During one of my professional stints in New Product Development, we were approached by an organization (‘A’) which had formulated a cutting-edge food additive through an apparently patent non-infringing route.
We were concerned about the strength of ‘A’s claim as the existing patent by a well-known MNC was an international process patent which was robust. In general terms, the MNC had not only locked the door of their technology but also secured the walls, so that no other door could be made for entry!
However, ‘A’ argued that in all probability there would be no patent contest. They drew our attention to the interesting fact that most of the global scale food and drink majors who used this type of food additive refrained from using this cutting-edge formulation. As per them, it was because these food and drink majors by policy, would not use an ingredient which had only a single source producer. Hence, ‘A’ argued that introduction of a second credible manufacturer would open up the market for this food additive by a multiple of 10, which would benefit both ‘A’ and the MNC!
I have seen similar strategies play out later in my career as well. In the realm of IoT, there are 2 competing types of players, the Cloud Services and the Chip-Based ones. Cloud Services players are in favor of all computing power residing in the cloud while the Chip players argue in favor of chip based local computing power in the physical buildings. However, when a ‘dumb’ building is made ‘smart’ through IoT-ization, potential revenue streams open up for both cloud and chip players as local chip based solutions doing the initial computing reduce the connectivity bandwidth and cloud computing and storage space requirement, thereby giving cost benefit to the customer. Cloud and chip players are now collaborating and making their systems mutually compatible.
As a managerial lesson, ‘competitive collaboration’ is an interesting strategy to bear in mind!
Section 166 of the Companies Act, 2013 lays down the fiduciary duties of Directors. They owe these duties not to individual entities of the Company e.g.- shareholders, creditors, etc.; but solely to the Company. These are-
(i) Director should be acting in accordance with the Articles of Association.
(ii) They should act in good faith so as to promote the objects of the Company and benefit of the Company, also in the best interests of stakeholders.
(iii) While exercising their duties, reasonable care, skill, diligence, and independent judgement should be exercised.
(iv) Directors should not get involved in an issue that directly or indirectly conflicts or may conflict with the interest of the company.
(v) They should not achieve or attempt to achieve undue gain or advantage on a personal level. If found to have done so, the Director will have to pay to the Company the amount of undue gain made by them.
(vi) A Director cannot assign the office held by them to another person; such a transfer will be void.
(vii) If provisions of this section are contravened, a Director may be fined between Rs. 1 lack- Rs. 5 lacks.
1) Let us consider the fiduciary duty of Directors to act in good faith– which is covered under section 166 (ii)- states that Directors must act honestly, without negligence and in good faith for the bona fide interests of the Company. When a legislation provides for protection of the public, the provision is rendered irrelevant when the class to which it is sought to be applied is not easily recognized. The second issue involving interpretation relates to whether the director is expected to act in ‘good faith’ for the promotion of the objects of the company or should it also encompass other groups in the sub-section. To act in the best interest is the duty of loyalty requiring decision making to be motivated by an intention to serve the best interests of all the relevant interest groups. The duty of care requires directors to make decisions in an informed and deliberate manner and to use reasonable prudence in performing their monitoring function
In the Stone v. Ritter judgement– good faith and best interest are used to balance each other. Directors need to exercise their jurisdiction to determine what a Court might consider and what they consider- is in the best interests of the Company. They also need to carefully weigh the commercial interests of the Company but also simultaneously aiming towards safeguarding the interests of stakeholders. While doing these activities the Director must keep in mind that their actions achieve the standard of a reasonably prudent person.
In the Dale & Carrington v. P.K. Prathapan– the Company was being run by one person; Mr. Ramanujanam was maintaining minutes of the meeting only to comply with the statutory requirements. However, in actuality, he was recording the minutes in an arbitrary manner. It was evident that he allotted shares to himself to gain a greater control over the Company. As understood from section 166(ii), the acts and deeds of directors have to done in accordance with benefitting the Company. Further section 166(iii) states that the duty to act on behalf of the Company comes with certain expectations such as- utmost care, due diligence, good faith. Directors also have the duty to make an honest disclosure about matters relating to the Company. Hence, Directors owe a duty to issue shares only for a proper purpose.
2) Avoid conflict of interests under section 166(iv)-
Globe Motors v. Mehta Teja Singh– this cases seems to blatantly signify the unfairness against the Company. It was a case of winding up of Globe Motors. There was an agreement between them and Teja Mehta Singh &Co. appointing the latter as distributors of company’s steel products. Some of the Directors showed interest in the Agreement therefore they did not take part in the discussion. The Court held that the Agreement was made in a manner so as to simply benefit the Directors. Even though they were well aware of the same they did not disclose this to the Company. Moreover, there was not even a single redeeming feature in the agreement for the Company. The Directors failed to put their personal greed aside and disclose this conflict of interest to the Company.
Rajeev Saumitra v. Neetu Singh & Ors– herein the defendant had incorporated two companies to compete with Paramount. In order to promote the companies incorporated by her she solicited the employees of Paramount; also made under use of goodwill and intellectual property of Paramount. Since she was a Director and a majority shareholder of Paramount, she had failed to disclose her conflict of interest. In fact she acted in bad faith so as to make personal undue gains at the cost of the interests of Paramount.
3) Fiduciary to act according to Proper Purpose under section 166-
Howard Smith Ltd. v. Ampol Petroleum Ltd. & Ors.– As per AoA, issue of shares was under the control of directors, who could allot or dispose of the same to such persons on such terms and conditions as they deem fit–thus, issue of shares was clearly intra-vires the directors. However, directors’ power under AoA is a fiduciary power, and though formally valid, maybe attacked on the ground that it was not exercised for the purpose for which it was granted(i.e.,the ‘proper purpose’). Power conferred is to enable capital to be raised–if purpose was otherwise, the issue of shares becomes invalid. Purpose here was simply and solely to dilute majority voting power held by Ampol & Bulkships and disable positive veto right– such issue of shares purely to flip voting power has been condemned- particularly where it disables an existing majority from blocking votes(Dale & Carrington). Directors cannot use fiduciary powers over company’s shares to interfere with the company’s constitution–doing so is separate from and against their powers.
Eclairs Group Ltd. & Glengary Overseas Ltd. v. JKX & Oil & Gas PLC– the purpose for which the Directors of JKX exercised their powers was not proper. As ‘purpose’ did not include influencing outcome of general resolutions which can be a consequence of a restriction notice but cannot be proper purpose.
Director to be viewed as an agent of the Company.
A company acts as a legal entity. However, it requires the assistance of human agency. Therefore, a company acts through directors who are essentially elected representatives of shareholders and make decisions for their benefit. By the basic definition, an agent is someone who acts on behalf of the principal; thereby ensuring that the third party can hold only the principal and not the agent liable for any wrong. Hence, directors do act as agents as they act on behalf of the Company and cannot be held personally liable for Company’s default.
1) Tristar Consultants v. Vcustomer Services India Pvt. Ltd. and Ors: Dinesh Mirchandani was acting as the sole proprietor of Tristar Consultants. The Defendant and Plaintiff firms had agreed that the Plaintiff firm was to recommend suitable candidates to the former on the basis of criterion discussed by them and conducting an interview. However, this agreement was cancelled by the Defendants. After this, there was an exchange of correspondence between the Plaintiff and Mr. Sanjay Kumar- the director of Defendant firm. On behalf of Defendant firm, Mr. Kumar agreed to pay professional fee and expenses incurred by the petitioner. Alleging that the said agreement was not honoured, suit was filed seeking recovery of Rs. 17.61 lacks. The contention herein was whether the suit claiming personal liability of Mr. Kumar would be justified despite the fact that he was simply acting as an agent of Defendant.
The Judgement held that Directors act as agents of Company and the latter acts through the former. It also states that Directors have been defined as Company’s agents since they act in a fiduciary manner vis-à-vis the Company. They also perform acts and duties for the benefit of the company. However, Directors are only agents of the Company to the extent they have been given the authority to certain acts on behalf of it. Here, the Court held that Mr. Kumar was acting in his capacity as the agent/Director of Defendant firm. Hence, he was not liable in his personal capacity. The petition was dismissed.
2) Ferguson v. Wilson: Mr. George Ferguson held the position of a Promoter and a Director of the Washoe United Consolidated Gold and Silver Mining Company Ltd. A Resolution of Promoters was passed thereby accepting advances from Promoters, and stating that advances with interest are to be repaid. This Resolution also gave Promoters the option of converting any unpaid amount into shares of the Company. Mr. Ferguson advanced 700 Pounds. The Directors decided to repay these advances. However, instead of repayment he wanted shares in lieu of his advance. He proposed that the unallocated shares should be disposed off only with the assent of shareholders. But this Resolution failed. The Directors continued to allocate shares without consideration for the share claimed by Mr. Ferguson. He eventually filed a petition against Directors claiming entitlement to 700 shares.
The question that arose here was the nature of the contract and the parties to the same. There arose a contract between Mr. Ferguson and the Company. The relationship between Directors and a Company is that of a simple principal-agent one. The petition filed against Directors could not be pursued. Directors are mere agents of the Company. Further, the Judgement stated that when an agent is liable naturally directors would also be liable; but when the liability is solely attached to the principal, it’s only the liability of the Company.
3) Walchandnagar Industries v. Ratanchand: this judgement widened the scope of a director’s role as an agent. It is a Director’s duty to disclose interest to the company. It’s also their duty to ensure that there isn’t a conflict of interest between their personal interests in the role of an agent of the company and in the principal’s interests i.e. the Company.
4) Allen v. Hyatt: in the eyes of law, directors are in the position of agents of the company and therefore have certain consequent duties. Hence, just like the general rule states- every director acting as an agent needs to disclose their personal interests (if any) during the course of a transaction, so as to avoid conflict of interest. As a corollary this means that where there is conflict of interest, there are probabilities that the interest of the director may prevail over that of the company which may be detrimental to the company.
Directors act as agents of the Company and therefore cannot be personally held liable when the issues at hand are attached to the principal i.e. the Company. When the case is solely leading to the liability of the principal, agents cannot automatically also be dragged in. The Directors as agents not only derive their authority from the Company but also from the Companies Act. However, there are certain roles and duties that need to be followed by the agents, so as to ensure that they don’t misuse their power to benefit themselves or to get away by thrusting the whole liability on the Company.
The older version of the privacy policy used to start with the following lines:
“Respect for your privacy is coded into our DNA. Since we started WhatsApp, we’ve aspired to build our services with a set of strong privacy principles in mind.”
That has gone now! Obviously so.
Facebook never bought WhatsApp for whopping $19 Billion to run it for free. They bought it for its user base and wanted to monetize from the advertisement revenues. Hence, this new policy. Now, with a deadline of 8th Feb 2021.
Here are some highlights of the new policy statements:
Messages will still remain end-to-end encrypted, which is a good thing and we need not worry much about the man in the middle attack.
WhatsApp cannot share our messages with anyone else. Of course , it can and will share with Facebook. That’s the main reason for this renewed privacy policy.
User information shall be shared with “the third-party services or other Facebook Company Products that are integrated with WhatsApp services. Those third-party services may receive information about what you or others share with them”
Simple example of this could be “using the in-app video player to play content from a third-party platform”. This is not new. But they are explicitly mentioning this in the new policy.
It shall use Facebook’s global infrastructure and data centers, including those in the United States to store user data. Now we know where our data will go to.
Data in some cases will be transferred to the United States or other parts where Facebook’s affiliate companies are based, adding that “these transfers are necessary to provide the global Services set forth in our Terms.”
If someone deletes the WhatsApp app from their device without using the in-app delete my account feature, then that user’s information will remain stored with the platform. So just deleting the app from our phone won’t be enough, if incase we want to exit from WhatsApp.
WhatsApp will collect our device information such as “battery level, signal strength, app version, browser information, mobile network, connection information (including phone number, mobile operator or ISP), language and time zone, IP address (Even if a user does not use their location-relation features on the phone).
Any device operation information and identifiers (including identifiers unique to Facebook Company Products associated with the same device or account, shall be collected and shared.
In case, if we are using the “Third-party services or other Facebook Company Products, their own terms and privacy policies will govern our use of those services and products.”
If at all we use WhatsApp’s new “Payment platform” they have the rights to process additional information about us, including payment account and transaction information.”
Our Recommendations:
Avoid using WhatsApp Payment platform.
Refrain WhatsApp and Facebook for official Business communication.
Do not share account details , Credit card Details and confidential details over WhatsApp. How much ever it is encrypted , it is vulnerable.
When you view videos/photos or “please click” links, please be aware that your account information shall be shared across to third party who are running these services ( by the way ,account information was getting shared even now!)
I often meet people who are stuck in one area of their life or another. They want a break-through, but they can’t seem to get traction.
Contrary to what they think, it’s not about having:
More money;
More time;
The right contacts; or
Better luck.
Instead, it almost always is about overcoming an invisible barrier that exists in their own head.
The barrier isn’t something external. It’s something internal—something they have created in their own mind.
Years ago, I heard a speaker talk about a research project conducted by a marine biologist. It seems he put a barracuda in a large tank. He then released smaller, bait fish into the same tank. As expected, the barracuda attacked and ate the smaller fish.
Then the researcher inserted a piece of glass into the tank, creating two separate chambers. He put the barracuda into one and new bait fish into the second. The barracuda immediately attacked.
This time, however, he hit the glass and bounced off. Undaunted, the barracuda kept repeating this behaviour every few minutes. Meanwhile, the bait fish swam unharmed in the second chamber. Eventually, the barracuda gave up.
The biologist repeated this experiment several times over the next few days. Each time, the barracuda got less aggressive, until eventually he got tired of hitting the glass and stopped striking altogether.
Then the researcher removed the glass. The barracuda, now trained to believe a barrier existed between him and the bait fish, didn’t attack. The bait fish swam unassailed, wherever they wished.
Too often, we are like the barracuda. The barrier isn’t “out there.” It only exists inside our heads.
Think how many other barriers have turned out to be only mental obstacles:
The sound barrier. Pilots didn’t think it was possible to fly faster than 768 miles an hour (the Speed of Sound at sea level). Then Chuck Yeager officially broke the sound barrier on October 14, 1947.
The four-minute mile. Runners didn’t think it was possible to run a mile in less than four minutes. Then, in 1954, Roger Bannister ran it in 3:59.4.
The two-hour marathon. Endurance athletes didn’t think it was possible to run a marathon in less than two hours. Now several athletes are on the verge of breaking Geoffrey Mutai’s world-record of 2:03.02.
The reason why most of us don’t accomplish more is because we set our goals inside our mental barriers, where it’s safe. (That’s why it’s called “ The comfort zone.”)
But if you want to get unstuck and start getting traction again, you have to set your goals on the other side of the barrier. You don’t have to get crazy, but you do have to stretch yourself and push past the invisible barrier in your head.
This is the secret to achieving break-through results.
Moral of the story…
Just like the barracuda, most of us stop ourselves from trying again just because we have experienced failures in the past. We think that since we failed before, trying again would be futile as the result would probably be the same. We prefer to die rather than try, just like the barracuda. We have been conditioned not to try anymore because of the fear of failure. To be successful we have to get rid of this limiting belief, and accept a new and empowering belief, “the future does not equal the past”. What’s past is just history, the future will be different. If we have failed earlier, we need not worry, just stand up and try again. It doesn’t mean that we are going to fail all the time. So let’s not get hit by the phobia, of losing again. Success will not come in the first try. We use the ‘trial and error method’ to achieve success; this means that if we have not failed before, you are not going to discover how to succeed.
Please keep asking yourself a Question: What goal do you currently have that is outside your comfort zone?
It is important that we step back a little bit and think “ What we want to be “? You want to be somebody or anybody ? There is a lot of difference in these two .
The questions is
Do you want to be just anybody in life , or do you want to be somebody in life ? If you want to be just anybody in life, then merge with the crowd. You will be one among the millions and you will get lost in the crowd. However, if you want to be somebody in life then stand up and be counted.
If you want to lead your life like everybody, you are sure to become like everybody. If you don’t want to be like everybody, then you have to do what nobody has done.
If you walk the path everybody walks, and you will reach the destination everybody reaches. Walk a different path and you will create a new destination for yourself.
The question you need be constantly asking is “ Do you want to be a typical human being who is one among the crowd or do you want to be a different human being, who will be looked up to by other human beings .
If you want to be a different human being, who will be looked up to by others keep asking this to your self
“ Either sub-ordinate you likes and dislikes to the purpose of your life “ – if you do this you are starting to be a different human being
“ Or Sub-ordinate the purpose of your life to you like and dislikes – if you do this you are becoming one among the crowd and will be lost.
It’s inevitable that our morale might dip occasionally. After all, we’re only human. But simply ignoring the problem and hoping that it will go away is unlikely to work, and may even make things worse. Actively rebooting your morale, on the other hand, can have a number of advantages.
Research has shown that people who are motivated and have job satisfaction tend to be more productive and creative, and are better at problem solving, than those who don’t. They will also more likely develop stronger relationships, perform better under pressure, and gain the recognition and respect of their colleagues.
So, if you’re feeling “down in the dumps,” read on to discover our top 10 tips for putting the spring back in your step.
1. Get to the Root of the Problem
If you’re struggling to stay positive, it’s time to ask yourself why.
Perhaps you no longer feel challenged at work, or there’s a lack of promotion opportunities . Maybe your confidence has been knocked by a poor appraisal, or you feel as though there’s a lack of constructive feedback at your company. You could be reeling from the departure of a favorite colleague who’s now moved on , or perhaps a difficult project has been dragging on and is getting you down.
It might be difficult to pinpoint the exact cause of your low morale. If this is the case, try the 5 Whys technique or Cause and Effect Analysis , both of which can help you to understand and solve complicated problems.
Tip:
Take our quiz to gain a better understanding of how self-motivated you are, and to find out what factors motivate you the most.
2. Find Meaning and Purpose
Ask yourself, what does your job mean to you? Does the work that you do align with your values? Do you feel satisfied at the end of the working day?
If you’re struggling to find meaning or pleasure in your work, or if you feel that your job lacks purpose, take some time to reassess your role using the Meaning, Pleasure, Strengths (MPS) Process . This will help you to identify work that you find worthwhile and that makes you happy. Shaping your role around projects that interest and engage you will mean that they become less of a chore and more of a passion.
Perhaps you feel as though your values no longer align with your role. If this is the case, don’t panic. It doesn’t automatically mean that you are in the wrong job, just that you might be thinking about it in the wrong way.
Find purpose in your work by helping out a co-worker. Take a step back to look at how your job and your organization positively impacts society. Perhaps your company is engaged in charity work or provides a helpful service to the local community. Finding the good in your role can give you a sense of renewed purpose and can help you to rediscover the value of your work.
Also instead of concentrating on what, at times, can feel like a never-ending To-Do List, keep a note of the tasks that you achieve each day. This will give you a clearer picture of the value that you bring to your organization, and you can leave work each day feeling satisfied that you have made a worthwhile contribution.
3. Don’t Get Stuck in a Rut
When you’re stuck in a rut, it’s easy to lose sight of the bigger picture. Ask yourself what direction you want your career to go in, and where you hope to be in one, three or even five years’ time. Set yourself short-, medium- and long-term goals to help you to achieve those ambitions.
For example, if your long-term goal is to head up your division, you might need to gain experience of managing a budget or presenting to the board. Put together an Action Plan to gain the skills that you need to get the job of your dreams. This will give you a sense of purpose, and it will also help you to put things in perspective and to keep you on track for career success!
4. Ask for Feedback
Feeling uncertain about how well you’re doing can knock your confidence, and can make you feel demotivated and down. It’s easy to get caught up in a cycle of worry and negativity , particularly if you stay silent about how you feel. So, instead, be proactive. Ask colleagues and clients for regular feedback . It might seem daunting at first, but it’s essential if you want to improve your skills and develop professionally – and you never know, you might be pleasantly surprised!
The next time you finish a piece of work, ask your manager how you did and how you could improve next time. He or she will be impressed with your initiative, and you’ll gain confidence from getting the recognition that you deserve.
At the same time, it’s good to be prepared to receive constructive criticism . If you do get negative feedback, don’t dwell on it – learn from it. You can do this by examining the positive and negative aspects of feedback with the help of the Feedback Matrix , and then by using the results to achieve positive, long-lasting change.
5. Learn Something New
Has your daily routine become predictable? Instead of concentrating on achieving your objectives, do you end up feeling bored, procrastinating and giving in to distractions? This can make you feel disengaged from your work, and lead you further away from your career objectives.
Step outside your comfort zone by taking on a new role within your organization. Perhaps you could offer to help a co-worker doing a different job, or devote some time to learning a new skill. Tell your manager that you are on the lookout for a new challenge, and ask your HR or L&D department about training and development opportunities
It’s important to stay challenged at work and to push yourself to try new things. If you don’t, your skills and knowledge may begin to stagnate, and you might even start to be passed over for new responsibilities.
6. Build Your Network
You likely work with the same people day in, day out. But how well do you really know them?
Taking time to strengthen your connections at work can benefit both you and your organization. Not only can positive working relationships help to build your network of useful contacts, but they can also elevate your mood and boost your productivity. You’ll likely enjoy your time at work more if you know that you have a team that you get on with and that you can rely on. It can also really help to lift your spirits, even on those “down days.”
Work on developing your people skills . Find out about a team member’s weekend, ask meaningful questions, and make sure that you really listen to his responses. Offer to meet him for coffee to get to know him better, and attend networking events with people who you share interests with. You never know what doors may open for you as a result of your new connections.
Tip:
Low morale doesn’t only affect individuals. It can be easy for negativity to spread through a team or even through an entire organization, particularly if it has recently undergone a painful change such as layoffs or a difficult project. If you notice that your team’s morale is low, you need to address it quickly and put a strategy in place to rebuild it .
7. Find Inspiration
Get inspired!
Find someone who you admire at work to mentor or coach you, even if it’s informally. Nothing beats learning from a successful person for gaining fresh insight and inspiration.
Read autobiographies and blogs written by the people who you admire the most. These might include people in your industry, experts working in your field, or even a particular politician or sports star that you look up to.
Having good role models can give you focus, and can prompt you to take action in your career by drawing on their example.
If you are still looking for inspiration, seek out a professional career or life coach, or try using positive affirmations . These can be particularly useful if you suffer from recurring, negative thoughts, and they can help you to make positive adjustments to the areas of your life that you wish to change.
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Tip:
Take a look at our extensive collection of Book Insight and Expert Interview podcasts featuring business authors across the world. They contain some great tips on how to achieve your career goals and are a great source of inspiration.
8. Shake Up Your Routine
Routines help us to stay centered, by providing structure and familiarity to our days. However, the monotony of our daily routine can sometimes wear us down. Change can be scary, and it’s all too easy to stick to the routines that we know best.
But when you engage in a new activity, your brain makes new connections that can help you to think about problems in a more innovative and creative way. So don’t be afraid to mix things up a bit.
Even small changes, like taking an alternative route to work, reading a different newspaper, or completing your daily tasks in a different order, can break up the monotony of your day-to-day routine, and help you to make new discoveries and keep things fresh.
9. Make Improvements
Long-winded processes and systems that don’t work properly drain our energy and can make us procrastinate .
So whether it’s a faulty printer or an over-complicated work process, make a concerted effort to tackle it head on. A more efficient approach will make your life easier and free you up to focus on more meaningful work.
Perhaps it’s not a process but a particular team member or colleague who’s been bothering you. If so, it might be time to finally tackle that difficult co-worker who habitually spoils your day. Practice assertiveness and, if necessary, speak up .
10. Treat Yourself
When we feel down, the smallest thing can cheer us back up again.
Rewards – no matter how small – can make all of your hard work feel worthwhile. So when you achieve a goal (even a little one), treat yourself with a cup of your favorite coffee or lunch at your favorite restaurant. For larger projects, a fun day out or even a vacation can act as a powerful incentive to keep heading in the right direction.
Choose treats that are proportionate to your goals and that you’ll look forward to. The more you reward yourself for honestly made progress, the more motivated you will be to fulfil your long-term goals.
Key Points
No one can feel positive all the time. But prolonged low morale can make us feel lethargic, slow and disengaged.
It can be easy to ignore the reason behind your low mood and hope that it just goes away by itself, but doing this is only avoiding the real issue. It’s much better to take control by identifying the cause of your low morale and tackling it head on.
Try to find meaning in your role by setting some long-term goals, asking for feedback, and learning new skills. Search out inspiration and guidance from positive role models, build your network of connections, and don’t be afraid to try something new. Most importantly, go easy on yourself. Take time to relax and treat yourself, particularly at the end of a hard day’s work.
Apply This to Your Life:
Choose something that you can do in the next week to boost your morale. Whether it’s reading an inspirational book, downloading a motivational podcast, or going for coffee with a new colleague, set yourself a morale-boosting goal now and go for it.
This site teaches you the skills you need for a happy and successful career; and this is just one of many tools and resources that you’ll find here at Mind Tools. Subscribe to our free newsletter, or join the Mind Tools Club and really supercharge your career!
The current economic climate has many of us thinking about how we can prepare for possible threats and business disruptions. This kind of strategic planning allows a business to approach a worst-case scenario with a growth mindset instead of fear – increasing the likelihood that your business will come out of a crisis stronger for having gone through it.
During a worst-case scenario, leadership must decide whether the organization will make the necessary adjustments needed to continue with business as usual or change how the company will operate. And while the conversation will undoubtedly include operational and capacity considerations, it is primarily a discussion about financial capabilities.
When COVID hit, some companies responded to supply chain disruptions by going outside of their existing supply channels to continue producing the same products and selling the same services. At the same time, others pivoted their operations to capitalize on new market opportunities – offering adjacent products and shifting their service approach. One example of shifting business operations was Unilever scaling back the production of skin care products in favor of ramping up their production of surface cleaners when demand spiked. Another example was Spotify making up for lost ad revenue by offering podcasts to listeners, signing deals with celebrities to provide original content that was exclusive to their platform.
Individual business circumstances, as well as specifics about the crisis itself, will determine which approach makes the most sense. However, regardless of the approach, your CFO will take the following strategic steps to prepare financially for a worst-case scenario:
Cash Flow Planning
When business activities are disrupted, cash flow planning is critical. Usually, it is advised that businesses keep at least a rolling 13-week cash flow forecast. However, when planning for a worst-case scenario, a CFO will likely expand it out to a 6, 12, or even an 18-month forecast.
Your CFO will aim to understand how the money will continue to move into and out of your business. They will analyze which of your current accounts would be likely to keep paying you on time and which would delay their payments or ask to change their payment terms. Once they get a sense of what cash inflow may look like, a CFO will do the same for cash outflows. Knowing which vendors you need to pay to keep operations running, your CFO can ensure that in any scenario, there is enough cash to satisfy your obligations to them.
Time is always of the essence when a disruptive event occurs. Often the organizations that respond the fastest have the best chance of minimizing impact and even finding growth opportunities in the chaos. A CFO will forecast multiple business disruption scenarios to make a financial preparedness plan that covers numerous scenarios and plan your strategic response for each scenario so that when one occurs, you can execute quickly. CFOs will also respond to uncertainty by leaning on financial best practices – planning to collect AR as soon as possible and avoid writing off outstanding invoices as bad debt to improve your cash position immediately.
Using a Decision Tree
CFOs think about possible triggers that could cause business disruption, such as:
A pandemic
Natural disasters
Economic market downturns
Changing governmental regulations
The emergence of new technology
A disruption in the competitive landscape
They then prioritize triggers based on their likelihood of occurring and formalize a plan that summarizes, “If this happens, we will do this.” A CFO will forecast the financial implications to your business model of each trigger and work cross-functionally to build financial models that represent the business impact of each scenario. Then your CFO will help you understand how your business should react and what types of barriers may exist to responding with an optimal growth mindset.
Adjusting Strategically
A CFO cannot plan for every possible scenario, but advanced strategic planning will provide the foundation to use in a crisis even when economic and political conditions change rapidly. During times of disruption and in the reporting periods immediately afterward, CFOs will compare business performance against the financial models you have forecasted and adjust strategy in response to these findings.
Remember, as businesses respond to market and industry disruptions, their goals must change as well. Be flexible in your evaluation of business objectives, key performance indicators (KPIs), growth milestones, and performance criteria. A CFO should welcome input from all areas of leadership to help reset goals and align various business teams around timely response scenarios.
Leveraging Available Resources
CFOs will proactively communicate with your bankers to determine which resources are available to your business. They can start a conversation that includes various planning components:
Understanding how much flexibility is available on your current funding
How likely obtaining additional funding would be during a market dip
Exploring government incentives as they become available during a crisis
Well-connected CFOs can also draw on their network of business professionals to find additional resources to aid the business during a downturn or times of disruption. Trust their experience to work for your business, especially when the company is at its most vulnerable.
This means making sure you align with your boss’s priorities and goals.
…and when you communicate with your boss or someone at a higher level, keep your communication clear and concise.
For example, if you want to highlight a problem, that’s fine – but a general rule of thumb is to keep a long story short..and to the issues which are important to him/her.
Outline the problem, offer a few key implications if it’s not addressed, and then propose two or three workable solutions.
Effective leaders will appreciate being informed on what’s happening in their organisation; should an issue escalate, it helps that they’re informed ahead of time.
Managing upward relates to the question, “What are you doing to make your boss’s life easier?” Put yourself in their shoes: What qualities would your ideal team possess? How would they communicate with you?
Whether you’re managing up or down, perspective-taking is a key skill and one that demonstrates big-picture thinking.
How to get rid of disqualification and avail the Company Fresh Start Scheme 2020
In the aftermath of COVID-19, benchmarking of profit margins of the low risk captive service providers from Transfer Pricing perspective would be a complex exercise, as the combined profitability in the value chain is shrinking and the associated enterprise would be seeking to renegotiate the remuneration paid as a cost plus mark-up, to reflect the margins in the current economic scenario.
The directors disqualified by the Ministry of Corporate Affairs (“MCA”) in 2017 have been given an opportunity to get rid of their disqualification, and also to avail benefit of the Company Fresh Start Scheme 2020 (“CFSS 2020”), valid till 30.09.2020, by a recent Judgment dated 02.09. 2020 passed by the Hon’ble High Court of Delhi in W.P.(C) 5490/2020 titled “Sandeep Agarwal & Anr. V. Union of India & Anr.” (“Judgment”).
Who is this for?
This development is relevant for directors who have been disqualified since 2017 or later, who remain disqualified till today. They would normally be unable to act as director in any other company and would also be unable to apply and take benefit of CFSS 2020. It may also be difficult to approach the High Court for writ remedy, because of delay in case of directors disqualified since 2017 or 2018.
First – What is CFSS 2020?
The MCA vide circulars dated 24.03.2020 and 30.03.2020 promulgated the CFSS 2020allowing only active defaulting companies a one-time opportunity to complete all pending compliances by filing belated documents on MCA-21 without being subject to a higher additional fees on account of delay and for getting immunity from prosecution for such default. The scheme closes on 30.09.2020.
What is the opportunity under the Judgment?
The Judgment dated 02.09.2020 sets aside the disqualification of petitioner Directors. These directors were unable to take benefit of CFSS 2020 as the default was in a struck off company and not in other active company(ies) where such persons are holding position as directors.
Hon’ble Delhi High Court noted that disqualification and cancellation of DINs would be an impediment for directors in availing remedies even for their active companies under the CFSS 2020 which is intended to allow a fresh start for active companies which have defaulted. The scheme would be ineffective if such directors are not given a chance. The Scheme was held to itself be a fresh and continuing cause of action for approaching the courts in such circumstances.
What is the remedy now?
The Judgment allows disqualified directors who are also directors in active companies to approach the High Court challenging their disqualification and suspension of DSC and DIN, so that they may be given an opportunity to avail the CFSS 2020 for their active companies. However, the window of opportunity is brief as the scheme itself expires on 30.09.2020, unless it is further extended. There is a likelihood of extension, given the past trend of extending similar amnesty schemes, and given the current situation of pandemic.
Once and if the petition is allowed, the disqualification may be set aside and the party would be able to able to take steps under the CFSS 2020 for their active defaulting companies:
Filing pending documents, statements and returns and paying normal fee;
Thereafter filing of form CFSS 2020 in between the period starting from 1.10.2020 till 31.03.2021.
An uneven economic recovery which is increasing the divide between the haves and have-nots. Thus, then there is that new letter to describe the future growth trajectory: Not V-shaped (a quick down and then up), as two optimistic government economists have forecast this past week, or U-shaped (recovery after a time lapse), or W-shaped, or L-shaped, but K-shaped. This last has two lines diverging from a perpendicular. It is this year’s discovery by the global commentaries to describe what has been happening in varying degrees since the financial crisis of 2008: The growing gap between winners and losers among countries, economic sectors, companies, and, of course, people.
Examples are aplenty. Among countries, China has been on an incredible buying spree since 2008, gobbling up strategic companies and crucial ports across the globe, and liberally financing governments that become vulnerable to Beijing’s diktats when they run into debt-servicing difficulties. Within the country, investors in India’s stock market are in clover while millions have lost their jobs and private consumption has collapsed — as the National Statistical Office has just reported.
Companies servicing distance-working or -learning are having a heyday (more “unicorns” and sudden wealth), as are the makers of pharmaceutical products, while the commercial real estate market and makers of formal office shirts experience a slump. Qantas has taken to selling pyjamas! Within sectors, the big are eating the small: Jio swallows most of the Future Group, forcing the next in line, D-Mart, to adopt price discounting; and Adani acquires local airport monopolies and has a quasi-monopoly on ports (reflected in skewed port charges).
This phenomenon goes beyond Schumpeter’s “creative destruction” perspective on capitalism. How does large-scale destruction help if it overwhelms banks? As the concentration of profits in the hands of sector leaders has reached unprecedented levels. Market regulators and the Competition Commission seem blind or comatose, compared to places like Europe and Australia, where they are taking on the tech giants and their uncompetitive behaviour.
What we see are much broader elements at work than those stirred by a mere pandemic. The forces causing the growth slowdown and rising inequality were there before Covid-19, and these trends are now getting accentuated. In a social welfare model, governments would take care of the losers among people while enabling small and medium businesses to keep going (think Germany’s Mittelstand). But increasingly, governments don’t have the capacity or the competence to deal with the scale of what confronts them. This encourages escapism through the politics and economics of nationalism, made worse by tribalism or nativism, the package accompanied inevitably by the erosion of institutional bulwarks and therefore state capture by powerful businessmen. Typically, the political and economic winners are not the same. Overall, it’s not a pretty sight, and 5 per cent begins to look like a possibility.
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