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Newsletter: The sound of silence

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Late salary payments are nothing new for some lawyers.

"It's a regular feature at some firms and the reason is that the managing partner might not feel like signing cheques on some days," muses one Delhi partner.

That does not appear to have been the case at FoxMandal Little (FML), where its Delhi office now owes salaries to associates and partners for almost two months due to cash-flow difficulties.

The issue of lengthening debt collection cycles is real for many Indian and international firms but the bigger problem for FML is arguably its internal culture.

FML has gone through a heavy and highly visible period of investment, setting up new offices in India and London, hiring numerous associates, paying top-of-the-market salaries, opening a legal process outsourcing (LPO) arm and even mulling expansion plans to places such as Japan and the Middle East.

In many ways it was a transformational period and during the boom years almost everyone at the firm will have benefited. But when things turn sour the buck tends to stop right at the feet of the managing partners.

Comments from what appeared to be FML lawyers venting frustration poured in on LegallyIndia.com, until the firm temporarily blocked access to the site on Tuesday afternoon to stem the flood. A sensible move in hindsight, as some comments had begun having precious little relevance to the issue at hand.

Most telling, however, is that the firm was genuinely taken aback by the hostility in its rank and file.

It appears that few, if any, FML partners and associates had raised serious criticisms about the non-payment of salaries until last Tuesday.

The real danger for a firm is to let such sentiments continue to simmer quietly until the kettle blows.

FML held an emergency partners' meeting yesterday and the firm's top priority is to fix the immediate problem as soon as possible.

Apart from chasing outstanding bills the firm is considering re-mortgaging or selling existing property, although the fall in real estate markets will not help. It is also actively scouting for longer-term solutions to bridging future cash-flow gaps by securing bank finance and overdrafts.

The problem is that these facilities are not something that Indian banks have traditionally extended to law firm partnerships, unlike in the West where many firms operate on overdrafts as a matter of course.

Nevertheless, there is little doubt in anyone's mind that FML can survive and flourish once it has taken care of its troubles.

And if it plays its cards right it could ultimately emerge stronger - at the very least culturally.

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Law students are apparently not taking any hits on their wallets lying down, as NUJS has almost doubled some of its tuition fees.

In deals news, Indian firms are reaping the rewards of a boom in Indian project finance, sitting pretty at the top of global league tables.

The capital markets too have been gone wild in the past few weeks as Indian companies are desperately trying to cash in on the recent bull run. And one of Clifford Chance's strategic hires from Amarchand one year ago is already starting to make a lot of sense.

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