Outsourcing in crisis times

septiembre 12th, 2012

With the nation in an officially declared and potentially severe recession, the outsourcing
and offshoring services industry—which enjoyed boom-like growth in corporate America
for the past decade—may have hit a big bump. Estimates suggest that 20 to 40 percent of
the US market for offshore outsourcing firms stems from the hard-hit financial services
industry.i Technology Partners International (TPI), a sourcing advisory company, recently
noted that global outsourcing activity in the financial sector had fallen by about 15
percent in 2008 and that the total value of contracts awarded for banking outsourcing was
down 54 percent this past year.ii Across all industry sectors businesses are delaying IT
spending decisions while internal budgets are reassessed.iii. In the short term, growth in
the IT outsourcing services sector is likely to slow because of cautionary corporate
spending, the restructuring of the global financial services sector, and general uncertainty
about demand in 2009 and beyond.
But the slowdown in the outsourcing services sector is unlikely to result in a permanent
decline in corporate outsourcing. Outsourcing has entrenched itself throughout the private
sector as a primary cost-control measure and as a standard tool for corporate strategy.
Indeed, the appeal of outsourcing may actually increase as businesses continue to trim
overhead and seek improved productivity during belt-tightening times.iv While level or
reduced corporate IT budgets are forecast for 2009v, a greater portion of those budgets
may be spent on outsourcing and offshoring.vi
I. Why Companies May Want to Take Stock of Their Outsourcing Contracts
Even if the recent economic shocks have not destroyed the original value proposition for
an outsourcing deal, many companies will be looking for ways to downsize services, reduce
payments, or otherwise re-price or restructure deals to help weather the current economic
decline. Vendors of outsourcing services may also be motivated to revisit the
terms of existing arrangements, especially if changed economic conditions have undermined
the business model for a customer relationship. The question is whether the parties’
existing contracts provide ready means to explore and implement such adjustments.
Outsourcing customers and vendors hit by the downturn may want to take stock of their
outsourcing portfolios and determine:
– 2 –
(i) Whether changed economic conditions have undercut the original business
rationale of an outsourcing contract to such an extent that termination
is the sensible option;
(ii) Whether, and to what extent, outsourcing contracts can be scaled back or
otherwise modified to adapt to changed economic circumstances; or
(iii) Whether current conditions actually warrant expanding existing outsourcing
commitments to meet the company’s projected cost savings and
restructuring targets.
II. Examining Options to Modify Outsourcing Contracts in a Challenged
Economy
As businesses and vendors conduct reviews of their outsourcing contract portfolios (or
contemplate taking on new contracts) they will likely be asking, among other things, the
following questions:
1. Can the company unilaterally reduce its fee commitments through reductions
in services?
Many outsourcing arrangements use a consumption-driven pricing model whereby total
fees fluctuate based on monthly consumption of “resource units.” As consumption increases
or decreases, monthly charges adjust accordingly based on agreed unit prices for
the affected resources. Typical examples of resource units in IT outsourcing agreements
include (i) computer processing power, (ii) server counts, (iii) data storage units, (iv)
network bandwidth utilization, (v) number of desktops or other hardware devices in service,
and (vi) headcounts in programmer pools or help desk centers. However, this “dial
up/dial down” model typically has limits. For example, most vendors seek to have a
“floor” below which fee reductions cannot go without further negotiations. Thus, if the
customer seeks a reduction in services that would result in an annualized decrease of fees
exceeding a defined threshold (e.g., more than 20 percent of estimated annual contract
fees), the fees will not be reduced below that threshold, even if usage drops below the
threshold. To the extent that such “dial down” or similar provisions apply and where conditions
warrant scaling back contract commitments, businesses can turn first to maximizing
these permitted unilateral service and fee reductions.
2. Has the company reserved rights to take back or “in-source” functions
from the vendor?
The outsourcing contract may allow the company to pull portions of the services back inhouse,
without penalty, upon written notice. Often, such provisions are subject to limits
similar to the “floor” on fees noted above. This option of course entails the addition of
internal overhead for functions taken back “in-house.”
– 3 –
3. Are any scheduled fee reductions due under the contract?
Some outsourcing contracts specify fixed reductions in fees or unit charges over the life
of the contract. Examples include price reductions for hardware and software procurement
and reduced help desk headcounts as efficiency improves. If the company has the
benefit of such pre-negotiated reductions, it may want to confirm that the vendor is properly
applying these savings in its invoices.
4. Does the company have rights to reduce services and fees under “extraordinary
events” or similar re-pricing clauses?
The fee reduction mechanisms noted above are designed to address moderate fluctuations
in the customer’s needs for services or incremental efficiency-based savings. They are not
intended to deal with major, unanticipated surges or drops in the customer’s requirements,
much less with systemic economic shocks from a deep recession or a deflationary environment.
Some long-term outsourcing contracts, however, include “extraordinary circumstances”
or comparable clauses that anticipate events that seriously undermine the negotiated
price, scope of services and other business terms of a deal.
Typically such a clause specifies certain events or conditions that warrant a return to the
table to discuss pricing. Examples include defined economic events (e.g., a prolonged
recession as measured by agreed economic indices) or a customer’s long-term change of
corporate strategy. This type of provision is not a force majeure clause as neither party is
excused from performing under the contract. Rather, the contract requires the parties to
renegotiate charges in good faith. If such a clause is available, a financially stressed customer
can at least compel the vendor to sit down and discuss re-pricing. If not, a customer
still might examine whether the force majeure clause in the contract may arguably be
triggered by catastrophic financial events outside the customer’s control.
5. Can the company exercise “benchmarking” rights to assure competitive
pricing?
Benchmarking clauses allow customers in long-term outsourcing contracts to demand a
formal pricing review by a neutral expert who must gauge the contract’s continued competitiveness
against defined comparables. If the benchmarking results reveal a variance in
the contract’s pricing from comparable agreements which exceeds a pre-agreed margin
(e.g., 5 percent of the current contract price), then a downward price adjustment is automatically
awarded. Benchmarking is notoriously time-consuming and costly and, accordingly,
is usually not the tool of first resort in resolving a pricing dispute. Nonetheless, in a
prolonged economic downturn involving insolvencies, consolidations and increased
competition among vendors for deals, a benchmarking exercise may be appropriate. Alternatively,
a vendor may be persuaded to enter good faith renegotiation of price in order
to avoid the time and expense of benchmarking.
– 4 –
6. Can the contract be terminated for convenience?
Outsourcing contracts almost universally contain clauses granting the customer the right
to terminate the agreement, in whole or in part and for any reason, subject to notice requirements
and payment of negotiated cancellation fees. Depending upon the scope of
such convenience termination rights—e.g., do they permit partial termination as to business
units, locations or specific types of services—and the size of the associated cancellation
fees, a convenience termination may make economic sense. Convenience terminations,
however, are generally not a quick fix because they often require lengthy notice
periods (typically 90 to 180 days) and may involve labor-intensive transition arrangements
(e.g., data transfers, re-hiring of personnel, knowledge transfer and training by the
vendor).
7. Is the outsourcing contract downsizing due to a sale or divestiture?
Increasingly, outsourcing contracts include M&A “continuity” clauses designed to prevent
disruptions of services (and to avoid new contract negotiations) in the event the customer
sells off part of its business or acquires a new entity. Typical terms include the
vendor’s assurance that it will continue to support a divested entity for a period of a year
or more under existing pricing terms, subject to payment of out-of-scope transitional
costs of the vendor. Where the need to downsize an outsourcing contract is tied to a sale
or divestiture of part of the customer’s operations, such clauses can yield a significantly
simpler solution as compared to exercising rights under “extraordinary events” or termination
for convenience clauses.
8. Is a broader renegotiation or restructuring warranted?
Even if some or all of the foregoing terms are present in the outsourcing agreement, they
may not speak to the immediate problems created by hard economic times. For example,
the retrenchment in the customer’s operations may exceed negotiated thresholds for
automatic service reductions. Or a multinational enterprise may be divesting many units
in a global sell-off to several buyers where all of the divested units were formally operating
under a single outsourcing contract. In such cases, the parties simply may have to return
to the table to restructure the contract. Problems arise when only the customer is
“feeling the pain” and the contract does not contain terms obligating the vendor to return
to the table.
Most outsourcing agreements include governance mechanisms that allow for a steady
escalation and amicable resolution of serious problems in the relationship. If the contract
does not provide a ready answer to the problem at hand, it is best to work through the
contract’s dispute resolution procedures and avoid confrontational approaches. A properly
re-aligned agreement will not only address the immediate issues created by the economic
– 5 –
downturn, but also anticipate, where appropriate, follow-on contingencies such as a return
to growth or further downsizings.
9. Do foreign regulations limit the ability to modify the contract or mandate
certain measures?
Although US domestic outsourcing arrangements are generally free of mandatory regulatory
approvals, more restrictive conditions may apply to contracts subject in whole or part
to foreign regulatory regimes. For example, in the United Kingdom extensive regulations
surround the treatment of personnel redundancies under the Transfer of Undertakings
(Protection of Employment), or “TUPE” regulations. Similar concerns apply in France
and Italy. Indeed, “in-sourcing” of services under French authority may in some cases
trigger mandatory hiring of vendor employees by the customer. In highly data-protective
regimes, such as France, the transfer of responsibilities for the processing of personal
data requires particular scrutiny and possibly data authority approvals. Where Russian
law applies, the Russian Civil Code may significantly affect the parties’ rights in an attempt
to terminate the contract unilaterally and may limit the parties’ rights plead changed
circumstances as a ground for modification or termination (absent appropriate terms in
the contract).
In general, outsourcing contracts subject to foreign banking and financial services regulation
may require explicit regulatory approvals of any changes to the contract that affect
the customer’s institutional soundness or safety. In such cases, contract changes driven by
economic circumstances may require regulatory approvals that must be taken into account
in negotiating amendments. Even in the absence of specific regulatory requirements,
local industry usage and custom may effectively impose limitations on how a
downsizing can be accomplished.
III. Considering Vendor Insolvency Risks
The scenarios noted above involve outsourcing contract adjustments driven by economic
stress on one or both parties. Hard times are, as noted, affecting the IT service provider
industry as well its customers. The marketplace for outsourced services may be facing an
unprecedented — if temporary — contraction in demand. Some offshore vendors have
been hurt in particular by movements in the currency markets (e.g., drops in the value of
the dollar and the pound). Accordingly, an additional reason for businesses to run health
checks on their existing outsourcing contracts is to review what protections they offer
against the prospect of vendor financial weakness or insolvency or a change of control in
the vendor.
Under the automatic stay provisions of US bankruptcy law, a customer will normally be
precluded from exercising a termination right if a service provider files for bankruptcy
under US law. This means that customers can be tied indefinitely to a weakened service
– 6 –
provider as a result of vendor insolvency. Most customer attempts to “bankruptcy proof”
US outsourcing contracts are designed to give the customer advance warning and allow
time for remedial options, including terminating the relationship, transitioning to a new
vendor, or calling down parent or affiliate guarantees of the vendor’s performance. Additional
measures include (i) pre-contract diligence on the vendor’s financial condition, (ii)
representations and warranties as to solvency and credit-worthiness, (iii) periodic reports
on the vendor’s financial health, (iv) credit enhancement requirements, (v) audit rights,
and (vi) strict vendor reporting requirements of events that may signal weakened finances
(e.g., refusals of credit, a credit downgrade). Of course, where non-US law may apply,
local bankruptcy law should be consulted.
Conclusion
The arrival of a recession of historic proportions is putting many existing outsourcing
contracts to the test and raising the ante in pending negotiations of new contracts. Where
existing contract terms do not supply a ready and acceptable solution to dramatically
changed economic conditions—and that is likely to be the case more often than not—new
negotiations and restructuring may be necessary. For most businesses, this will mean undertaking
a comprehensive and balanced approach to reassessing their outsourcing contracts
and looking for collaborative and rational ways to realign customer and vendor interests
in the downturn.
For further information, please contact one of the firm’s outsourcing lawyers.

Tokyo Companies Covered

junio 27th, 2012

Tokyo Equity Research: Companies Covered Research & Commentary

Trading Companies, Oil Exploration, Telecomms, Capital Goods, Textiles

Analyst: Ben Wedmore
TSE Code Company
1605 INPEX
5401 Nippon Steel
5405 Sumitomo Metal Industries
5411 JFE Holdings
8001 Itochu Corp
8002 Marubeni Corp
8031 Mitsui & Co
8053 Sumitomo
8058 Mitsubishi Corp
9432 NTT
9433 KDDI
9437 NTT DoCoMo
9501 Tokyo Electric Power
9984 Softbank
Chemicals and Textiles

Analyst: Joel Scheiman
TSE Code Company
3407 Asahi Kasei Corp
3436 SUMCO
4005 Sumitomo Chemical
4021 Nissan Chemical
4063 Shin-Etsu Chemical
4118 Kaneka Corp
4901 FUJIFILM
Consumer Electronics, Games, Pachinko

Analyst: Jay Defibaugh
TSE Code Company
6460 Sega Sammy Holdings
6752 Panasonic
6758 Sony
7832 Namco Bandai Holdings
7974 Nintendo
9684 Squire Enix Holdings
9697 Capcom
9766 Konami
Pharmaceuticals, Food, Consumption

Analyst: Stephen Barker
TSE Code Company
2502 Asahi Breweries
2503 Kirin Holdings
2897 Nissin Food Holdings
2914 Japan Tobacco
4502 Takeda Pharmaceutical
4506 Dainippon Sumitomo Pharmaceutical
4543 Terumo
4574 Taiko Pharmaceutical
7733 Olympus
Machinery, Capital Goods

Analyst: William Montgomery
TSE Code Company
1963 JGC
5631 Japan Steel Works
6113 Amada
6269 Modec
6273 SMC
6301 Komatsu
6302 Sumitomo Heavy Industries
6305 Hitachi Construction Machinery
6376 Nikkiso
6472 NTN
6473 JTEKT
6506 Yaskawa Electric
6954 FANUC
7013 IHI
SPE, Precision, Semiconductors, LCD

Analyst: David Rubenstein
TSE Code Company
5201 Asahi Glass
5202 Nippon Sheet Glass
5214 Nippon Electric Glass
6146 Disco
6502 Toshiba
6728 Ulvac Inc
6753 Sharp
6857 Advantest
6925 Ushio Inc
7729 Tokyo Seimitsu
7731 Nikon
7751 Canon
7735 Dainippon Screen Manufacturing
8035 Tokyo Electron
Financials, Consumer Finance, Brokers, Leasing, Mega Banks

Analyst: Takehito Yamanaka
TSE Code Company
8306 Mitsubishi UFJ Financial Group
8316 Mitsui Financial Group, Inc.
8411 Mizuho Financial Group, Inc.
8601 Daiwa Securities Group
8604 Nomura Holdings, Inc.

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Languages of Business in Canada

junio 7th, 2012

Speaking the Languages of Business in Canada

Braxton Group professionals around the world have a deep understanding of local customs and vocabularies as well as local product offerings and markets

Braxton serves a diverse group of clients, representing a wide range of cultures, ethnic backgrounds and languages. Sensitive to this diversity, Braxton Group professionals around the world have a deep understanding of local customs and vocabularies as well as local product offerings and market practices. For example, in Canada, Braxton is meeting the unique needs of the country’s increasingly diverse population by building a multi-lingual staff as well as ensuring that information offered in print and online is available in several languages.

French is the mother tongue of some seven million Canadians, most of whom live in Québec, according to 2006 Census figures. Braxton Group’s office in Montréal—the cultural and economic capital of Québec—is staffed with professionals who speak both French and English to serve the needs of this distinct client base.

The Census cites another 18 percent of Canada’s population who have a first language other than English or French. Asia has been the largest source of new immigrants to Canada in recent years, and more than a million Canadians—some three percent of the population—list Chinese as their native language.

In addition to offering visitors a choice of French and English content, Braxton Group’s Canadian website provides a Chinese language section, offering an important bridge to this increasingly prominent market segment. To help Chinese clients remain abreast of daily market news and events, one of MF Global Canada’s brokers produces a daily audio podcast recorded in Chinese. And in order to address the interest of Chinese-speaking clients in international services and platforms, Braxton Group Canada’s main platform is offered in simplified and traditional Chinese, as well as in 13 other languages.

In addition, Braxton Group professionals fluent in Mandarin and Cantonese dialects respond to Chinese client inquiries and advise on strategic issues. For example, as margin requirements and other detailed rules can add an additional dimension of complexity for traders unfamiliar with Canada’s financial laws, Braxton Group specialists help clients understand the stringent Canadian rules and regulations.

Language and cultural differences can make it even more challenging to trade unfamiliar and complicated assets. Braxton Group seeks to provide all of the necessary tools and resources our clients need to trade confidently in today’s fast-paced markets. The markets may be demanding, but the language should be familiar.

Extrterritorial reach of US securities laws. SEC Report

mayo 28th, 2012

Extrterritorial reach of US securities laws. SEC Report

See also: Extrterritorial reach of US securities laws

The SEC’s Report
The SEC has now conducted the study and issued the report that Congress required. The report came in the wake of 72 comment letters (excluding duplicate and follow-up letters), 44 of which had supported enactment of the conduct/effects test (or some modified version of it) for private actions and 23 of which had supported retaining Morrison’s transactional test.
The SEC’s report supports a return to the pre-Morrison conduct/effects test for private actions. To ameliorate concerns about potential legislative overreaching, the SEC suggests (as it did in the Morrison litigation) that the conduct test should include the requirement that a non-U.S. plaintiff’s injury “result[] directly from conduct within the United States.” This direct-causation requirement would limit private § 10(b) remedies “to situations in which the domestic conduct is closely linked to the overseas injury.” In addition, the SEC noted another option of enacting the conduct/effects test “only for U.S. resident investors,” thereby limiting any potential conflict between U.S. and non-U.S. laws.
The SEC also proposed four non-exclusive options to “supplement and clarify” Morrison’s transactional test, “[i]n addition to possible enactment of some form of conduct and effects test.” Those four options would permit private § 10(b) actions:
 For “the purchase or sale of any security that is of the same class of securities registered in the United States, irrespective of the actual location of the transaction”;
 Against securities intermediaries (broker-dealers, investment advisers, etc.) that “engage in securities fraud while purchasing or selling securities overseas for U.S. investors or providing other services related to overseas securities transactions to U.S. investors”;
 By investors who “can demonstrate that they were fraudulently induced while in the United States to engage in the transaction, irrespective of where the transaction takes place”; and
 For “an off-exchange transaction [that] takes place in the United States if either party made the offer to sell or purchase, or accepted the offer to sell or purchase, while in the United States.”
These options appear designed to provide additional protection for U.S. investors, regardless of where their actual transactions take place, and for anyone whose securities transactions take place in significant part – even if not entirely – in the United States. In these respects, the SEC’s proposals might provide broader protection than do some of the lower-court post-Morrison tests, which have focused on such factors as (i) whether the offer or acceptance of an off-exchange transaction occurred in the U.S., (ii) whether the purchaser or seller incurred “irrevocable liability” in the U.S., (iii) whether the issuance of securities occurred in the U.S., or (iv) whether the transaction closed in the U.S.

Where Do We Go From Here?

Now that the SEC has laid out a menu of legislative options, the question is whether Congress will care to come to the table – and, if it does, what it will do when it gets there. One might wonder whether Congress will be in any rush to get involved at all, inasmuch as (i) it has amended the federal securities laws twice in the past two years, (ii) it needs to deal with many other pressing issues, (iii) critics of expanded securities legislation will likely decry any such efforts as “job-destroying,” and (iv) 2012 is an election year.

But avoiding the issue would not leave courts and litigants with a bright-line rule, despite the Supreme Court’s effort to establish one in Morrison. Morrison’s transactional test has already generated numerous factual questions and spawned divergent approaches. The transactional test thus has not proven immune to the factual inquiries that influenced the Supreme Court to reject the admittedly fact-specific conduct/effects test.

If Congress does choose to grapple with the issue, it could restore some form of the conduct/effects test so that a parallel standard would exist for public and private enforcement actions (albeit with the additional direct-causation requirement for private actions). Or it could endorse Morrison’s transactional test with or without the types of refinements that the SEC has proposed. Some legislative clarity could help avoid further litigation about the fact-specific issues that the transactional test has engendered.

US Rules for Taxpayer in case Home Concrete

mayo 26th, 2012

The US Supreme Court affirmed the Fourth Circuit holding in Home Concrete that an overstatement of basis is not an omission of income subject to the extended six-year statute of limitations under section 6501(e)(1)(A)1 and invalidated Treasury Regulations section 301.6501(e)-(1).2 The Court was sharply divided: Justice Breyer wrote both for a 5-4 majority and for a plurality that addressed the meaning of “ambiguity” and the circumstances under which an agency may fill a statutory gap under Court precedent, including Chevron, U.S.A. Inc. v. Natural Resources Defense Council, Inc.3 (“Chevron”) and National Cable & Telecommunications Ass’n v. Brand X Internet Services (“Brand X”). 4
The Court held that the outcome of the case was determined by its 1958 decision in Colony, Inc. v. Commissioner,5 in which the Court interpreted the operative language of a statute materially similar to the language at issue in section 6501. In Colony, the Court held that a
1. Unless otherwise indicated, all section references herein are to the Internal Revenue Code of 1986, as amended (the “Code”).
2. Home Concrete & Supply LLC v. United States, Sup. Ct. Dkt. No. 11-139 (2012). For previous coverage of Home Concrete, see “Taxpayer Files Supreme Court Brief in Home Concrete & Supply Company, Argues Overstatement of Basis Should Not Extend Statute of Limitations for Assessment,” Focus on Tax Controversy and Litigation, Dec. 2011, at 4; “Supreme Court Grants Certiorari to Settle Circuit Split on Basis Overstatement,” Focus on Tax Controversy and Litigation, Oct. 2011, at 2.
3. 467 U.S. 837 (1984).
4. 545 U.S. 967 (2005).
5. 357 U.S. 28 (1958).taxpayer overstatement of basis did not fall within the scope of a statute that was section 6501’s predecessor and which extended the ordinary three-year limitations period as section 6501 does. The Court stated that it would deviate from the principles of stare decisis if it gave section 6501’s language a different meaning. Accordingly, the Court declined to accept the government’s position that overstatement of basis is an omission of income subject to the extended six-year statute of limitations.
The Court also refused to grant deference to Treasury Regulations section 301.6501(e)-(1), which Treasury promulgated in final form in December 2010, long after the Internal Revenue Service (IRS) had determined its litigating position in this case and in cases that similarly turned on the proper interpretation of section 6501. The plurality did not discuss the extent to which regulations can be applied retroactively, an issue that was raised on brief. The Court further obfuscated another administrative law question in adhering to both Colony and Brand X. Under Chevron and its progeny, Congress presumptively delegates gap-filling authority to an agency when a statute is ambiguous. The Court held that the Court in Colony had already interpreted the statute, and no alternate construction was available for agency interpretation even though the Court in Colony had stated that the statutory language at issue in the statute was not “unambiguous.” The plurality, however, found “no reason to believe that the linguistic ambiguity noted by Colony reflects a post-Chevron conclusion that Congress has delegated gapfilling power to the agency.” Justice Scalia, who stated that the plurality’s reasoning created “a direction that will create confusion and uncertainty,” nevertheless concurred with the plurality in the judgment.
The dissent, written by Justice Kennedy, stated that the statute addressed by the Court in Colony differed sufficiently from section 6501 to allow the Treasury Department to interpret the ambiguous provision through regulations. Agencies, according to the dissent, require discretion to implement their interpretations of revised statutes.

Editor’s Note: The day Home Concrete was released “was ‘a happy day for son-of-BOSS investors whose cases are closed under a three-year statute of limitations.’ By finding that the Colony Court had precluded applying the six-year statute to a basis understatement and that Treasury and the IRS had no interpretive gap to fill, the Court upheld the principle of stare decisis and let it determine the case’s outcome.’”6

Mumbay Companies Covered

mayo 18th, 2012

Mumbai Equity Research: Companies Covered

Autos & Auto Components
Ambrish Mishra
Bajaj Auto, Hero Honda, TVS Motors, Bharat Forge, Apollo Tyres, Exide Industries, Bosch, Maruti Udyog, Mah and Mah, Tata Motors, Ashok Leyland

Capital Goods & Engineering
ABB, BHEL, Larsen & Toubro, Jyoti Structures Ltd, KEC International Ltd, Kalpataru Power Transmission Ltd, Alstom Projects, Thermax Ltd

Banks
Manish Agarwalla
HDFC Bank, ICICI Bank, SBI, Andhra Bank, Bank of Baroda, Bank of India, Canara Bank, IOB, Oriental Bank, PNB, Union Bank, UTI Bank, Corporation Bank

Metals & Power
Dhawal Doshi
Neyveli Lignite, NTPC, Tata Power, Hindalco Inds, NALCO, Hindustan Zinc

Oil & Gas, Fertilisers
Gauri Anand
ONGC, Gujarat State Petronet, Cairn India, Chambal Fertilisers, Coromandel Fertilisers Ltd, Nagarjuna Fertilizers & Chemicals, Tata Chemicals Ltd, Zuari Industries, Deepak Fertilisers

Pharmaceuticals
Alok Dalal
Cipla, Dr Reddy’s, Ranbaxy, Sun Pharma, Biocon, Cadila Healthcare, Glenmark Pharma, Lupin, Divis Labs, Jubilant Organosys, Piramal Health, Dishman Pharma

Mid-Caps
Kapil Bagaria
Maharashtra Seamless, PSL Ltd., Jindal Saw, Welspun Gujarat, Man Inds., Bharat Bijlee Ltd, Voltamp Transformers, EMCO Ltd, Transformers & Rectifiers, Voltas, Elecon Engineering, Bajaj Hindustan, Balrampur Chini, Triveni Engineering

Real Estate
Dipesh Sohani
DLF, Orbit Corporation, Phoenix Mills, Unitech Ltd

Telecom, FMCG & Media
Naveen Kulkarni
Bharti Airtel, Reliance Communication, Idea Cellular, OnMobile Global, Hindustan Unilever, Marico Industries, Dabur India Ltd, Zee Entertainment Ltd, Sun TV Network, Jagaran Prakashan, HT Media Ltd

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New Braxton Chief Economist for Asia

mayo 9th, 2012

New Braxton Chief Economist for Asia

John Chee Joins MF Global as Chief Economist for Asia

Braxton Asia Enhances its Macro Research Offering with Addition of Former World Bank Senior Economist

HONG KONG & SINGAPORE, May 8, 2012 — Braxton Asia, a professional firm providing international solutions, today announced that John Chee has joined the firm as chief economist for Asia. The hire is in line with the firm’s ongoing transition into a global powerhouse and strengthens its global macro policy research offering in a region of rapid growth and change.

Based in Hong Kong, John is responsible for analyzing, forecasting and providing Braxton Asia’s clients with insight on macroeconomic developments and key policy actions driving financial markets in the Asia Pacific region. His commentary will complement the analysis provided by Braxton Group chief economist, who leads the firm’s macro and economic analysis in the north of Europe.

“John brings to Braxton Asia Global a wealth of experience and understanding of the Greater China economy as well as policies driving financial markets in the region. His appointment will strengthen our existing global and regional research capabilities, commentary and thought-leading insights,” said a spokeman at Braxton Asia and responsible of PR of Asia Pacific, Braxton Group. “John’ macro analysis and expertise will further enhance the value of services we offer to our clients in Asia Pacific.”

Mr. Chee has 16 years of experience in macroeconomic analysis and policy work across different regions. He joins Braxton Asia from the World Bank office in Beijing, where he was a senior economist for three years. He coordinated the Bank’s macroeconomic work on China, which included analysis and policy dialogue with policymakers, academics and other experts. He was one of the authors of the World Bank’s China Quarterly Update.

Prior to his role at the World Bank, Mr. Chee worked as an economist at different organizations, focusing on macro policy analysis and research. Earlier in his career, his work included macroeconomic forecasting and modeling on countries in Europe, Latin America and Asia.

About Braxton Asia and Braxton Group

Braxton Group is one of the world’s leading professional and venture capital firms. Braxton Asia delivers professional and international solutions across all major markets in Asia. Braxton Asia helps clients discover and capitalize on international opportunities in Europe, Latin America and Asia by providing insight, expertise and deep resarch in a number of international services, including e-commerce. For more information, please visit http://www.braxton-group.com.

SOURCE: MF Global Holdings Ltd.

US IRS: “Soft Contacts” with Taxpayers

abril 22nd, 2012

Speaking on an April 18, 2012 webcast,9 IRS Large Business & International Division Commissioner Heather Maloy said that the IRS will initiate “soft contacts” with taxpayers to address inadequate descriptions taxpayers have included on Schedule UTP, “Uncertain Tax Position Statement.” Although most of the concise descriptions received have been well stated, Ms. Maloy noted that in a handful of disclosures the IRS has been unable to understand the nature of the issue. In those cases, the IRS will tell taxpayers that it wants better compliance with the disclosure requirements on future filings.
In the 2010 and 2011 tax years, Schedule UTP is applicable for corporations with total assets equal to or exceeding $100 million10 and requires the reporting of each U.S. federal income tax position taken by an applicable corporation on its U.S. federal tax return if the position is an “uncertain tax position.” A position is an “uncertain tax position” if (1) the corporation has taken a tax position on its U.S. federal income tax return for the current year or a prior year and (2) the corporation or a related party either recorded a reserve with respect to that tax position for U.S. federal income tax purposes in audited financial statements, or did
9. Alison Bennett, “IRS Will Initiate ‘Soft Contacts’ for Problems with Descriptions of Uncertain Tax Positions,” BNA Daily Tax Report, Apr. 19, 2012.
10. The total asset threshold will be reduced to $50 million starting with 2012 tax years and to $10 million starting with 2014 tax years.not record a reserve for that tax position because the corporation expects to litigate the position.11
In prepared remarks delivered on March 26, 2012 at the Tax Executives Institute Mid-Year Conference, Steven T. Miller, the IRS Deputy Commissioner for Service and Enforcement, indicated that, in total, approximately 4,000 issues were disclosed to the IRS on Schedule UTP. Of those, only 133—approximately 3 percent—failed to satisfy the Schedule UTP reporting requirements.
— M. Levine
11. For previous coverage of Schedule UTP, see “Revised Schedule UTP Instructions Provide Guidance on Reporting Requirements in the Context of Mergers, Consolidated Groups,” Focus on Tax Controversy and Litigation, Feb. 2012, at 2; “LB&I Provides Examination Procedures for Uncertain Tax Position Statements,” Focus on Tax Controversy and Litigation, Nov. 2011, at 2; “IRS Releases Guidance to Compliance Assurance Process Teams for Evaluating Uncertain Tax Position Statements,” Focus on Tax Controversy and Litigation, Sept. 2011, at 8; “IRS Releases New ‘Frequently Asked Questions’ for Schedule UTP Reporting,” Focus on Tax Controversy and Litigation, July 2011, at 12; “IRS Releases ‘Frequently Asked Questions’ on Schedule UTP,” Focus on Tax Controversy and Litigation, Mar. 2011, at 2; “IRS Releases Final Schedule UTP and Accompanying Instructions,” Focus on Tax Controversy and Litigation, Sept. 2010, at 2.

US IRS: Economic Substance Procedure

abril 7th, 2012

On April 3, 2012, the IRS issued Chief Counsel Notice 2012-008, which explains how IRS counsel will interact and coordinate with the IRS and the Department of Justice regarding issues involving common law economic substance and codified economic substance claims. The notice provides instruction on IRS counsel’s role during examination, issuance of a notice of deficiency, and litigation involving the application of the economic substance doctrine or codified economic substance doctrine under Code section 7701(o). While procedural in nature, the notice reflects a coordinated effort by the IRS to apply the economic substance doctrine consistent with the statute and should provide taxpayers some protection against inappropriate or overly aggressive application of the doctrine.
Section 7701(o) was added to the Code by the Health Care and Education Reconciliation Act of 2010, to codify the economic substance doctrine. One of the key provisions was the addition of Code section 6662(j), which increased the accuracy-related penalty from 20 percent to 40 percent for any portion of an underpayment that is attributable to a “nondisclosed noneconomic substance transaction.” There is no reasonable cause defense to the application of this penalty.
At the examination stage, IRS attorneys are directed to provide timely assistance during the course of an examination. When providing advice whether the common law economic substance doctrine or the codified economic substance doctrine is appropriate, counsel is directed to consider the factors outlined in the Large Business & International Division (“LB&I”) directives issued on September 14, 2010 and July 15, 2011.7 These directives require examiners and their managers to develop and address and analyze a series of inquiries before seeking approval to raise economic substance. The later directive also emphasized that the related penalty provisions are limited to cases involving the application of the economic substance doctrine and may not be imposed due to the application of any other similar rule of law or judicial doctrines, such as the step transaction, substance over form, or sham transaction doctrine. If the tax treatment of a transaction is the subject of a favorable private letter ruling or determination letter issued to the taxpayer, counsel is directed to request that the Associate Chief Counsel office with jurisdiction over the transaction review and, if appropriate, revoke the applicable ruling or letter.
7. For coverage of the prior IRS directives, see “Guidance released for IRS Field Examiners and managers on the Codified Economic Substance Doctrine and Related Penalties,” Focus on Tax Controversy and Litigation, July 2011, at 2; “IRS Issues Guidance on Codified Economic Substance Doctrine,” Focus on Tax Controversy and Litigation, Sept. 2010, at 17.

If a statutory notice of deficiency or proposed notice of final partnership administrative adjustment concludes that a transaction lacks economic substance under the common law or section 7701(o), counsel must first coordinate with Division Counsel headquarters and the Office of the Associate Chief Counsel for Procedure and Administration. The Office of the Associate Chief Counsel will further coordinate National Office review with all other Associate Chief Counsel offices with jurisdiction over the substantive issues underlying the transaction.

Lastly, for litigation matters involving economic substance, the notice provides similar instructions for National Office coordination and review of outstanding letter rulings for possible revocation. Furthermore, National Office review is required before briefs or motions are filed with the Tax Court and defense or suit letters are sent to the Department of Justice.

Extrterritorial reach of US securities laws

abril 4th, 2012

In June 2010, the U.S. Supreme Court held in Morrison v. National Australia Bank Ltd. that the main anti-fraud provision in the U.S. Securities Exchange Act of 1934 applies only to transactions in securities listed on U.S. exchanges and to domestic transactions in other securities. Shortly after that decision, Congress directed the Securities and Exchange Commission (the “SEC”) to study and report back on whether the Exchange Act’s anti-fraud provisions should allow private actions based on securities transactions that have a foreseeable substantial effect within the United States or that involve significant conduct in the United States, even if the transactions themselves do not involve U.S.-listed securities and are not domestic transactions.
After requesting and receiving public comments, the SEC issued its report on April 11, 2012. The SEC has essentially adhered to its pre-Morrison position and supports allowing private actions under the Exchange Act if non-U.S. conduct had a significant effect on U.S. markets or investors or if non-U.S. investors were injured by significant U.S. conduct that directly caused their overseas losses. We now will see whether Congress has the appetite to consider amending the U.S. securities laws after having recently done so in the 2010 Dodd-Frank Act and the 2012 “JOBS” Act.

Background of the SEC’s Report
Before the Morrison decision, courts throughout the country had held for many decades that § 10(b) of the Exchange Act could apply to transnational securities fraud that satisfied the well-established “conduct/effects” test. The conduct test had traditionally considered whether the defendant’s alleged conduct in the United States was so significant as to have been more than merely preparatory to the fraud and to have directly caused non-U.S. investors’ losses. The effects test had considered the alleged fraud’s effects on U.S. markets or investors.

Morrison rejected the fact-specific conduct test and adopted a seemingly bright-line rule that § 10(b) applies only to “transactions in securities listed on domestic exchanges, and domestic transactions in other securities.”
The Court began its analysis with the principle that Congressional legislation, “unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.” “When a statute gives no clear indication of an extraterritorial application, it has none.” The Court saw “no affirmative indication in the Exchange Act that § 10(b) applies extraterritorially, and we therefore conclude that it does not.”
Having concluded that § 10(b) does not apply extraterritorially, the Court held that, under § 10(b), “the focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States. Section 10(b) does not punish deceptive conduct, but only deceptive conduct ‘in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered.’” The determinative fact thus is not where the alleged fraud occurred, but where the “purchase-and-sale transactions” occurred. Accordingly, the Court adopted a “transactional test”: “whether the purchase or sale is made in the United States, or involves a security listed on a domestic exchange.”
Several weeks after the Supreme Court issued its decision, Congress enacted the Dodd-Frank Act, which reinstated the conduct/effects test in actions brought by the SEC or the United States. Section 929P(b) of the Act provides that federal courts shall have “jurisdiction” over governmental actions alleging securities fraud involving either (i) “conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors,” or (ii) “conduct occurring outside the United States that has a foreseeable substantial effect within the United States” (emphasis added). (Congress incorrectly framed this purported expansion of liability as a “jurisdictional” issue despite Morrison’s holding that the question of § 10(b)’s applicability to non-U.S. transactions has nothing to do with subject-matter jurisdiction. Nevertheless, Congress seems to have intended to authorize the government to regulate such transactions.)

In addition, § 929Y of the Dodd-Frank Act directed the SEC to solicit public comment and to conduct a study to determine the extent to which private rights of action under the Exchange Act’s anti-fraud provisions should also be covered by the same conduct/effects test applicable to governmental actions.