The Hindu Business Line : Lid off the modern Pandora’s box

August 9, 2007, was the date on which the lid came off the modern version of Pandora’s box, write Larry Elliott and Dan Atkinson in The Gods that Failed: How Blind Faith in Markets has Cost us our Future ( www.landmarkonthenet.com ).

That was when the financial markets wobbled, with the Dow Jones industrial average losing almost 400 points, the authors chronicle.

“After all, the Dow had closed at an all-time high of above 14,000 only three weeks earlier after the Fed had given reassurance that there would be no contagion effects to the rest of the US economy from the problems in the US sub-prime mortgage market.”

The book traces ‘Pandora’ to the giant French bank, BNP Paribas.

“It announced that it had blocked withdrawals from three investment funds because of what it called the ‘complete evaporation’ of liquidity.”

Everyone, including the European Central Bank and the US Federal Reserve, tried ramming the ‘lid’ back in place, but in vain…

Engaging account.

Your money, your destiny

Take control over your own money, your own destiny. This is an important lesson that Greg Norman learnt after paying the price for not giving closer attention to how other people handled his affairs.

“It’s fine to delegate, but if you don’t stay well informed, especially about your financial matters, you put yourself at risk,” advises an essay about Norman in Entrepreneur Power Plays: How the

World’s Most Dynamic Thinkers Reach the

Top of their Game ( www.tatamcgrawhill.com ).

Norman, the athlete-turned-businessman whose ‘empire runs the gamut from golf course design to wine,’ generally takes a long view and protects his brand image.

“Norman limits his financial risks by not investing much of his own money in new ventures,” the essay informs.

“He understands that his brand is a powerful enough asset that he can attract partners by lending his name, not his money.”

Instructive read.

Tax-planning ideas

Before a partner retires from the firm, you revalue the firm’s assets and pay the partner his share of the revaluation increase.

Now, does this transaction attract capital gains tax?

“No,” say George Koshi and V.K. Subramani, as one of the hundred tax-planning ideas.

“Transfer of shares in a company in exchange for shares in the amalgamated company is not regarded as transfer if the amalgamated company is an Indian company. However, for the shares exchanged the consideration must only be in the form of shares in the amalgamated company,” reads another tip in

Taxation of Capital Gains ( www.taxmann.com ), based

on a verdict delivered in the

Gautam Sarabhai Trust case.

The authors also cite related judgments, where it was held that the consideration can consist of shares, debentures or cash etc.

Reference material of value.
How markets work

The professional private equity fund is a relatively recent phenomenon in India, write Ajay Shah, Susan Thomas, and Michael Gorham in India’s Financial Markets:

An Insider’s Guide to how

the Markets Work ( www.books.elsevier.com ).

The first private equity capital inflows into the country were by multilateral agencies like the World Bank in partnership with the Government of India, the authors narrate.

“The entry of the first foreign private equity funds was in the second half of the nineties. Their participation in the industry rode on the back of the global IT boom, where IT in India was viewed as the prominent funding opportunity…”

For the discerning professionals.
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D. Murali

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