Let’s start with the first skill: how to retrieve information about a listed company from the stock exchange website. This is a very important skill if you are going to perform an internship at a law firm. Junior associates are also required to use this.
Imagine that Tesla wants to acquire Tata Motors. Such transactions frequently happen.
Now, imagine that you have a meeting with Tesla. If it goes well, you may be engaged for the deal.
How can you prepare?
Tata Motors is a listed company, so you can visit the BSE or NSE website to pull out all information about them.
But…
Where should you start?
What information should you have?
#1 – Shareholding Pattern – what is the shareholding of different categories of people in the company?
#2 – Promoter Encumbrance – have the owners taken a loan from banks by offering their shares in the company as security?
#3 – Board meetings – This will give an idea about when the board meetings were held. Companies are required to inform the stock exchange about upcoming board meetings.
#4 – Secretarial Compliance – This will show the company secretary’s report on compliance
#5 – Annual Report – Annual reports of listed companies provide valuable information about the activities of the company, the business model, and various other aspects. Lawyers read them for major corporate transactions.
#6 – Announcements – This section will give you an idea about recent announcements. This section is also scanned whenever any major corporate transaction is undertaken.
For example, what if Tata Motors recently entered into a joint venture with Huawei for self-driven cars? Wouldn’t you want to know that before the meeting?
Here is a way to remember this:
Sherpa Promoters in Board Meeting want Compliance, Reports and Announcements
Sherpa – Shareholding Pattern
Promoters in – Promoter Encumbrance
Board Meeting – Board meetings
Compliance – Secretarial Compliance
Reports – Annual Report
Announcements – Announcements
What kinds of corporate transactions require you to look up filings on the stock exchange website?
- Any transaction where one of the companies is listed. As part of the due diligence exercise, you will need to dig out all these filings to be prepared.
- This is most common when a listed company is being acquired or taking a big financial loan.
- For example, what if Tata Motors wants a loan, and the bank wants security from promoters, but its shares are already pledged to someone else?
- What if a tax demand of thousands of crores is pending? These items will later be flagged out in due diligence and provisions will be made for this in the transaction documents later.
- Without knowing such details you can’t even start the initial discussions.
- These details can give you valuable information in disputes also. Consider that a bank wants to recover its loans, but you realise that the company barely has any assets remaining. Is the litigation still worth it?
- Maybe, you dug out two years’ financial statements and found that the promoters sold these assets in one year, probably anticipating this situation. Then this information can be used to build a case for fraud.
- If a company is unlisted, you will still pull out similar documents, but these will be taken from the website of the Ministry of Corporate Affairs, not from the stock exchange.
When do you get to do these things? If you are a corporate lawyer, you do this work day in and day out.
If you ever appear in an interview for a law firm job, and you don’t know these basic skills, it will be a very sad situation.
Even if you are an intern, and you can pull out such information quickly and present it well, it would really help to make a strong impression.
Do you now realise the importance of this skill?
I’ll bring you more content on skills in my upcoming emails. So, stay tuned.