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 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.
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.
“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.
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.
Data Protection has emerged to be a leading concern in today’s world due to the rise in the number of cybercrimes. The current Indian legal framework is inadequate in dealing with the threat posed by cyber-crimes. The Supreme Court of India has also recognized the need and importance of legislation that seeks to protect the personal data of the citizens. Based on this report, the Personal Data Protection Bill was tabled in the Parliament. The Bill has not yet become a law. Once passed, it will become the sole law addressing data protection issues in India, replacing Section 43A of the Information Technology Act, which regulates data privacy in India currently.
In 2008, Section 43A was inserted in the Information Technology Act along with Section 72A to address the issue of protection of personal data. Section 43A makes a company that collects sensitive personal data and fails to protect the same, thereby causing wrongful gain or loss liable for damages. Sensitive personal data is nothing but sensitive information that may be used to identify a person. For instance, information like password, biometrics, medical records, physical and mental health, financial information, or any other information which relates to a person, and which can be misused against that person.
However, information of an individual that is freely available from a public domain or under the Right to Information Act is not included under sensitive personal data or information. Section 72A spells out the penalty for unauthorised disclosure of such information. Any person who discloses sensitive personal data shall be liable to be imprisoned for a term not exceeding three years or fine up to INR five lakhs or both.
The Sensitive Personal Data or Information rules presently regulate data protection in India. They only apply to companies and individuals based in India. The Sensitive Personal Data Information Rules, mandate the following:
The Sensitive Data Protection Rules have been inadequate in addressing the issue of data protection. Not having a dedicated law aimed at data privacy, is altering India’s image in the world. The Personal Data Protection Bill, 2019 (PDP), as stated earlier, if passed, will become an exclusive law regulating data protection in India.
The PDP seeks to protect not only sensitive personal information but personal information of all kinds. It calls upon companies that collect and determine the purpose of collection of personal information to follow certain safeguards in order to protect the data from being leaked. Among other things, the PDP, stresses on the consent of the individual for the processing and usage of his personal data. If passed, it can go a long way to provide proper data protection mechanisms in India.
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