PE/VC Deal Making: Current Trends And Legal Risks

After a brief phase of uncertainty, PE/VC investments have shown exponential growth in the Indian market. If numbers tell a story about the growth in this segment, PE/VC investments were 62 percent higher than in 2020. While experts believe that the trend is positive and is likely to continue, the mantra for ease of investing would entail identifying the risks associated with PE/VC investments for an investor. 

Why identifying risks is mission-critical?

The growth of the three trillion Indian economy has been by and large, steady. But reaching the benchmark of 10 trillion in the next 10- 15 years entails filling the gaps and improving the climate for investors in the PE/VC space

To put things in perspective, a private equity investor contributes to the capital of a company and gets certain rights in lieu of the investment. Now, in the Indian context enforceability of the rights is a contentious issue. For instance, the enforceability of a contract in India in the lowest court of jurisdiction takes around 4 years as opposed to one year in a major foreign jurisdiction. 

While the enforceability of a contract needs streamlining, the enforceability of rights is a problem too. The Zee case is a prime example of an investor’s predicament where the minority shareholder was unable to call a shareholder’s meeting.

So enforceability of contractual and statutory rights are risks that need to be looked at from a reform perspective. The trends in the PE/VC space are on the plus side, however for investments to multiply and move towards the desired projections, it is imperative to address the risks.

Watch Mohit Saraf; Managing Partner, Saraf And Partners; Seema Jhingan, Partner and Co-founder, LexCounsel Law Offices; Dipti Lavya Swain, Managing Partner, DLS Law Associates,  Anish Jaipuriar, Partner, AKS Partners; Kunal Tandon, Legal Counsel Delhi High Court and Supreme Court of India; Managing Partner, Tandon & Co, talk about trends and risks in PE/VC space at BW Legal World Global Legal Leaders Summit on the link below.