The Hindu Business Line : Move to amend Press Note 18 — FICCI for `sunset clause' with five-year cooling-off period

Corporate - Alliances & Joint Ventures
Government - Policy

Move to amend Press Note 18 — FICCI for `sunset clause' with five-year cooling-off period

Our Bureau

New Delhi , Dec. 9

THE Federation of Indian Chambers of Commerce and Industry (FICCI) has said that the Government's move to amend Press Note 18 should be accompanied by a `sunset clause', allowing for a cooling-off period of five years.

This, according to the Chamber, would ensure that the Indian joint venture partner is not left in the lurch if the foreign company chooses to enter the same or allied business independently.

"Such a provision would be in consonance with the spirit of the press note," the Chamber said in a statement issued here on Wednesday.

It is pertinent to mention two major settlements that have been made satisfactorily between Indian and foreign partners, both having a five-year understanding on continuation of technology commitment and model, the Chamber stated.

The Indian industry, the Chamber said, would be well advised to use the templates in the joint venture agreements drafted in US, which include a `conflict-of-interest' clause defined by a cooling-off period that prevents the technology provider from rocking the boat and leaving the technology receiving company in difficulties. Such joint venture agreements inevitably provide for a cooling-off period, even after parting of ways in an orderly manner, so that the brand name (trade mark) created by the joint venture cannot be instantaneously exploited by the newly-formed company, FICCI has pointed out.

Further, a 5-year cooling-off period would tantamount to giving the Indian partner in joint ventures reasonable period to recoup and reposition itself.

In the case of new joint venture, FICCI would like to urge the Indian industry to be cautious and ensure the insertion of a `conflict-of-interest' clause so that the existing Indian companies do not get `Frankensteined' later.

FICCI has said that it must be recognised that Press Note 18 corrected a serious policy anomaly that could have ruined the future of many small shareholders, weakened some major financial institutions and brought disaster to hundreds of Indian private promoters.