ladies and gentlemen good morning good afternoon and good evening to all of you joining us today thank you for taking the time to be with us and a very warm welcome to the m&a academy program to what is our sixth webinar in 2024 my name is surbi krial and I'm an m&a partner in katans corporate group based out of Bombay on behalf of the firm I would like to extend a very warm welcome to all of you to this webinar the m&a academy program is designed to provide foundational legal knowledge and understanding on m& transactions and the various processes uh to all stakeholders in an m&a deal including corporate Executives in-house legal teams and various other stakeholders the topic we've chosen for today is employment and human capital issues in m& transactions you will see the agenda on the slide that is visible to you we've already received uh several audience questions uh for this webinar audience interest is already peaked uh but do keep your questions coming uh there's a facility provided in the um in the webinar portal please use that to uh give us your questions I can't promise that I'll be able to cover all the questions given our time constraints I will however try and cover most of the topics and be rest assured that we will separately respond to each of your questions post this webinar we will also share a copy of the presentation summary notes and a recording of This webinar via a link to all of you who've registered I would now like to introdu introduce this topic as you know m&a is a a very important part of our firm's practice we have significant resources devoted to uh merges and Acquisitions we have more than 50 Partners concentrating on m&a as part of our m&a Academy program we will today be dealing with employment issues in an m&a transaction of the criticality of this aspect in Deal making cannot be overstated as you may be knowing India has a complex web of laws relating to hiring maintaining and exiting human capital it is absolutely essential for all deal makers to understand the gravity of this issue to avoid any post deal complications while scaling businesses in organically there is a near certain potential disruption for employees in terms of restructuring positions perks integration so on and so forth Indian labor law is complex the landscape Cape is constantly evolving new laws are constantly coming in judicial precedents are constantly coming in and now the given added emphasis on ESG it has become absolutely critical for m&a deal makers to understand employment issues in an m&a transaction and we thought this is an essential topic for us to deal with as part of our m&a Academy program now as an m&a lawyer I I have been doing this for about 7 18 years and for a majority of those years I have a trusted goto adviser in our firm who I go to for almost all my m&a deals um Mr anul prakash anul Heads Are elb practice in ketan and anul and I have been dealing with this for almost 15 plus years those of you who've registered for this webinar should have received anel's U uh introduction and summary of His credentials not that he needs any introduction um so without wasting any further time I'll now hand over the Baton to to anshul uh and anul why don't you take us through some of the most important issues that one has to deal with in m&a deals so over to you anre thanks so much for the kind introduction s uh uh greetings for the day for all attendees here it's a pleasure to have you here and uh uh thank you so much for this opportunity um now in the over the next 1 hour uh my object shall be to provide you with an overview of uh certain key employment law uh related implications that parties may come across during a corporate transaction and the manner or processes to navigate such issues uh while corporate restructuring provides an edge to organizations from a market standpoint it is equally important for the parties involved in the restructuring process to ensure that interest of the employees are not negatively or adversely impacted during that process so it's not just about adhering to the legal Provisions it's also about ensuring that you follow the best practices when dealing with issues emanating from the HR domain while you are navigating through complex uh corporate transactions now in this presentation my intent is not to delve or deep dive into all the issues and procedural requirements that parties need to consider while entering into any Arrangement that results in corporate restructuring of entities but to discuss the critical legal requirements that the parties need to be mindful of and are required to comply with so as you see on the slide in front of you the most important factor which will go into the aspect of any corporate transaction as far as employees are concerned is classification of Workforce Now industrial disputes act which is India's most significant industrial relations legislation which governs employer employee relationship primarily provides for mechanism for settlement of industrial disputes Provisions with respect to unfair labor practices layoffs reten strikes walkouts enclosure of establishment the industrial dispute set applies to and protects only a particular category of employees who are termed as workmen now this is something which is important we may be using employees and workmen as interchangeable terms but the Workman category of employees may enjoy certain specific Privileges and protections under industrial relations laws in India now when I say workmen the purposes of Indian industrial relations law would categorize workmen and managerial employees or I would say non-w Workman category employees and the meaning of these terms if you look at the screen in front of you a Workman is defined under the industrial relations law of India as a person employed in an industry to do any manual unskilled skilled technical operational clerical or supervisory work for hire or reward of course when it comes to exclusions you need to pay attention to this one because there's a lot of misnomer around identifying Workman category employees let me tell you the salary of these employees the monthly remuneration earned by employees is not the determining factor to categorize an employee into workmen or non-w Workman so the whole perspective of an employee earning a salary of 10,000 rupes per month is not the determining Factor it is only relevant for employees who are engaged in supervisory capacity if they earning more than this amount they are categorized as non-w workmen otherwise irrespective of the designation a person may carry in an organization the most important Point here will be the test for an employee to fall under the definition of workmen and that is essentially the organizational setup and the role of such person within the administrative setup of the organization the remuneration or designation of a person cannot solely determine whether he or she is a Workman to determine whether an employee is a Workman the actual or primary work performed by the employee needs to be examined now substantive nature of duties and responsibilities forms the fundamental perspective basis which you can determine categorization of Workforce and this forms the very basis of the session itself because all the way when we talk about the special protection in relation to transition of Workforce the whole perspective and categorization of employees will come into play some of these essential tests could be looking after the progress of work within the establishment that is the quality and timeliness ensuring compliance Manpower planning contract management monitoring cost and mentoring team members of course if an individual within the administrative setup is involved in policymaking decisions regarding any aspect of the business or service the conditions of workers employees and such other similar Powers it can be inferred that the concerned individual who is engaged in these aspects of the administrative setup of an organization would fall outside the category of a Workman moving on to the next slide now having understood the differences between the two categories of employees let us now understand the implications of Distinction or what are the benefits that workmen enjoy in case of corporate restructuring which involves business transfers asset purchase agreements or even mergers that are code driven now at the outset and prior to delving into the benefit benefits that an employee engaged in the category of workmen would enjoy uh in a corporate restructuring setup do note that Indian labor laws do not envisage an automatic transfer of employment for employees who are engaged in an entity which is proposing to divest his business undertaking to another potential buyer or acquirer now you need to be mindful of the fact that against the backdrop of any business trans or asset purchase deal there is no automatic transfer of employees who are associated with a particular business vertical because the contracts of employment under Indian law are deemed to be contracts of personal service now transfer of employees services on a service continuity basis is one of the most important elements as far as corporate restructuring is concerned uh primarily when it comes to certain ations that require compliance by both seller as well as buyer and I already spoke about the industrial dispute side which is which forms the basis of any industrial relations issues emanating from a potential corporate restructuring deal now the idea as we call it provides for fulfillment of certain conditions for transfer of workmen that is non-managerial Personnel in the event of transfer of an undertaking from one entity to another such that the parties would be required to comply with the following conditions as you see uh on the slide the transfer of employees should be and must be on the on the basis of uninterrupted uh mode they had to be provided continuity of service they have to be offered terms and conditions of service that are no less favorable than the existing employment terms and the most important point is consent of these employees who are proposed to be transferred along with the business undertaking that is proposed to be transferred as part of the corporate restructuring deal now while the requirement of consent of the employees for transfer of their services has not been set out under the industrial disputes act several Court judgments have emphasized on the requirement of seeking Express consent of the employees whose services are proposed to be transferred from one employer to another employer who is acquiring the business vertical without the consent of employees the transfer of Services of these Personnel cannot be effectuated and if that is done if that is effectuated it is susceptible to challenge by the concerned employees who are otherwise proposed to be transferred along with the business now in the event the employee whose services are proposed to be transferred from the current employer to the acquirer doesn't provide his or her consent and that is to despite being offered continued employment on the same terms and conditions of service there cannot be a transfer of his or her employment from one organization to another and of course it shall be a commercial call for the transferer entity the seller in this case to dispense with the employees Services as for the terms and conditions of current employment agreement and why this is important because if there is no consent under the industrial relations law which is the Ida that employee who falls within the category of workman will be deemed to have been retened and that is the point where you need to look at the scenario if at all there is a possibility of uh accommodating the services of that individual within the current setup or you need to comply with the necessary requirement for retention that person who has refused to consent to his transfer along with the business undertaking uh now separately the above conditions which I just spoke about are only required to be adhered to in case of transfer of an undertaking and now this is another important aspect when I say undertaking it has been defined under under the industrial disputes act to include any establishment where business trade undertaking manufacturer or calling is being carried on it is also clarified that where there are several units or branches within establishment a unit or Branch would in itself be considered as an industrial establishment or undertaking if it is severable from the other units of the establishment so please be mindful of the fact that within an organization they could be different business verticals or divisions or even a departmental function which is something which can thrive on its own which is not largely dependent on other functions or other business verticals if that is carved out as a different business vertical for the purpose of a corporate restructuring that would also essentially form an undertaking for the purposes of industrial disputes act now we talk about the manner of transfer or transition of Workforce uh this is something which forms the bone of contention between the parties to a transaction employment of workmen uh category employees proposed to be transferred continues as is and all their acred and cumulated benefits get carried forward to the transfer entity The transfering Entity will be expected to pay regular salary and deposit St statutary contributions in respect of such employees up to the day preceding the transfer date so you have to be careful about the fact that entire gamut of procedural requirements the softer nuances of determining the date of employees transfer looking at the payroll processes Etc all of that needs to be prepared well in advance before you intend to effectuate the transfer of these employees who are associated with the business vertical sought to be transferred as part of the corporate restructuring process now the acur benefits such as gratuity and accumulated earned leave would get carried over to the transferred transfer entity the value of statutory and contractual liabilities so assumed by The transfery Entity can thereafter be adjusted against the lumsum consideration which is otherwise forming the part of purchase consideration for the larger transaction now this is something which is commercially discussed and agreed upon but in majority of these instances unless and until we are talking about a funded liability for gratuity you look at the possibility of ensuring that you do an acturial valuation for the total gratuity liability for employees who are sought to be transferred from the current employer to the new employer which is the acquirer of the business vertical and basis that you determine the value which needs to be adjusted against the overall purchase consideration payable by the acquirer to the seller the reason being Assumption of liability on a continuing basis by the acquirer another important point which I already spoke about uh in short is no less favorable terms now this is a term which is uh enshrined in the law it is also something which is spoken a lot about but the question is what do you mean by no less favorable terms uh the services which are going to to be transferred on continuity basis uh would really be uh enshrined in a manner where all these employees are going to enjoy terms and conditions which are largely similar or identical to what they have already enjoyed with their current employer now the phrase in any way uh less favorable to the workmen does not mean that small infractions in the benefits or conditions of service till now enjoy ired by the Workman under the former employer would render the conditions of service less favorable to the Workman under the new employer so courts in India would usually emphasize on comparing the terms and conditions as a whole now this is very important terms and conditions as a whole need to be taken into account as opposed to looking at pockets of what benefits are being provided or currently enjoyed by the the employees with the former employer and two checking whether there is any material condition that is less favorable now when I say material condition you need to bear in mind that under any corporate transaction which involves basically the business transfer on a Lock Stock Barrel basis uh the the remuneration structure of employees uh especially I'm talking about the Workman of protected category that needs to remain intact So to that extent while you can look at uh probably changing the constituents of the salary but the quantum the overall Quantum of salary which is otherwise payable to the employees must not undergo change because that is something which strikes at the very root of this particular phrase which talks about no less favorable terms uh now from a practical Viewpoint when when it comes to dealing with HR related aspects for any corporate uh restructuring deal to ensure this it would be imperative for the transfery entity to review and assess the transferring non-managerial employees remuneration structure and Associated benefits with the transfer entity and ensure that overall compensation which includes the remuneration and Associated benefits for these employees remains intact to the extent possible a practical example in our experience while advising client cents in such transactions there have been scenarios where the transfer entity provides higher benefit entitlement than what is statut mandated now that becomes a challenge for the transfery entity to replicate considering the impact it would have at an organizational level and the costs that are associated with it for instance the transfer entity may have a policy of making gratuity payments on an UNCA basis whereas the trans entity may have a policy of capping the gratuity payments to the statutory limit of 20 lakhs uh rupees per month now in these situations and from a risk mitigation standpoint it would be important for both the transfer organization and the transfer organization to have an appropriate paper trail and relevant documentation and seek Express consent of the transferring employees uh to change any proposed uh uh uh to the existing terms and conditions of their services speciically to the existing salary structure contractual benefits which they were entitled to during their employment with the transferer entity another aspect which is equally important uh because I just talked about transfer on the basis of continuity of service the question arises what if as part of the commercial Arrangement which is envisaged by parties to the transaction does not envisage a clean slated approach of transfer of employees and in that case a situation would arise where the acquirer is of the view that Assumption of liability for employees right from the day when they joined the services of the current employer is not something which uh an acquirer is Keen to uh assume as the new employer in those cases we would normally normally look at the possibility of uh transition of the workforce associated with the business vertical on the basis of resign and hire we usually call it the hybrid model now as an alternative to the approach of transferring an employees services on continued basis Workman category of employees may also be provided with an opportunity to voluntarily resign from their employment with the transferer entity on and with effect from day prior to the uh transfer date as such the transfer entity would be required to simultaneously ensure payment of all statutory and contractual dues for example gratuity leaving cment notice salary which is otherwise payable as per the employment contract terms now these employees would then be required to be hired and onboarded by the transfer entity on Fresh terms immediately after the release by the transfer entity now under this option The transfery Entity would be free to offer employment terms as they may like it is advisable it's a very practical uh proposition it is advisable that this this employment offer would set out terms that are largely comparable in aggregate speciically in terms of existing ration uh to the existing terms that are currently enjoyed by the employees who are proposed to be transferred so while you may have a practical call a commercial arrangement to offer employment on new terms on Fresh terms but do see from a strategic Viewpoint as to whether the workforce which is transitioned under this model would be amenable to that kind of an offer being made because nobody would want to lose out on the benefits that are core to them so this is something which is equally important from a practical perspective not just from a legal standpoint which I just spoke about in the previous slide now when I say hybrid model I would like to emphasiz on the point that parties may also agree on a resign and higher model for the transition of employees engagement where they resign from the services of the transfery entity employed with the transfery entity with no service continuity except for the understanding that the employees employment tenure with the Ile employer the former employer shall be recognized only for The Limited purpose of computing gratuity liability now usually uh we talk about gratuity eligibility criteria being minimum five years of continuous Service as for the payment of gratuity act now in this instance the value of ACR gratuity liability so assumed Visa the transferring employees by the transfer entity will be adjusted Ed against the purchase price consideration which is otherwise payable by The transferer Entity this is more of an accounting perspective but and based on the commercial understanding between the parties but Assumption of liability in this case where employees are otherwise joining under fresh terms based on the offer of employment made to them by the new employer the acquirer uh you need to determine the value of gratuity liability which is assumed on a limited basis as part of the corporate uh Arrangement between the two entities now the aspect of deciding the manner for transition of employees Services would largely depend on the nature of corporate restructuring and the commercial understanding M the parties moving on to the next slide now another question that arises from time to time is we talk about workmen we talk about protected employees but what happens to the EMP employees who are falling in the non-w Workman category now as discussed in the previous slides categorization of employees as workmen and non-w workmen as for the industrial disputes Act is a subjective assessment it may also be a timec consuming process because the categorization of employees into workmen and non-w workmen cannot be solely done based on employees designation and Quantum of salary which is pable to them in ordinary course now to avoid ambiguity and administrative inconvenience to The transferer Entity for categorizing an employee as a Workman or non-managerial employee under the Ida it is a common practice for the transfery entity to adopt largely a universal approach for all employees including managerial personnel and adhere to the terms and conditions prescribed under the industrial dispute set which I just spoke about in the previous slides now that is largely to ensure that the transferring employees the transferring employees are not prejudiced as a result of the transition and may accordingly exceed to the arrangement more quickly and seamlessly so the idea is not to carve out a distinction as part of this corporate transaction between two categories of employees unless the corporate Arrangement between the two entities or parties through the transaction is such that Assumption of liabilities is only limited to employees who fall within the Workman category but largely basis our experience we have seen that the seamless transition would entail categorization of employees on an equal footing and the entire perspective of how to transition the work force is not based on uh the assessment of their duties and responsibilities as Workman or nonwork now looking at this slide on the perspective of share acquisition and transfer mechanisms in the event of corporate restructuring that entails a change in the shareholding pattern of a company the employer entity of the employees engaged shall largely remain the same now to clarify the employer employee relationship between the employer entity and the employees engage shall not be impacted resulting in no change in the employer and therefore the terms and conditions of services will not be impacted under any circumstances accordingly in these scenarios where there is a change in the shareholding pattern of a company the acquirer needs to ensure that it has undertaken a thorough diligence on the employer entity the company the target which includes the engagement policies the employee policies and practices which are adopted by The employing Entity the company's compliance status with the applicable labor laws is equally important to be looked into now any non-compliance by the employer entity under applicable labor laws would need to be rectified to the extent possible largely as a pre-closing proposition in many instances you may look at post closing action it Ms also as part of the uh understanding between the parties uh but this is something which is equally important in a share deal because in those instances you are stepping into the shoes of the current employer as a majority shareholder now do note that conducting extensive due diligence on the target entity from an employment law standpoint becomes imperative to assess the non-compliance the risk and liabilities associated with these non-compliance and agreeing on the manner to mitigate such risk on non-compliances from future standpoint a very quick um practical example uh in one such matter a client had reached out to us to assess the mitigation strategy for non-compliance of the target entity under the employees Provident fund act now there was a shortfall which was committed which was essentially a in because of certain issues that arose uh prior to consumation of the transaction now the defense of the acquired entity was that they were not in control of the organization at the time of commission of such non-compliance under the statute now these submissions argument shall not assume any relevance as it shall be the responsibility of the entity which has failed to comply with the provisions of EPF Act and the responsibility of rectification of this non-compliance or payment of liability towards shortfall of the contribution under employees Provident fund act shall be of the entity uh I mean of course without the authorities delving into the aspect of if there has been a change in the shareholding of the company post Commission of such non-compliance under the EPF act now in this regard it becomes important to assess the compliance status of the target entity and seek specific uh clarifications specific Indemnity in certain cases in case of any assessed major non-compliance under the applicable law as a potential risk mitigation measure for the future moving on to the next slide now another scenario which comes into play uh we already spoke about business transfers share acquisition deal uh another way of uh corporate restructuring being effectuated is uh through mergers Dem mergers that would entail approval or sanction of the competent courts uh for such restructuring now now that renders the process to be Cod driven accordingly the court sanctioning the merger or Dem merger scheme shall set out the manner or procedure concerning the transfer or transition of the workforce uh with the newly demerged or merged entity now as is commonly observed the scheme as approved by the competent Court would generally prescribe conditions for transfer of uh Services of employees or Workforce associated with that particular entity akin to the stipulations that are already set out under the industrial disputes act so the principles which I just spoke about and emphasized on would form the basis of the conditions that are set out by competent Courts for transfer of employees or transation of Workforce under an approved uh scheme of merger or Dem merger if you look at the corporate restructuring aspect which involves trade unions and this is very important from an industrial relations standpoint the parties to the transaction uh may need to undertake an assessment of the unionization details that is the first bit about status of ongr industrial relations with employees and any existing trade unions on the premises it may be for a manufacturing establishment it may be for a Services sector company but all the more it is important for any acquirer uh to assess the nature of industrial relations on ground now existence of any collective bargaining agreement for determining contractual stipulations which may be relevant for a corporate restructuring is equally important there is no uh statutory requirement to obtain trade unions consent uh in the event of corporate restructuring having said that it would be prudent to consult and lies with the union members the office bearers to discuss and apprise them of the corporate restructuring excise which is on the anual now the timing of that is important in many instances questions have come before us as to whether it would be important for uh the parties to the transaction to disclose uh the proposed transaction to the office bearers of a trade Union in advance or way in advance of the transaction or is this something which may be may not be aligned with the overall disclosure requirement for the authorities so from a statutory Viewpoint you need to bear in mind any specific regulatory implications which may come in where you need to disclose the potential transaction to the office bearers in advance of the transaction largely it is more of a softer Nuance where you look at the collective bargaining agreements you look at the stipulation that may be there from the perspective of seeking any specific uh consent or consultation with the office bearers of a trade Union when it comes to the nuances involved in transferring or transitioning the workmen engage with the business which is sought to be transferred or transitioned as part of a corporate restructuring process now while navigating with trade unions can certainly add more work to a operate restructuring of uh share acquisition or Equity purchase the largely better news a better perspective for acquirer entities that trade unions cannot unilaterally block transactions now we have seen instances where uh in certain instances uh trade unions have come up uh challenging the overall deal uh which is currently proposed by uh one or more two or more parties uh to a transaction but this is not something which can be legally tangible before the courts of law Because unless and until there is a scenario where unfair Labor practice is highlighted by a trade Union especially uh in the state of Maharashtra uh we do not see the possibility from a legal standpoint for trade unions to unilaterally block uh a corporate restructuring deal the presence of a trade Union will not always be problematic in a deal scenario but those involved in a share acquisition deal in which a target has an active Trade union should of course be mindful of the requirement to be to have sensitivities of Trade union members to be kept in mind and of course acknowledge the terms and conditions agreed with such Trade union members by way of a wage settlement agreement or any specific Charter of Demands which have already been agreed and taken on record modifying the benefits of already promised to the Trade union members may have an adverse impact on the functioning of the organization and the acquired entity shall need to trade carefully in case it has to do so for business reasons now some of the key takeaways as you look at uh the slide in front of you now given the above employment law considerations uh in the corporate restructuring processes for uh corporate entities it would be prudent for parties involved in any such deal to assess the nature of the deal the transaction which they are currently envisaging whether it is a business transfer whether it is a share acquisition or Cod driven merger or Dem merger at the outset and the nuances that concern employment law aspects under the under the current mandates uh what is really of significance will be that in business transfer or asset purchase transactions while the industrial dispute set provides for transfer of employees services on continued basis uh with no less favorable terms and conditions the parties to such transactions may also assess and agree for transition of employees on a resign and hire model so this is not something which is elimated from the usual practice which parties to a transaction may agree to and this is not something which you need to be completely uh adverse to this is one model which you can always consider as part of a corporate restructuring transaction needless to mention that the documentation or the definitive agreements which will be coming into play for such Arrangements have to be very carefully drafted the verbiage cannot bring in the element of involuntary separation of employees as part of corporate restructuring process where employees are otherwise meant to move voluntarily after relinquishing their roles with the current employer so this is equally important as a takeaway in terms of the slides which have previously covered so uh I would like to end this session uh in terms of what I wanted to cover on the uh practical and statutory side questions from the audience thank you anul for that uh exceedingly detailed uh and thorough presentation uh it's very much the reason why you continue to be my go-to advisor I think you've covered most of the most of the aspects we have a couple of very interesting uh questions from the audience um one of the questions uh that we've received uh you know is is relating the value um that one can ascribe to employees now as you know in a slum sale or a business transact business acquisition transaction the asset is ascribed a value and in the purchasers books we often resort to what is known as U uh you know purchase uh allocation to various aspects uh a rudimentary question but an important one do you ascribe value to employees from a monetary perspective I mean of course employees continue to be very valuable but purely from a monetary perspective when you know employees are moving as a bulk pursuant to business transaction do you ascribe any monetary value uh to employees thanks Su I think it's a very good question but emanating largely from uh the tax domain because uh no Lock Stock Barrel sale will uh be effectuated if you I mean of course from a current uh regime standpoint we have largely seen that a value is ascribed to employees I'm not just talking about gratuity liabilities or leaving cment liabilities it is also about uh the expenses which one would incur or ascribe to uh transition the employees from the current setup to the new setup uh of course uh we are talking about people as capital and the moment we call people as capital you do a Stripes of value but the methodology which comes into play is something which is largely uh emanating from accounting Viewpoint so what value exactly will come into play is something uh which needs to be delted from a from a tax and accounting viewpoint but yes if you ask me from a transaction Viewpoint yes uh we have seen employees uh getting valued and that value is largely uh determin from the perspective of how they will move alongside the business vertical which is meant to be acquired by the by the purchaser right right uh thank you so much shout out to our audience please keep keep your questions coming we have about eight or nine minutes uh to take these questions un the second question is you know another structure that we as law firms Indian law firms advise considerably and and you've sort of handheld my team a lot on this is indirect share Acquisitions when there is no direct change in um The Entity you know the and and let's say at a grandfather level there is a change in owners let's say another overseas buyer selling the company to another overseas buyer nothing changes at the Indian subsidiary level is there any impact uh on on on you know employees are there any consents anything that we should be keeping in mind so not an immediate requirement should be but uh I think for all our audience what is important is that uh don't just think that uh changes are happening at the grandfather level uh then there is nothing which is per se required because uh any change which may happen at overseas level may also entail few changes at the local level which may include uh change at the board level and when I say changes to the board of directors there may be a scenario where uh the question about uh change in occupier or change in ownership where you have a designated member of the board named as owner for the purposes of EPF act or ESI act uh some of those aspects are very instrumental and fundamental to uh transactions of this nature nature and apart from that another important point will be where you may want to align uh the current setup which employees are a part of with your Global policy perspective so if there is realignment of policy framework that is something which you need to see in advance as to where things lie and I'm talking about both monetary as well as non-monetary benefits and policy consideration so from the perspective of an indirect change where nothing is happening really effectively at the local level but employees may be proposed to be falling within the Ambit of larger policy framework that alignment is something which needs to be looked at from a softer Nuance standpoint and if there is anything which needs to be redrafted that is something which may be I would say more carefully dealt with because terms and conditions under those scenarios should not lead to any specific advanced notice requirements for employees who fall in the uh protected category I just spoke about workmen so that's something you need to be mindful of absolutely um this reminds my next question actually reminds me of a very interesting anecdote a friend was um looking for a change in a job and the prospective employer and she was negotiating her designation with the new employer and the new employer said you know don't worry about the designation you should worry about the role we are giving you is that true for uh business transfer Acquisitions when you talk of parity if there is a the role Remains the Same but if there's a change in designation from a potato to a potato do you think that impacts uh you know how you would look at things is is it does it mean that you're employed at the same terms if you're no longer uh given the same designation very interesting point and uh of course when it comes to transactions which are uh which involve India or are India focused uh I would say a substantive majority of Workforce are very uh sensitive towards the titles they carry as employees now a quick example of somebody who is currently carrying the designation of a vice president uh but uh when it comes to transition of their services the new designation will call them manager uh from a legal perspective no issues at all if if you are ensuring as a new employer that the remuneration structure the Quantum of benefits all of it is largely intact there may be some differences here and there but yes you need to ensure that there are no surprises and that is where on one of the slides if you see uh we have already captured that that point that if there is any different factor which comes into play for their continued employment with the new acquired entity the new employer that needs to be coming upfront the moment you have employees on boarded and then they are coming in uh for a surprise that their designation is undergoing change it is not about the law it is also about dealing with with the sensitivities of employees and this is a very minor issue but may tend to disrupt uh your business your operational Viewpoint from day one understood understood umel another question that we've got from our uh audience is uh it may be an academic question because my sense is that we deal with it practically but I want to understand what you think about it is um what if the employee the transferring employee has consented uh in a business transfer situation for a transfer but the um the transfery uh has not accepted it does it what what is the impact then I mean I think you and I know the answer but just for the benefit of our audience in a situation where the employee has consented for the movement from the transferer to the transferee but the transferee hasn't accepted his employment what are the implications so uh uh I think um this this aspect was covered word in uh very briefly in one of the slides but uh we it's the other way around if the consent is not there and uh the acquirer is ready to take on or on board the employee the transfer cannot be effectuated and in that case the provision of deem reten for protected employees who are workmen uh will be triggered but in this instance which you just spoke about will be uh uh we have seen it all there have been multiple instances where there could be a cherry picking of employees people have already accepted an offer are not being onboarded now in those scenarios speciically we are talking about the non-managerial Personnel people who are likely to fall within the category of workmen uh the deem retrenchment Provisions will come into play and that is where it is very important to have uh the necessary vage in the in the definitive agreements to determine who is going to be liable to to meet uh those those obligations to pay compensation to employees who may have consented to their transfer but not eventually being onboarded because ultimately they are at a loss and that's something which I I I spoke about in the beginning of the session that employees uh uh perspective should not be adversely impacted so the moment we are talking about a scenario where the employee is going to lose out uh on potential employment because of the deal which is on the Anvil in that case either you are accommodating the employee in a similar setup as the current employer or you uh look at the deem renement provision for non for managerial Personnel completely driven by the terms and conditions of employment at present notice salary and other benefits are required to be payable if you're not able to accommodate the managerial Personnel who are otherwise consenting to their transfer as part of the deal absolutely and and to just sort of add to that um in most m& transactions you know it's a condition precedent for the transfery to accept the employment because as you very correctly said if there are retrenchment Provisions that is an additional liability on the transfer uh account and the transferer would not want any of those so this clearly from a documentation perspective we as you know uh when we drafting that contract along with your team we ensure uh that there is an adequate condition precedent as well that is built into the uh document to ensure none of these situations U arise so thank you for that um Ando the next question is um you know in again you know most of our questions are with regard to business transfers because that's really the more complex aspect is U how does one deal with uh variations in employee policies such as you know leave entitlements gratuities uh various other things between a transferer entity and a transfering entity and I know in one of the earlier slides you mentioned that we have to look at it in totality but if there is a difference you know how deep do you go and how do you how do you then sort of in as an adviser how do you assess whether the policies are no less favorable when you talk of leave entitlements gratuities and things like that so I so SOI uh I think fundamental question this is something which we deal with at the outset uh for uh any business transfer uh transaction because the first suggestion first advice from our end is to ensure you look at uh all the policy considerations specifically the monetary uh uh benefits very carefully because if there is any difference uh on the fundamental Viewpoint of how you are Computing some of those benefits and especially I'm talking about gratuity and leave entitlements and I'm giving a very quick example in some of the instances leave entitlements uh are based on uh the basic salary in certain instances it is based on the full salary of the employee now there could be a difference of opinion between two entities the transfer entity observes full salary computation The transfering Entity says I will only compute on basic I won't get into the legal implication of that but this is something which you need to assess well in advance and if there is any difference of how you quantify uh these leave accumulation benefits uh as well as gratuity entitlements which could be uh going beyond what is stutely limited under the law then that needs to come up much in advance as part of the tripati documentation which is usually entered between the employees the transferer and transfere but yes it needs to be determined because it's not just about communicating to the employee it is also about determining the value of liability which you're going to assume and from the perspective of the transfering entity it becomes imperative that you already have it on record and you have conveyed to the employees and also for your Auditors to determine that not the liability Bas is what has been followed as a practice in the past but the liability which is based on my practice as the new employer so yes I mean it is there is no straightforward answer to it but largely dependent on how you are prepared in advance of a particular transaction when you're dealing with monetized benefits for employees who are proposed to be transferred uh absolutely um we're actually completely out of time and we have a bunch of questions um to deal with so maybe un just one last question before we wind up um in your experience more and this is more from a practical aspect I think you've been very comprehensive and you know uh elucidating the various legal and Technical aspects now maybe from a practical aspects um have you ever seen of a tough Trade Union uh when you know in their collective bargaining agreement they are not playing ball with the transfery entity and practically how do you deal with this I mean legally we know there is an agreement and there's a collective bargaining agreement and things like that but from a practical perspective because I know that you do a lot of that kind of work also uh you know practically handholding a lot of our clients in these issues but have you ever seen a scenario where a Trade union or let's say a category of employees are uh sort of acting difficult and that is that can have the potential of delaying the deal or delaying deal closure no I I think uh this is very important uh for any party uh to the transaction to to assess uh how the trade unions can play an important role in either streamlining or disrupting your operations uh from the perspective of effectuating this deal and uh yes we have seen instances where trade unions can act very difficult and communication there is nothing always legal about it but communication becomes the key factor here uh in several instances parties have probably undermined uh the strength of trade unions of let's say the on the premises or even locally where they have joined hands with the umbrella T Union organizations or federations to come up with specific concerns on how the employees are eventually going to move and there could be situations where you don't hold dialogues or discussions with the office bearers and they will allege that they have been kept in dark on what exactly is on the anval for the workers either they are affiliated to the Trade union or even for non-unionized Workforce what exactly is on the Anvil so the idea is not to just look at it from a myopic Viewpoint of how we are dealing with this these factors from HR perspective but also taking the unions into confidence is equally important and yes last point is about Charter of Demands which which may be ongoing or which have already been negotiated the moment you step into the shoes of the establishments which currently employs these unionized workers you need to take those agreed Charter on demands uh on record to say that uh there is no change in the core terms and conditions of service for these workers who are proposed to be transition from one entity to another all right thank you anul uh so much for this U I'm completely out of time um uh we won't be able to take all of the questions but be rest assured we will um you know respond to each of them separately um to just sort of summarize unel the way I sort of see this entire human capital issue and m&a transaction the three or four main takeaways for me as an m&a lawyer first and foremost is his homework is the KE key we must not leave employment issues as an issue to be dealt with uh later in the day uh you know when you're making your list of four or five uh critical issues for an m&a deal one must assess how critical uh the employment issue is and we must do our homework uh I think the key is an early identification and that goes a long way in smooth transitioning the second is uh a certain Le in liabilities and factoring those in the cost sheet whether through an acturial valuation Financial uh due diligence legal due diligence understanding where the pitfalls are what the non-compliances are what is the cost for transitioning those employees maintaining parity in terms of employment and the third and most important thing that I think you mentioned in your concluding remarks as well is constant interaction back channeling communication uh you know I think at the end of the day uh any inorganic growth is a key point for both transferer and transfery companies it leads to uh you know very justifiable insecurity issues it's important for for uh you know the key players on both sides to constantly interact with the employees and to tell them that their concerns will be taken care of one way or the other so don't um so don't leave employment issues uh uh as a segue please deal with it as an important and integral part of uh m&a transaction I been doing that and uh I only find that more I interact with my uh employment colleagues from an's Team the smoother things are for me uh when I proceed uh thank you so much anul for taking the time out uh before we close uh may I request our audience to please take some time out and respond to the poll slide PR if you can just project the poll slide um we take your feedback uh very very seriously it helps us curate our Pro programs for the future the Improvement that you've seen over our uh over the years and months in our m&a Academy programs are all thanks to your feedback so please do give us honest and constructive feedback um thank you everyone um uh for taking the time out and joining us for this webinar thank you for your feedback for your questions uh anel thank you to you and your team who worked uh to get this presentation uh in a very suent and precise manner uh to us we enjoy bringing these webinars to you keep your suggestions coming let us know what more we can do to make these sessions meaningful um after the webinar we will of course uh send our audience a copy of today's 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