Of late I have been having conversations with the several corporate lawyers. It seems that in India there are just about 3000+ corporate lawyers i.e. lawyers whose primary occupation is to advise, consult, draft agreements for big corporate clients (like BSE 500, really big private (unlisted) companies and MNCs). Like in many other areas in India, there are very few reliable sources of data – no one has done a comprehensive study of the number of corporate law firms and the number of lawyers working in them. In terms of law firms with 10 or more people, figures like 70 to 100 law firms are bandied about.
Since such a small number of firms (and their corporate lawyers) are serving the whole corporate sector in India, getting high quality corporate legal advice has become an expensive proposition. For example, the best law firms in the country charge out rates between Rs. 6000 to Rs. 25000 an hour. For those outside the industry, that is a staggering figure. So say you want to get an JV agreement drafted by the best lawyers in the country, you can expect to be charged at least Rs. 10 lakh (INR 1 million). Typical example of demand and supply deciding the price.
So what are the consequences of about 100 corporate law firms serving the entire Indian corporate sector – there are, according to one estimate, 3.2 crore (32 million MSMEs in India)? The number would not move much if you include the 2000 biggest companies (listed cos, MNCs etc. which cannot be called an SME).
There are several consequences.
1. Hum aapke hain kaun – The big law firms have enough work to go around and can refuse work. I have heard of several SME owners who aspire to hire the best law firms in the country, only to find that they are not really a priority client for them. You can’t really blame the law firms either – they have bigger fish to fry.
2. Burn after reading – Most SMEs are forced to go to litigating lawyers (lawyers who go to court and don’t practice corporate law on a regular basis) or small practitioners who claim they know corporate law. Many times the service SMEs get – including drafting of agreements, commercial advice etc. – is, well, wrong, frustrating, unprofessional, incomplete etc.
3. Chalti ka naam gaadi – Most entrepreneurs don’t care. Sign contracts, we’ll deal with the consequences later. Or cut, copy, paste is the way to go. Needs a website terms of service? Go to www.facebook.com, www.cleartrip.com, and, carve, chop, hack, incise, open up, rip, score, sever, slice, slit AND then, amalgamate, associate, bind, blend, bond, bunch up, coadjute, commingle, compound, conjoin, couple, incorporate, interface, join, marry, merge the two website terms of service. Jugaad. It works. And sometimes it doesn’t.
4. Aitraaz – These startups or SME entrepreneurs don’t like lawyers. Period. For good reason too, given the general impression of lawyers (In old days, people used to say “Bemari aur kacheri ghar main nahi aani chahiye” i.e. disease and litigation shouldn’t enter the house). But a smarter entrepreneur will know when to use a professional. As a lot of SMEs interact with each other, with foreign suppliers, clients, employees, partners etc., more and more they don’t have a choice. Also most of the SMEs falling under this category usually end up having messy corporate compliance.
So what can we do? Well, that’s a good question. Maybe for another time.