One of my students was a litigator who wanted to get an in-house counsel job.
He didn’t know how he could utilise his litigation mindset and exposure.
Most of the in-house counsels he reached out to were not responding to his emails.
I asked him what he wrote in his applications.
He answered that he wrote about his litigation experience.
That is when I realised what the problem was.
He was using the wrong approach by relying on his litigation experience.
Maybe he might get a litigation matter at best, if he got lucky, but this approach would not enable him to land an in-house counsel job.
He needed to use a problem-solver’s approach – this is the fundamental distinction of being an in-house counsel vs. a litigator or even a law firm lawyer.
He’d have to go out of the box, not just stick to a few petitions, litigation drafting, presenting arguments before judges or drafting a few contracts.
How can I do that? He asked.
I cannot guarantee the outcome of my services because the outcome of litigation is uncertain.
I cannot quantify the economic benefit of my client.
How can I use a problem-solver’s approach to my services?
That’s when I gave an example of a simple service that he can provide startup and SME clients to help them to improve recovery of dues to them.
Given the slow speed of contract enforcement, money recovery is a huge problem for all kinds of clients, from startups to larger corporations.
Every startup, every SME and even large corporations are likely to have at least some amount of unpaid dues.
These unpaid dues increase over time.
Due to the high-cost of traditional litigation or arbitration, and also high legal fees which do not increase the probability of recovery, they struggle to recover these dues.
How can you solve the money recovery problem for them?
When we started a legal solutions initiative Cliklawyer in 2016, this was one of the biggest problems that most startups faced by startups, SMEs, homebuyers, developers, and even professionals.
Even employees were not able to recover their money due from listed companies.
In 7 months, here are some of the results we achieved:
- An HNI recovered 50 lakhs from a stock-broker
- Homebuyers got refund from builders
- 100+ employees recovered unpaid dues amounting to over 50 lakhs from a listed company
- Startups started getting paid on time by big companies
- B2C startups were able to enforce contracts in 90 days instead of years
How did this happen?
Here are a few tricks.
We will share the strategies relevant for startups and SMEs.
It varies depending on whether the client is an individual customer or a big company.
Let’s assume that the client is a company.
How can you ensure that the startup is paid on time?
Especially in cases of B2B supply where big companies take undue advantage of the startups and delay their payments under the garb of lengthy approval and payment processes.
The first step is to obtain registration under the Udyam Aadhaar scheme online Here under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).
All benefits are available to registered micro and small enterprises, that is, if investment in plant and machinery does not exceed 10 crore rupees, or turnover does not exceed 50 crore rupees.
Any business availing goods and services from such micro or small enterprises must make payment within 45 days from the date of acceptance.
Any delay beyond such time makes the buyer liable for a penal interest 3 times that of the interest rate notified by RBI, until the date of payment.
Further, in order to encourage timely payments to MSEs with effect from FY 23-24, if payment to MSEs is not made within the 45 day period, then tax deduction or expense allowance will be allowed only in the year when such payment is actually made.
Apart from this, all companies are required to add a statement of details of dues pending towards a micro or small enterprise in the annual account statements – most listed companies are extremely vigilant that this does not happen.
Here’s how to use this when your clients are other business:
- Every sale of goods/service transaction must have an invoice, with the due date mentioned clearly
- Be certain to issue invoices for each supply and all invoices must contain the information that you are a registered MSME under the Act in the following manner :
“TechAN Private Ltd. is registered under the he Micro, Small and Medium Enterprises Development Act, 2006,
Udyog Aadhaar Number (UAN) – XXXXXXXXXXXX
(Delayed payments beyond 45 days shall attract interest at a rate three times of the bank rate notified by RBI and must be reported in annual financial statements without exception, and will not be deductible as expenses for the purpose of income tax)”.
- Ask the client to implement a system for email, telephone and SMS/Whatsapp reminders – they can hire a junior admin/virtual assistant for this person. The person has to be trained to communicate implications of delay in a very polite way as well.
- Also specify the interest due under the law beyond 45 days, and requirements to report this in annual statements. Most accounting softwares have a field where this can be included. Just let the CEO/finance/CA know about this.
This should solve a lot of problems.
You can also draft & implement a step by step recovery process to be initiated in case of default.
Keeping this in mind, let’s draft an integrated process chart with a little help from AI.
Here is a sample process for you which was generated using these prompts and human editing the final response.
This process takes us to the Samadhan portal under MSME Act, which can be utilised for admitted debts, but you can alternatively use an ODR process which we explain below.
Interestingly, you can even use this process to recover money from clients, consumers or other third parties.
Why use ADR and not traditional arbitration?
Here is what you need to do if you want ad hoc arbitration which most lawyers have in their contracts:
- Go to HC or SC to appoint an arbitrator
- before arbitrator is appointed, the other party can go to local district court to get some interim relief – so more litigation in local court
- Even after arbitrator is appointed other party can go to court citing various problems with arbitrator or arbitration
- To enforce decree given by arbitrator you have to go to court
It can cost 20-50 lakhs (on a conservative estimate) and 3-5 years to complete this process.
What is the likelihood of getting a favourable outcome in a reasonable period of time?
None at all
So everyone is now scared of arbitration – they want to avoid it if possible
What if you could give them an amazing solution so that they can get the entire arbitration done in 1 month at a cost of Rs 10k-50k?
Will they love it or not?
You need to insert online institutional arbitration clauses. There are incredibly low cost online arbitration options, but developers and their lawyers do not know about them
There are arbitral institutions such as SAMA, CAMP, etc. which conduct online arbitrations – disputes are decided quickly, cost effectively, and fees are very very reasonable.
Banking industry already uses their services. Banks like ICICI and other major banks use their services to deal with disputes related to loans. In fact, these online arbitration was set up and propagated by these banks to lower their cost of arbitration and contract enforcement.
Now it is your turn to introduce your clients to these wonderfully beneficial game-changer institutions.
An ODR arbitral tribunal’s award is equivalent to and enforceable like the decree of a civil court.
If there is a violation, you can simply file an execution petition.
If a developer obtains one award in its favour, it can prevent hundreds of other defaults under contracts, and make vendors comply.
However, ODR can easily save more than 90% of the costs.
For a dispute of INR 10 lakhs, the cost of the arbitration will be INR 4000. Here is a sample fee schedule. Can you believe this?
In most of these cases, you will be able to complete the legal work in under 10 hours of legal work (drafting, arguments, trial), including arbitration sittings.
In most of these scenarios, oral hearings are not needed. Even if required, arbitration would be resolved in about 3-4 hearings of about 3-5 hours in aggregate.
In 2021, RBI issued regulations for ODR mechanisms to be implemented for payment disputes by any payment gateways as well!
There is a huge opportunity to apply this principle to any industry.
How can you propose this to a client?
Simple, you need to review their contracts and insert appropriate arbitration clauses in the contracts for ODR.
Here is a sample clause provided by SAMA:
All disputes and claims arising out of or in connection with this Contract shall be resolved through arbitration in accordance with the Arbitration and Conciliation Act, 1996 through online institutional arbitration, namely, Sama, an independent Electronic-Alternate Dispute Resolution (E-ADR) Institution that will conduct the arbitration proceedings remotely on its Online Dispute Resolution (ODR) platform available at [https://filing.sama.live/ in accordance with the Sama Rules of Arbitration (https://www.sama.live/rules_and_procedures-2021.php).
The seat and place of arbitration shall be [according to parties’ agreement]
Once you have this clause in contracts, disputes can be resolved much faster and probably 100x more cost effectively.
Remember that ODR awards are enforceable in the same way as traditional arbitral awards, and can be executed like the decree of a civil court.
How did you find it?
Let us know in the comments.
Most traditional litigators charge 25,000 for a notice, 25,000 more for a draft, and then 10,000 per appearance in a court.
They may charge higher for drafting a traditional notice of commencement of arbitration, a Section 11 petition and a statement of claims!
That is why you will have an advantage when you assist clients to implement these strategies.
There are many other problems that you get to solve for clients as an in-house counsel.
You will have a massive advantage if you use this approach to secure in-house counsel jobs.
You could initially start assisting startups and SMEs as they welcome such assistance, cannot go to big law firms and most traditional lawyers have no clue about these techniques.
If your clients like what you do, they will be happy to pay you well, share other well-paid assignments with you and refer you in their network to other potential clients.
You might also land retainers that pay you for being an external counsel, called a “fractional general counsel”.
Some of these will startups and SMEs will also grow extremely fast by raising investment or debt funding.
When one of them needs to hire a full-time in-house counsel, guess who the first person they want to hire will be?
You will be the first person they reach out to as they already trust you!
Even until they need a full-time in-house counsel, you can work with them on the basis of a part-time retainer, where you charge approx. 20-30k per month for 10 hours of work.
You could have several such clients in a few months.
When you meet general counsels, definitely ask them if they have these strategies implemented in their company already.
If not, that’s your way in!
You can offer to assist them to implement some of these things, without expecting any immediate favours in return.