Boom time for law firms in the age of insolvency
Blue-blooded law firms of the country are realigning their resources to lap up the big opportunity offered by the new insolvency regime.
Leading names in corporate practice such as Shardul Amarchand Mangaldas & Co, Cyril Amarchand Mangaldas, Khaitan & Co, AZB & Partners, Trilegal, Dhir & Dhir Associates, and Kesar Dass B & Associates have created separate verticals or business divisions and are deploying over 100 top-notch lawyers between them to tap new opportunities thrown up in the stressed asset resolution space.
These firms are looking at teams of 10-30 lawyers to handle the resolution of big-ticket stressed assets, where activity has heightened in the past three weeks. There is a scamper for fresh talent with expertise in banking and recovery matters. While the total stressed assets in the banking system is over ~7 lakh crore, the first 12 companies that have been marked for insolvency by the Reserve Bank of India account for over ~2.5 lakh crore.
“The new insolvency regime will definitely augment demand for legal professionals. Legal advice will be required by the lenders, the company, promoters, directors and the insolvency professionals,” says Cyril Shroff, managing partner, Cyril Amarchand Mangaldas.
The firm plans to build a robust practice with a team of more than 30 lawyers, largely those with experience in banking, litigation, corporate and the capital markets. This is largely to tap opportunities related to corporate restructuring and liquidation.
“We have not even started on the personal insolvency front,” he adds. The sections of the Insolvency & Bankruptcy Code (IBC) that relate to bankruptcy — the term that covers insolvency of individuals — are yet to be notified.
How seriously the law firms are looking at this opportunity can be gauged by the response of Shardul Shroff, executive chairman, Shardul Amarchand Mangaldas & Co.
“I have personally taken responsibility for the insolvency practice as a national head,” Shardul Shroff says.
The firm, he says, is extensively researching the subject of insolvency and augmenting resources and knowhow by seeking out international precedents for resolution plans and fast-tracking insolvency processes. Shardul Amarchand Mangaldas & Co currently has a dedicated team of 12-15 lawyers looking at this fledgling practice, with plans to ramp up the numbers to 20 by the year-end.
“We see a requirement of legal help during the entire corporate insolvency resolution and liquidation process,” says Haigreve Khaitan, partner, Khaitan & Co. Though it is early days for the new insolvency and bankruptcy regime, legal barons expect lenders and resolution professionals to work closely with lawyers to limit the possibility of claims by the affected parties.
The IBC has created a new class of professionals — insolvency resolution professionals — to conduct the resolution process under the supervision of creditors and the National Company Law Tribunal.
Khaitan & Co, one of the oldest law firms in the country, is looking at a dedicated team of 20-25 professionals across different offices over the next six months. Over time, law firms expect dispute resolution, insolvency and bankruptcy to become standalone practice as in the other developed markets.
Dhir & Dhir Associates, a firm that specialises in insolvency and bankruptcy, has gone a step ahead to register itself as an insolvency services agency, with a dozen-odd dedicated resources to start with. Plans are also afoot to ramp up operations, with a step-up in workflow, says the firm’s managing partner Alok Dhir.
Kesar Dass B & Associates, through its managing partner Sumant Batra, was actively involved in the drafting of the insolvency law and assisted in regulation framing and capacity-building following the enactment of the IBC, has nominated joint managing partner Sanjay Bhatt to lead its IBC practice. Bhatt is a registered insolvency professional.
The talent and skillset required for this nascent practice will require lawyers who understand contentious or enforcement work, along with restructuring, mergers and acquisitions, and turnaround work. Human resources experts say since this is a new area, lawyers will develop these multi-disciplinary capabilities over time. Those who have both corporate and finance experience, along with those with enforcement wherewithal, will be in demand.
According to Khaitan, the demand on lawyers would be to have a rounded experience in insolvency and other areas of corporate laws, litigation, employment laws, property laws, tax laws etc. “The initiation of the insolvency process being on account of debt and security enforcement-related issues, expertise in this area would be crucial,” he says.
At Trilegal, another law firm, the emphasis is more on skilling up internally rather than hiring large-scale for the bankruptcy practice. “The focus is on skilling up, building knowledge and experience internally rather than ramping up through lateral hires,” says a company spokesperson.