8.  Think that being in-house means a lighter load? Think again.

The demands of the in-house practice cannot be underestimated. Your in-house business partners can be just as demanding as life at the law firm. 

9.  Check your ego and DIY (“Do It Yourself”).

 “Remember that you now work in an organization where lawyers don’t control the business,” commented Ms. Hackett. She further advises, “Leave your JD persona at the door each day and pull it forward only when you’re working on a legal issue. And remember that in business there are no legal issues—just business issues that require a lawyer as one of the people solving the problem.”  In-house counsel can no longer push down administrative duties to support staff. They must instead master the company’s software and systems and learn processes themselves. Kelly Prettner, corporate counsel at Minnesota-based Educational Credit Management Corporation, suggested that corporate counsel must also be administrative ‘jack-of-all-trades’. Prettner shared, “One of our newest additions has commented that she has been embarrassed by asking who does things for her, when the answer is ‘you do it yourself.’” 

10.  Rely and maintain professional network.

 The importance of maintaining your professional network is even more pronounced in-house. Join and participate in the local  chapter. Make sure to reach out to this network on a regular basis; they will be a treasure trove of practical advice, forms, and reassurances. 
 

India : Real estate- stamp duty- ready reckoner

http://www.wirc.icai.org/material/CA%20Lecture%20Stamp%20Duty%20Registration%20Final%20Mumbai%2090930.pdf

Practical things which you thought you knew...

1. Signing of Agreement:

Deed Escrow

A deed signed by one party will be delivered to another as an "escrow" for it is not a perfect deed. It is only a mere writing (Scriptum) unless signed by all the parties and dated when the last party signs it. The deed operates from the date it is last signed.  Escrow means a simple writing not to become the deed of the expressed to be bound thereby, until some condition should have been performed. (Halsbury Laws of England, 3^rd Edn., Vol. II, p. 348). 


                                               2.Date of Agreement:

Place and Date of Execution of a Deed
We first highlight the importance of “date”. The date on which the document is executed comes immediately after the description of the deed. For example, "This Deed of Mortgage made on the first day of January, 2012". It is the date of execution which is material in a document for the purpose of application of law of limitation, maturity of period, registration of the document and passing on the title to the property as described in the document. Thus, the "date" of the document is important.Date of execution of document is inscribed on the deed. The date is not strictly speaking an essential part of the deed. A deed is perfectly valid if it is undated or the date given is an impossible one, e.g. 30^th day of February.

If no date is given oral evidence will always be admissible to prove the date of execution only it leaves necessary to prove it. However, it is of great importance to know the date from which a particular deed operates. In India there is a short period of 4 months (Section 23 of Registration Act) for its registration from the date of execution within which a deed must be presented for registration. The date is important for application of law of limitation also. In view of the extreme importance of date of execution of deed it should be regarded as an essential requirement. The date of deed is the date on which parties sign or executing it. If several parties to a deed sign the deed on different dates, in such cases, the practice is to regard the last of such dates as the date of deed

In order to avoid mistake and risk of forgery, the date be written in words and in figures. 



The place determines the territorial and legal jurisdiction of a document as to its registration and for claiming legal remedies for breaches committed by either parties to the document and also for stamping the document, as the stamp duty payable on document differs from State to State

Attestation, Registration and Stamp Duty 

Attestation: It is not necessary for an agreement to be attested by any witness. But agreements are usually attested by one witness. Where registration is desired the agreement should be attested by two witnesses

Registration: Agreements not relating to immovable property and agreements not creating an interest in immovable property are not compulsorily registrable. Only agreements creating an interest in immovable property worth more than 100 are required by law to be registered.


Stamp Duty: For the purpose of stamp duty, agreements are covered by Article 5 of Schedule I to the Indian Stamp Act, 1899. The stamp duty for different kinds of agreements varies from State to State. While drafting an agreement the draftsman should ascertain the proper stamp duty having regard to the changes made in the Stamp Act in the State where the agreement is executed