Thursday, October 24, 2013

Sweat Equity - ESOP

SWEAT EQUITY (SE) AND EMPLOYEE STOCK OPTION SCHEMES (ESOP) IN
UNLISTED PRIVATE COMPANIES

WHY SE OR ESOP?

When a company is newly formed or starts a new line of business, the company
engages the best executives and employees available, who bring in their know-how, skill
and expertise with them which adds great value to the growing enterprise. Certain key
professionals would like to invest in the company’s capital and would like to risk their
own contribution to the capital of the company along with their own IPR, know-how, skill
and expertise. The shares issued to such employees (either at a discounted price or
against the know-how contributed) are given the nomenclature “Sweat Equity”.

On the other hand, as the company grows, the management would like to see that their
core management team remains with them and further, such core management team is
given additional incentive as a reward for the efforts put in by them in managing the
company. Such employees are offered ESOP at a price which is less than the market
value of the share. ESOP is to recognize loyalty and / or performance and a good
employee retention tool.

1. SWEAT EQUITY SHARES
Issue of sweat equity shares is governed by the provisions of Section 79A of the
Companies Act, 1956. This section is applicable to both private limited as well as public
limited companies. Explanation II to the said Section defines the expression sweat
equity shares

“to mean equity shares issued by the company to employees or directors at a discount
or for consideration other than cash for providing the know-how or making available
rights in the nature of intellectual property rights or value additions, by whatever name
called.”

It is, therefore, necessary for the issue of sweat equity shares that the concerned
employee either provides the know-how, intellectual property rights or other value
additions to the company.

In terms of the said Section, a company may issue sweat equity shares of a class of
shares already issued, if the following conditions are satisfied:

(a) Such issue is authorized by a special resolution of the company passed by the
shareholders in the general meeting;
(b) such resolution specifies the number of shares, current market price, consideration, if
any, and the class or classes of the directors or employees to whom such shares are to
be issued;
(c) Such issue is after expiry of one year from the date on which the company was
entitled to commence business; and
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(d) Such shares are issued in accordance with the prescribed guidelines referred to in
section 79A i.e. The Unlisted Companies (Issue of Sweat Equity Shares) Rules,
2003.
The Rules inter alia provide the procedure to be followed by a company issuing sweat
equity shares for consideration other than cash. Some of the key Rules are enlisted
below :


Rule 2(v) defines the expression ‘value addition’. The said Rule reads as under :
"(v) ‘value addition’ means anticipated economic benefits derived by the enterprise from
an expert and/or professional for providing the know-how or making available rights in
the nature of intellectual property rights, by such person to whom sweat equity is issued
for which the consideration is not paid or included in :

(a) the normal remuneration payable under the contract of employment, in the case of an
employee, and/or
(b) monetary consideration payable under any other contract, in the case of non-
employee."
The term ‘know-how’ is not restricted to technical know-how but can extend to practical
knowledge, skill and expertise. Hence, imparting practical
knowledge to the company would be considered as value addition.


Rule 6 restricts the issue of sweat equity shares in a year to 15% of the total paid-up
equity share capital or shares of a value up to Rs.5,00,00,000/-(Rupees five
crores only), whichever is higher. If this limit is to be exceeded, the same is required
to be done with the prior approval of the Central Government.
The approval of the shareholders of the Company must be obtained by a separate
special resolution if the issue of shares to the identified employees and Directors is
equal to or exceeds 1% of the issued capital of the Company (excluding warrants and
conversion) in a year at the time of grant of such sweat equity shares.

If the Company intends to formulate the scheme for the issue of equity shares with no
voting rights it has to be verified whether the charter documents of the Company i.e. the
Memorandum or Articles of Association has provision for the issue of equity shares with
differential voting rights. For the purposes of issue of Sweat Equity with differential voting
rights, the Company has to ensure that equity shares of the particular class with
differential voting rights have been issued prior to the issue of Sweat Equity shares of
such class.


Rule 8 prescribes that the issue of sweat equity shares to employees and directors
shall be at a fair price calculated by an independent valuer.
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Rule 9 provides that where a company proposes to issue sweat equity shares for
consideration other than cash, it shall comply with the following:
(a) The valuation of the intellectual property or of the know-how provided or other value
addition to consideration at which sweat equity capital is issued, shall be carried out by a
valuer;
(b) the valuer shall consult such experts, as he may deem fit, having regard to the nature
of the industry and the nature of the property or the value addition;
(c) the valuer shall submit a valuation report to the company giving justification for the
valuation;
(d) a copy of the valuation report of the valuer must be sent to the shareholders with the
notice of the general meeting;
(e) the company shall give justification for issue of sweat equity shares for consideration
other than cash, which shall form part of the Notice sent for the general meeting; and
(f) the amount of sweat equity shares issued shall be treated as part of managerial
remuneration for the purposes of Section 198, Section 309, Section 310, Section 311
and Section 387 of the Act, if the sweat equity shares are issued to any whole time
director or manager and they are issued for non-cash consideration, which does not take
the form of an asset which can be carried to the balance sheet of the company, in
accordance with the relevant accounting standards.
However, these sections are not applicable to a private limited unless it is a
subsidiary of public limited.

In case of issue of shares to an NRI, apart from compliance with Sec. 79A including
valuation of IPR/know-how etc., the Company needs to obtain FIPB approval, since
shares are issued to non-residents without receiving FDI.

2.
EMPLOYEE STOCK OPTION SCHEMES
ESOPs refer to various schemes of offering an equity stake by a Company to its
employees. The stake may be in various forms such as allotment of shares, grant of
stock options that entitle the employee to acquire shares in the future, or simply by way
of rewarding an employee based on the appreciation in the value of the shares.

In other words, Employee Stock Option Scheme means an option but not obligation
reserved in favor of employees by the Company to subscribe to the equity shares of the
Company at a pre-determined price and at a future date.

Unlike public companies, private companies are not bound by specific regulations as
relating to the formulation and operation of an Employee Stock Option Scheme for the
employees of the company. A private company can set up an Employee Stock Option
Scheme in two ways:

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a.
Creation of Trust: A Trust can be created by the company by appointing a
Trustee with a power to hold the shares/options in Trust for the employees who
can subscribe to the shares reserved at a later date and at a pre-determined
price. The Trust can assist the employee to obtain financial assistance to buy the
shares from the company from financial institutions, banks or others.
b.
Directly to employees: The company can formulate a scheme of ESOP wherein
an option can be reserved in favor of the employees to subscribe to the shares of
the company at a future date and at a pre-determined price.
A private company can formulate a scheme by providing the rules governing the ESOP
including but not limited to the eligibility criterion required of the employees to subscribe
to shares at a future date, the pre-determined price, the nature of equity shares forming
the subject matter of the option, the exit mechanism etc.

Treatment of SE and ESOP under Income-tax Act, 1961:

From A. Y. (Assessment Year) 2001-02 up to A.Y.2007-08 ESOPs were not taxed at the
time of grant or exercise. As per proviso to S. 17(2)(iii), value of benefit arising out of
allotment of shares, warrants or debentures free of cost or at concessional rate under a
scheme of stock options in accordance with guidelines issued by the Central Govt. is not
treated as perquisite. Transfer under a gift or irrevocable trust of shares, warrants or
debentures allotted under a scheme of stock options would attract capital gains. The
market value of such shares, etc. would be treated as full value of consideration of such
transfer.

From A. Y. 2008-09 up to A.Y. 2009-10, the ESOPs were subjected to FBT:


ESOPs were subject to Fringe Benefit Tax (FBT) at the time of allotment or transfer
of shares on the excess of fair value as on the date of vesting and the Exercise Price
[S. 115WB(1)(d),S.115WC(1)(ba)];

The value on which the Employer pays FBT is treated as cost of acquisition in the
hands of the Employee [S. 49(2AB)]; and

The Employer can recover FBT from the Employee if scheme is suitably modified
and the recovery of fringe benefit tax is deemed to be the tax paid by such employee
in relation to value of fringe benefits provided to him. However, the employee is not
be entitled for any refund out of such deemed payment of tax and is also not be
entitled to claim any credit of such deemed payment of tax against tax liability on
other income or against any other tax liability [S. 115WKA, S.115WKB].
Perquisite taxation of ESOPs :

The taxability of ESOPs under the FBT regime received a lot of criticism from the
corporate sector as well as tax experts. This was on account of the fact that it required
the employer to pay tax on a benefit clearly identifiable and accruing to the employee.
Also the value of the benefit had to be computed in relation to a future valuation of the
share, determined by market, rather than a value controlled by the employer.

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Further, the FBT paid by the employer was not a tax deductible expense leading to a
much higher post-tax expenditure. Taking these issues into consideration, the Finance
Minister has abolished FBT and again brought ESOPs within the ambit of the perquisite
tax regime. Now ESOPs are being taxed as perquisite in the hands of employees on the
date of exercise. The benefit would be computed as the difference between the Fair
Market Value (FMV) of the shares on the date of exercising the options and the exercise
price. It would be interesting to note that the Finance Minister has not reverted back to
the pre-FBT regime of ESOPs being exempt from perquisite tax if they qualified as per
the erstwhile Central Government (ESOP Guidelines). Instead, the treatment is identical
to the ESOP tax regime during the period 1 April 1999 to 31 March 2000. The amended
provisions are effective from 1st April 2009. Any exercise of options on or after 1 April
2009 are now being taxed as perquisite in the hands of the employees. Further, for the
purpose of computing capital gains, FMV on date of exercise would form the cost basis.

The relevant provisions, as on date, are briefly reiterated hereunder:


Any benefit from ESOPs would be taxed as perquisite in the hands of the employees
on the date of exercise, at the difference between the FMV of the shares on the date
of exercising the options and the exercise price.

Any subsequent sale of shares by employees would trigger capital gains tax liability
in the hands of the employee. For the purpose of computing capital gains FMV on
date of exercise would form the cost basis.

The holding period of shares shall be reckoned from the date of allotment/ transfer of
the security. If such shares are listed on the Indian stock exchange, long term capital
gains tax liability will be ‘Nil’.
Conclusion:

In view of the various rules and notifications both under the Companies Act and under
the Income-tax Act, a proper reading and analysis of Companies Act, Income-tax Act
and Accounting Standards / Guidance Note of ICAI needs to be undertaken in order to
structure the schemes in a way that maximum benefit, both to the employer and to the
employee is achieved.

Under the Companies Act, ESOP and SE are separately defined and considered
separately in Section 81 and Section 79A, respectively.

The Income-tax Act defines only the ESOP and is absolutely silent on SE. However, on
reading of Section 17(2), one would notice that ESOP includes shares issued to
employees free of cost. Thus it can be concluded that under the Income-tax Act, ESOP
and SE are the same, though distinguished under the Companies Act.

Credit:
Vivek Hegde, Company Secretary in Practice
Divya Paras, Advocate

Wednesday, October 23, 2013

Lecture method - merit demerit

Lecture Method of teaching  - Merits and Demerits

Per se no method of teaching is good or bad. It is those people who teach whether in the field of education of law or any other subject make the difference in the ability of the students who grasp the subject. Certainly there are certain extra ordinary of them who do not need to be ‘taught’. But barring those exceptions, rest of the league have to be introduced to the subject with utmost gentleness and care.

The success of lecture as a method of teaching will therefore squarely hinge over to the on the lecturer who is teaching the subject.

For teaching in the field of law, it is imperative that the teacher should have grasp of both the theory and the practice of law. Although it is not that both are different but the manifestation with which the later projects itself bears the difference.

Understanding both good and bad lectures is important. Here they are...
First the bad lectures and then the good lectures...

Bad Lectures


- Talks too much about himself
- Spends talking about things extraneous to lecture.
- Does not come prepared
- The lecturer is not clear about the subject himself.
- Is too generalized in topics required technical approach.
- Remains annoyed with people who question or point flaws.
- Brags about his achievements.
- Tells or reminds students about how much he is helping them.
- Expects too much from others and prepares too little for himself / herself.
- Frequently gets annoyed or angry in class without any provocation or indiscipline from students.
Due to our lack of concern of our apprehensions of our career objectives being unnecessarily getting into controversies, we are sometimes mum or silent spectators to the fracas of bad lecture during the class.

The traits of bad lecture had been provided from somebody who has witnessed the lectures and here is his description provided:

Here is an example of how a lecturer may screw the subject. Peculiar characteristics of such lecturers are that they boast too much about themselves and they are too focused on their attributes of intelligence and wit which is totally lacking. So when the lecturer says that he is too good in the subject or how people of high profile are in touch with him or that he is being called to various places to speak then that posits a first sign of lecturer’s inability and parade of his ignorance on  the subject.

Such lecturers mostly they spend first one or two lecturers talking about the course and the college activities and other lecturers. They even try to glorify the subject and explain you how ‘hard’ the subject is. They then will proceed to explain you that the exams are nearly intimidating. These lecturers often come late but they insist you to submit your assignments in time. They expect all sorts of qualities that they do not have but which you should have. For example I had recently attended a lecture by a boy who had just completed his masters degree, for the sake of convenience we can all him Mr. Aimless. Mr. Aimless had been first teaching the subject of Judicial process in the class. So when he started off the subject he started by saying that the Judicial Process was a very tough subject. It was concerned with Roscoe Pound, Protagoras, Salmond, Socrates, Cicero and on and on he went to mention the names and only the names all those jurists. Then the rest of his speech (constituting 99 percent of the time) was something like this:

You know that the judicial process is indeed a very tough subject. But if you understand the meaning of two words you can in fact go straight to the exam to write the answers. Your general knowledge about the politics in this place or any other field will be good enough to explain the subject. You do not have to worry about what they ask since you have to present your views on the subject. Then you can also criticize Kant and tell how you differ from Kant. For example, take judicial process as a measure of social change, you can say that the municipal law needs to be changed. This is because there is lot of corruption and the roads are not clean. You know Mr.xxxxx when he was a member of the municipality he had made tall promises but did not actually abide. Next time when he came in our colony we taught him a good lesson. This is a process of social change...[he was known to have spent all of his session talking all this stuf of this sort.]

Same way this very Mr. Aimless had been allotted a subject on Intellectual property next semester. Since he had nothing to do with the subject, every time he would come to class and address something like this:

You know that intellectual property is about intelligence. We don’t have much of it so we are always copying. Last week ___ movie had been released. When I went to the market I was surprised to see that the movie that had just been released was being sold in CD and they were just costing Rs.30. Now if that is going to happen what is the police doing. We as lawyers should do something about all this. [...His examples of movies, picnics, parties were endless]

Then he would teach Exim Policy like this:

In Exim, foreign trade is very important. Therefore custom department plays a huge role. There are very big ports like Mundra and Kandla. Ships are very important. Ships travel throughout the world. There is a Merce line ship which is the largest ship in the world. Even tug boats look like babies against the ship. I have seen the ship and taken its photos. If you go to Mundra port they take x-rays and in a picnic when one of my friends tried to take a picture of the port, our entire trip had been cancelled. [...his meaningless chatter continued on and on...]

The teaching of Insurance would be like this:

Insurance from accidents:

The course contents required teaching of Fatal Accidents Act and the Personal Injuries Compensation Insurance Act. This is what had been taught:

Accidents are very fatal. Fatal accident means an accident that kills somebody. Last time on xyz Road when I had been traveling I saw that a car had crashed behind the tractor.... I had taken a relative to a public hospital and I fought with the doctor who admitted him... [This sort of teaching continued for all the term]


Then in case of Banking law, here is a brief abstract of some notes I had taken during the class. The lecturer was Mr.Ass Con:

You cannot close the bank account after opening it. VC is illegal ... the word ‘bank’ is a copyright word. Cost is increasing, vegetables are costly...getting a government job is a very good idea – you keep getting increments and you don’t have to worry about rising prices...India is the top class banking in world, we are number 1....in Gujarat people use nationalized bank and in Kerala private banks are used....ICICI is a private bank and it is so powerful that even if does not use the word ‘private limited’ nobody can do anything. ..more ATM will lead to more electronic transfers. E-transfers means that the need to print actual money will lessen and due to this the inflation will go down... 

[now the self applause in banking class.. this consumed about 75 per cent of time.]...
I am very good in the banking subject. I am on panel of 25 banks and all of them pay me 50000 a year. You know that is because of my extraordinary ability . I had drafted a power of attorney that is not accepted in embassies world wide. That is not a small thing. Take interest don’t pass time. Stay back week ends. I used to spend most of my time in library and I used to write novel things. In PHD I had been questioned by a panel of six people and all were impressed...[...self appreciation continued for rest of the time.] you people can’t write a sentence and look at me how have I written 800 pages of thesis...The seniors will simply screw you if you think that things are very easy. .

No offenses intended, but that is what a bad lecture is. Here are some attributes of a good one...

Good lectures:

The lecture can be an immensely effective tool in the classroom, allowing an instructor to provide an overarching theme that organizes material in an illuminating and interesting way. The instructor must take care, however, to shape the lecture for the specific audience of students who will hear it and to encourage those students to take an active and immediate part in learning the material. It is essential to see lectures as a means of helping students learn to think about the key concepts of a particular subject, rather than primarily as a means of transferring knowledge from instructor to student.
Preparing
During the Lecture
After the Lecture
Links and References
Preparing
Create a comfortable, non-threatening environment.
Introduce yourself and explain your interests in the topic on the first day. Encourage questions from the outset. For example, require each student to submit a question about the course during the first day or week. Students can submit these questions via an online discussion forum, such as that which is available on Blackboard; this assignment can also serve as a way for you to ensure that they have each figured out how to log on to a discussion forum that you are using throughout the course.

Incorporate visuals.

The human brain has independent processing streams for visual and verbal information (Baddely, 1992). Research has shown that dual-channel processing is better than single channel, or that learning can be improved when instruction includes both visual and verbal information (Mayer, 2005). Incorporating visuals into your lecture can help your students learn. However, make sure that each visual has a clear purpose, and design your visuals carefully. For example, reduce or eliminate extraneous information, highlight key phrases or ideas, and place keywords in close proximity to the graphics they describe. Each of these strategies can enhance learning when using visuals (Mayer, 2008).

Reset the "attention clock": Include opportunities for active learning.
Most university classes last 50-90 minutes, much longer than the attention span of a typical student. Sustained attention varies widely, and the quality of attention depends on several factors, including time of day (DeYoung et al., 2007; May et al., 1993), motivation and enjoyment (Freitas and Higgins, 2002), and emotion (Reisberg and Heurer, 2004). However, active-learning activities may "reset" your students' "attention clocks." A recent study of student attention (Bunce et al. 2010) found that students reported fewer attention lapses when instructors were using active-learning methods (a demonstration or a question) compared to those reported during lecture segments. The researchers also found that there were fewer reported lapses in attention during lecture segments in the period immediately following active-learning methods, when compared to lecture segments that preceded these methods. This finding hints at the possibility that active learning may have dual benefits: engaging student attention during the segments when faculty use these methods and "refreshing" attention immediately afterward. (For more information about this study, see our review article on student attention.)
Organize the lecture like a good speech, with a clear structure and “signposts” marking key points and transitions.

As Barbara Gross Davis suggests, you should “prepare your lecture for the ear, not the eye” (104). Use short, straightforward sentences and informal diction. Include transitions and “signposts” that will help your students follow the sequence of your lecture. Plan to summarize and ask questions at several points throughout the lecture to help ensure that students have grasped key concepts.
The lecture should have a clear structure, with a beginning, middle, and end. It should relate back to the previous lecture. The lecture should have an overarching theme or objective that fits the course as a whole.
Prepare notes that will serve as a “road map” rather than a script to be read verbatim.

Notes that are too comprehensive will take your attention away from the students. Instead, write down key concepts and examples, including any essential details such as formulas, dates, or other information. Use color and other cues to mark those points that are most important and to signal when you will use the board or other aids. Experiment with different formats until you find one that works for you. Include notes of moments when you will pause for questions or ask students to solve a problem applying the concept you have just presented.

If you are a professor who is working with Teaching Assistants (TAs), communicate with the TAs frequently to ensure coherence between lectures and TA-facilitated sessions such as discussion sessions, recitations, and office hours.
It is essential that TAs understand your expectations of their roles in assisting with the teaching of the course. Consider defining clear objectives for the time that they spend with students in discussions, recitations, and office hours. Speak with them often about how to use this time to help students learn the material and about any problems that develop. Ask TAs to share their impressions of where students are getting lost or otherwise struggling with the material; students may be more likely to ask a TA for help if they are hesitant about approaching a faculty member.

Review and practice the lecture before class begins.

After writing the lecture, leave at least 30 minutes before your class to organize your thoughts and gather any material you need. Practicing the lecture will help you identify points where you will want to slow the pace, pause, or offer a summary or a question.

If you plan to use audiovisual aids or instructional technology, do so with care and preparation.

Use audiovisual aids and instructional technology only when doing so contributes to student learning. Seek out any training you need to master the use of equipment and technology. Seek out advice from The Teaching Center and your colleagues on why and how you might integrate technology with more traditional tools to improve student learning. Practice using these tools so that you can integrate their use smoothly into the lecture. If you are using PowerPoint, be careful to limit the amount of information you include on each slide so that your lecture, rather than the PowerPoint, is the focus. (For additional guidance on using PowerPoint and other visual aids, see Improving Presentation Style.) If you are teaching in a University-managed classroom, you may call The Teaching Center at 935-6810 to schedule a multimedia training session.


During the Lecture
Interact with your students.
Arrive to class early, especially on the first day, and greet students who are already in the room. Students will feel more comfortable asking you questions and will feel more engaged in the topic of the course if they have an opportunity to interact with you in this way. If time does not permit for students to approach you for questions before or after the lecture, encourage them to see you during office hours.

The more an instructor interacts with the students during a lecture, the more active the learning will be. The judicious use of questions throughout a class session can move the lecture forward, engage the students, increase the use of higher-order thinking processes, and make the lecture more interesting.
Provide students a clear sense of the day’s topics and their relation to the course as a whole.

Write an outline on the board before class begins. This strategy will help students organize the material you are presenting. An outline can also help students when they are studying to identify ideas and connections that they did not grasp during the lecture itself.

Take time at the beginning of class to connect the day’s ideas, concepts, or problems to material that you presented in the previous class and to the overarching themes of the course.
Show passion for the subject.

Tell students what you find fascinating about what you are teaching. If you are teaching a course that you have taught many times, recall what is interesting about the subject to someone learning about it for the first time. Find new applications and examples that will enable you to communicate why the topic should be studied and understood.

Focus on communicating with your audience: speak clearly, so that all students can hear you.

Project your voice. When lecturing in a large room, use a microphone. Ask students to tell you if they cannot hear you; some may feel too intimidated to speak up unless you ask. Speak with an animated tone, but more slowly than you would in an informal conversation. (See Improving Presentation Style).
Use gestures, eye contact and movement around the room to engage student attention.
Make eye contact with students in all areas of the room, not just with those students who routinely answer your questions or otherwise appear engaged.
When asking questions, do not be afraid of silence.

Give students 5-10 seconds to think and formulate a response. If 10-15 seconds pass without anyone volunteering an answer and the students are giving you puzzled looks, rephrase your question. Do not give in to the temptation to answer your own questions, which will condition students to hesitate before answering to see if you will supply “the answer.” Patience is key; do not be afraid of silence. The longer you wait for students to respond, the more thoughtful and complex their responses are likely to be.

Demonstrate respect for, and interest in, student ideas and questions.
Make it clear that you are interested in what and how students are thinking about the material. Show that you value their questions and insights by referring back to these responses later in the lecture or on a subsequent day. This strategy is especially important in a large group. It is common for students to be very sensitive to an instructor’s reaction.
Return to top.
After the Lecture
Rethink, retool, revise.

Each time you deliver a lecture, you learn something about how best to present the material. Jot down brief notes on how each lecture went and use these as the basis for improving your presentation skills, rethinking the material included, rewriting the lecture, or developing ideas for future teaching and research projects. Include these notes with your lecture notes so that they are readily accessible the next time you teach the course.

Speak with your colleagues about their approaches and ideas. Stay abreast of new scholarship on teaching and teaching with technology. Arrange to have one of your classes observed or videotaped so that an observer can help you evaluate what went well and what you can do to improve student learning. To schedule a class observation or videotaping, contact The Teaching Center at 935-6810.

Lectures are the major teaching method employed in many academic departments and schools. As you reflect on how best to prepare and deliver lectures, keep in mind that a primary goal should be to foster critical thinking and active learning.


Demerits of Lectures

Notwithstanding the apparent benefits detailed above, newer approaches to teaching and learning, such as problem-based learning, are increasingly being introduced on the grounds that, even for an equivalent investment of staff time, the learning outcomes of students are far improved. The use of techniques that aim to involve a greater amount of student involvement is of course nothing new. Tutorials, seminars and other variations on student-centred learning have long been used to complement lectures. However, the justification for abandoning or reducing the number of lectures on a course typically focuses on two criticisms: that lectures are a poor medium, first for conveying information and second for developing student understanding.

Conveying information to students

Are lectures an efficient means of conveying information to students? According to Miller (1956), the average number of items that can be held in short-term memory is 7 (±2). Therefore, if students do not have significant time to process new information one of two things happens, either previous information is displaced or the new information is lost. Lectures which proceed quickly simply do not give students sufficient time to process information. Similarly, the ability to concentrate for an hour or so while taking adequate notes is not something that can be taken for granted. Indeed, listening and note taking can be mutually exclusive activities, especially for more inexperienced students. It cannot be assumed that an hour-long lecture will result in an equivalent sum of learning taking place within a student’s head.

This problem can be compounded by the problems of a crowded curriculum. As new theories, research findings and policy initiatives emerge, space has to be found within the syllabus to accommodate them, and not always at the expense of existing content. If more and more content is crammed into a series of lectures it may encourage the lecturer to do little else but talk from the front from start to finish. The logical consequence of such practice is that the pace of lectures is forever quickening to ensure that the expanding syllabus is covered. A lecture could hardly be considered successful if it 'covered' the appropriate part of the syllabus and yet students retained little of what was said or were not guided in their private study.

Students are also more likely to remember information when it is structured in a logical fashion and if it is demonstrably meaningful to them. This again highlights the important of context to learning. Students need to comprehend why they are being taught what they are and how they will subsequently be assessed on it.
Developing student understanding
To judge the 'success' of a lecture, it is important to identify its intended learning outcomes. A lecture could hardly be considered successful if it 'covered' the appropriate part of the syllabus and yet students retained little of what was said or were not guided in their private study. Learning outcomes are often specified in module or course descriptors or handbooks. However, caution should be exercised in judging the success of a lecture against them, since these parts of the documents have often been prepared to meet university or QAA requirements, and compliance in this process by lecturing staff does not necessarily mean that the specified learning outcomes are the most appropriate or are even the ones that the lecturer would choose to identify.

In addition, whilst a lecture's success should be judged in terms of what students gain from it, it does not follow that lectures which students consider successful are necessarily good lectures. Students may prefer lectures that allow them to take notes which can be used directly in preparing for examinations or other forms of assessment. If their objective is to maximise marks subject to a time constraint, or to minimise time commitment subject to achieving a target mark, then this will almost certainly be the case. Similarly, a lecture might be very entertaining, and for that reason popular with students, and yet be a poor learning medium for students. Students are also likely to show a preference for the teaching format they are familiar with, as is equally the case with lecturers.

Assessment is clearly an indicator of student learning and hence of the success of lectures. But even if it were possible to separate the contribution of lectures from other learning media to assessment performance, the assessment itself may not capture the extent to which students have acquired and developed an understanding of the subject matter. To gauge this it is necessary to consider a theory of learning first developed by Marton and Säljö (1976a, 1976b) and since elaborated by Ramsden (1992), Biggs (1987, 1993) and Entwistle (1981). In these studies an important distinction is made between surface, strategic and deep learners. Surface learners are characterised as focusing on memorising words, formulae and theories rather than building relationships and connections. Surface learning is encouraged by:

• A heavy workload;
• An excessive amount of course material;
• A lack of independence;
• Assessment methods that emphasise recall and create anxiety;
• Poor or little feedback on progress; and
• A lack of interest in the subject.
Deep learners seek to relate theory to practice in a range of different contexts. They are able to organise their impressions into a coherent whole rather a set of disassociated facts. Deep learning is encouraged by:
• A choice over content and study methods
• Teaching methods that build on existing knowledge and experience
• Active involvement in their learning
• Long-term engagement with the subject

Strategic learners will adopt whichever approach they believe will maximise their grades. If they believe, rightly or wrongly, that the form of the examination rewards memorisation of disparate facts, they will adopt a surface approach. If they believe that the examination will reward a holistic understanding of key ideas and how these apply in different circumstances they are more likely to adopt a deep approach.

Most students cannot be so readily pigeon holed, displaying characteristics from two or more categories at any one time and may change their preferences over time. Nonetheless this theory exemplifies the potential shortcomings of a wholly didactic model where it is assumed that what is not said is not learnt. The purpose of this chapter is not to debate at length the merit of this models (further reading references are provided at the end), but to establish that the intention of any economics course should be more than simply to allow students to adopt surface-learning strategies that promote the accumulation of transient non-contextualised knowledge.

Finally there is the issue of the diversity of ability and prior experience of students. This is especially a problem at level 1, where lecture groups tend to be larger, where some students are new to the subject and others have A' level Economics and/or Maths or equivalent, and where exit routes can vary from Single Honours Economics degrees to degrees where no further economics will be studied beyond level 1. How can a traditional lecture cope with diversity? To which students should the lecture be pitched? What back-up support will be necessary for the weaker students and what additional learning activities will stretch the stronger students?

Tuesday, October 22, 2013

Copyright

LAW GOVERNING COPYRIGHT In India the first Copyright Act was passed in the year 1914. At present, the Copyright Act, 1957 (hereinafter referred to as the Act) governs copyright law in India. The original Act of 1957 has been amended in the year 1983, 1984, 1992, 1994, and recently in 1999. No copyright exists in any work, except as provided in the Act (Section 16). Copyright is a creation of the statute. Unlike trade marks, there is no such thing as common law copyright. The moral basis for protection under Copyright law rests in the Eighth Commandment: “Thou shall not steal”. Philosophy of the Copyright law is: ‘The law does not permit one to appropriate to himself, what has been produced by the labour, skill and capital of another’. What is copyright? Like trade marks, a copyright is an intangible property. The subject matter of copyright, the thing protected is called a “work”. Copyright subsists throughout India in (a) original literary, dramatic, musical and artistic works (b) cinematograph film and (c) sound recording (Section 13). These terms are defined in the Act. Apart from these works, no other work is entitled to copyright under the Act. Section 14 of the Act defines a Copyright for the purposes of the Act. A Copyright means the exclusive right to do or authorise the doing of acts in respect of a work or any substantial part thereof. Which are these acts? Literary, dramatic or musical work: The owner has exclusive right to reproduce work in any material form including the storing of it in any medium by electronic means, to issue copies to the public, to perform or communicate the work to the public, to make cinematograph or sound recording in respect of the work, to translate or make any adaptation of the work. [14(a)]. Computer programmes: In addition to the above rights, the owner has exclusive right to sell or give on hire, or offer for sale or hire any copy of the programme. The Copyright (Amendment) Act, 1999 has added one more right; i.e., to sell or give on commercial rental or offer for sale or for commercial rental any copy of the programme. [14(b)]. Cinematograph film: A producer has exclusive right to make copy of the film including photograph of any image forming part thereof, to sell or give on hire, or offer for sale or hire any copy of the film, to communicate the film to the public. Sound recording: A composer has exclusive right to make any other sound recording embodying it, or offer for sale or hire any copy of the film, to communicate the film to the public. [14(e)]. Rights conferred by section 14 upon the author are the economic rights, because exploitation of the work by himself or by licensing it for royalty may bring economic benefit to the author. Object of copyright law is to encourage authors, composers and artists to create original works by giving them exclusive right for limited period to reproduce the work for the benefit of the public. It is a negative right to prevent others from copying their work. Term of copyright- (Sections 22 to 29) Copyright is not a perpetual right. It exists for a specific term. After the expiry of the term, the work falls in the public domain and open to public to use without permission of the owner. For literary, dramatic, musical and artistic works the term is 60 years from the death of the author; for photograph, cinematograph film, sound recording 60 years from the beginning of the calendar year next following the year in which it is published/ released. Who owns copyright? It has to be understood that the ownership of copyright in a work is independent of the ownership fo the physical material in which the work is fixed. Take for example, you go to a shop and buy “GOD OF SMALL THINGS”. You are the owner of the book; i.e., `the physical material in which the work is fixed’ and Arundhati Roy is the owner of copyright in the work (unless of course, she has already assigned her copyright to some publishing company). Author of any work is the first owner of copyright (Section 17) viz. Author of literary or dramatic work, composer of the music, artist or photographer in respect of an artistic work and a photograph respectively, producer of a cinematograph film or sound recording. When the work is computer generated, the person who causes the work to be created is the author. Section 17 of the Act provides situations where author is not the first owner of copyright (in the absence of the agreement to the contrary) e.g. when a photograph is taken, portrait or painting draw, or engraving made on in return of consideration, then the person giving the consideration is the owner; when literary, dramatic or artistic work is created by the author during the course of employment under a contract for service - employer is the owner. To illustrate: A shorthand writer is not the owner of the work, but the person who dictates is. The teacher writes a book during his employment, He is the owner since he is employed to teach and not to write. An employee of a solicitors’ firm drafts a document in the course of his employment - employer is the first owner of the copyright. For being the owner of copyright - is registration compulsory? The answer is in the negative. An author of the work becomes owner thereof, the moment the work is created. Registration is not necessary either for the subsistence or for the enforcement of copyright. However, the Register of Copyright is prima facie evidence of the particulars entered therein. (Section 48). It is advisable to register the copyright in the work. Assignment Assignment of copyright has to be in writing and signed by the assignor or by his duly authorised agent. (Section 19). Copyright is a multiple right, consisting of a bundle of different rights in the same work, which can be assigned or licensed either as a whole to one party or separately to different parties. For example, take any book say "“ONE WITH THE WINDE"”- separate right exist in the same work - viz. reproduction in hard back and paper back edition, right of serial publication in a magazine, right of dramatic version or cinematograph version, translation, adaptation etc. The deed of assignment must specify the `rights assigned’, the duration and territorial extent of assignment. When duration of assignment is not specified, it is presumed to be for five years and when territorial extent is not specified, it is presumed to extend within India (this presumption is applicable to assignments made after 1994). An assignment of a Copyright is exempted from Stamp Duty. (Article 25 of Schedule I of the Bombay Stamp Act, 1958). In the Deed of Assignment, assigning copyright along with some other property say trade marks, it is advisable to state as to what part of consideration is towards the assignment of copyright. Other rights In addition to Copyrights, the Act also recognises moral rights of the author, which exist with the author even after assignment of the work. These rights are - to claim authorship of the work; and to restrain and claim damages in respect of any distortion, mutilation, modification or other act in relation to the work, which is done before the expiration of the term of copyright, if such distortion etc. would be prejudicial to his honour or reputation. Extent of copyright protection In case of a published work the copyright will subsists in India if, the work is published in India OR if the work is published outside India - the author at the time of publication (if alive at that date) or at the time of his death is citizen of India. In case of an unpublished work, the copyright subsists in India if: The author at the time of making of work was a citizen or domicile of India. In case of architectural work, if work is located in India. International arrangements Copyright is granted only by the law of the country in which the work is created. Therefore, if copyright does not subsists in certain country, to prevent piracy in that country is impossible. To meet this problem conventions like Berne Convention and Universal Copyright Convention are formed. The Member States offer minimum copyright protection on reciprocal basis to the works originating in another member country. India is a member of both these conventions. Central Government has passed Universal Copyright Order, 1991 in exercise of right granted under Section 40, which empowers the Central Government to extend the copyright protection to foreign works. TRIPS (trade related intellectual property rights) Articles 9 to 14 of TRIPS deal with Copyright and related rights. Members are required to comply with Articles 1 to 21 of the Berne Convention. Article 9 states that Copyright protection shall extend to expression and not to ideas, procedures, methods of operation or mathematical concepts as such. After amendment to the Act in 1999, India has complied with all the requirements of said Articles. Computer software Much is being discussed about software piracy. Let us discuss some of the aspects of nature of the protection enjoyed by software. The term Computer software is very wide and includes: Preparatory design materials, e.g. flowcharts, diagrams, specifications, form and report layouts, diagrams, specifications, form and report layouts, designs for screen displays, etc.; Computer programmes (object code and source code) and other executable code; Software development tools, e.g. Relational database development systems, compilers, report generators, etc.; Information stored on computer media, e.g. conventional works such as literature, artistic works, music, etc. stored digitally, Database and data files; Computer output e.g. Sound, print-out, computer file or data, electronic signals; Screen displays; Manuals and guides (on paper or stored digitally); Programming languages. Depending upon the nature of the work, software is protected as artistic or literary work. In India, a Computer Programme is protected as a literary work. However, the debate is still on internationally as to under which head of Intellectual property computer programme should be protected - copyright or patent. Article 10 of the TRIPS reads: “(1) Computer programmes, whether in source or object code, shall be protected as literary works under the Berne Convention. (2) Compilations of data or other material, whether in machine readable or other form, which by reason of the selection or arrangement of their contents constitute intellectual creations shall be protected as such. Such protection, which shall not extend to the data or material itself, shall be without prejudice to any copyright subsisting in the data or material itself.” Indian provisions S.2(o) “literary work” includes computer programmes tables and compilations including computer databases. S.2 (ffc) “Computer programme means a set of instructions expressed in words, codes, schemes, or in any form, including a machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result.” Computer programme being a literary work - for being capable of copyright protection - it should be “original”. Originality for the purpose of copyright law relates to the expression of thought, but such expression need not be of original or novel form. To be original, the work must not be copied from another work but must originate from the author. To secure copyright the author should expend sufficient labour, skill, judgment and capital to impart the work some quality or character which the raw material did not possess and which distinguishes the work from the raw material. However, what is the precise amount of labour etc. which the author must bestow upon the work in order to acquire copyright cannot be defined in precise terms. Most computer programmes, however, small are result of skill and judgment and therefore entitled to copyright. However, there is a `De minimis’ rule in copyright i.e. trivial, insignificant or very small works are not protected. Protectability may depend upon the language used. E.G., to achieve the same result a programme written in one language may fall in the `De minimis’ rule but if written in another language be entitled to copyright. Infringement If any of the acts specified in Section 14 relating to the work is carried out by a person other than the owner or without licence from the owner or a competent authority under the Act it constitutes infringement of copyright. (Sec.51 of the Act). The type of acts, which will constitute infringement, will depend upon the nature of the work. Secondary infringement such as making for sale or hire of, exhibition in public by way of trade of, distribution - infringing copies - is also prohibited and punishable under the Act. Acts which do not constitute infringement of copyright Section 51 gives a list of such acts. Permitted acts can be classified as : fair dealing, educational purpose, library and archive use, use associated with public administration, certain acts carried out by lawful users of computer programme etc. In respect of computer programmes permitted acts allow lawful users to make back-up copies, to decompile programme in limited circumstances, to copy and adapt programmes in ways consistent with lawful use. Creation of a similar work does not infringe if it is created independently without copying the original work. E.G. A and B click photograph of the same beautiful tree from the same angle and have idenitical looking photographs. A and B are both entitled to separate copyright in their own photograph and one photograph does not infringe the other. Remedies Civil: Remedies available are injunction, damages, and accounts of profits, delivery up of infringing copies and material. Criminal: Section 63 to 70 deal with criminal remedies against the infringers. Credits: Majmudar and company.

llm - topics

INDIAN CONSTITUTIONAL LAW : THE NEW CHALLENGES. 1. Federalism. 1.1. Creation of new States. 1.2. Allocation and sharing of resources – distribution of grants in aid. 1.2.1. The inter state disputes on resources. 1.3. Rehabilitation of internally displaced persons. 1.4. Centre’s responsibility and internal disturbance within States. 1.5. Directions of the Union to the State under Article 356 and 365. 1.6. Federal Comity : Relationship of trust and faith between Union and State. 1.7. Special status of certain States. 1.7.1. Tribal Areas, Scheduled Areas. 2. “State” : Need for widening the definition in the wake of liberalization. 3. Right to equality : privatization and its impact on affirmative action. 4. Empowerment of women. 5. Freedom of press and challenges of new scientific development. 5.1. Freedom of speech and right to broadcast and telecast. 5.2. Right to strike, hartal and bandh. 6. Emerging regime of new rights and remedies. 6.1. Reading Directive Principles and Fundamental Duties into Fundamental Rights. 6.1.1. Compensation jurisprudence. 6.1.2. Right to education. 6.1.2.1. Commercialisation of education and its impact. 6.1.2.2. Brain drain by foreign education market. 7. Right of minorities to establish and administer educational institutions and State control. 8. Secularism and religious fanaticism. 9. Separation of powers : stresses and strain. 9.1. Judicial restraint. 9.2. PIL : Implementation. 9.3. Judicial independence. 9.3.1. Appointment, transfer and removal of judges. 9.4. Accountability of executive. 10. Democratic process. 10.1. Nexus of politics with criminals and the business. 10.2. Election. 10.3. Election commission : status. 10.4. Electoral Reforms. 10.5. Coalition government, stability, durability, corrupt practices. LAW OF INDUSTRIAL AND INTELLECTUAL PROPERTY. Syllabus : 1. IPR and International Perspectives. 2. Trademarks and Consumer Protection (Study of UNCTAD report on the subject). 3. The Legal regime of Unfair Trade Practices and of Intellectual Industrial Property. 3.1. United Nations approaches (UNCTAD, UNCITRAL) 3.2. EEC approaches. 3.3. Position in U.S. 3.4. The Indian situation. 4. Special Problems of the Status of Computer Software in Copyright and Patent Law : A Comparative Study. 5. Biotechnology Patents : 5.1. Nature and types of biotechnology patents. 5.2. Patent over new forms of life : TRIPS obligations. 5.3. Plant patenting. 5.4. Sui generic protection for plant varieties. 5.5. Multinational ownership. 5.6. Regulation of environment and health hazards in biotechnology patents. 5.7. Indian policy and position. 6. Patent Search, Examination and Records : 6.1. International and global patent information retrieval systems (European Patent Treaty). 6.2. Patent Co-operation Treaty (PCT) 6.3. Differences in resources for patent examination between developed and developing societies. 6.4. The Indian situation. (28) 7. Special Problems of Proof of Infringement : 7.1. Status of intellectual property in transit – TRIPS obligation - Indian position. 7.2. The evidentiary problems in action of passing off. 7.3. The proof of non-anticipation, novelty of inventions protected by patent law. 7.4. Evidentiary problems in piracy : TRIPS obligation – reversal of burden of proof in process patent. 7.5. Need and Scope of Law Reforms. 8. Intellectual Property and Human Rights. 8.1. Freedom of speech and expression as the basis of the regime of intellectual property right – copyright protection on internet- WCT (WIPO Copyright Treaty, 1996). 8.2. Legal status of hazardous research protected by the regime of intellectual property law. 8.3. Human right of the impoverished masses, intellectual property protection of new products for healthcare and food security. 8.4. Tradition knowledge – protection – biodiversity convention right of indigenous people. Select bibliography : 1. Terence P. Stewar (ed.), The GATT Uruguary Round : A Negotiating History (1986-1994) The End Game (Part-1)(1999), Kluwer. 2. David Bainbridge, Software Copyright Law (1999), Butterworths. 3. W.R. Cornish, Intellectual Property Law (1999), Sweet and Maxwell. CORPORATE FINANCE. Syllabus : 1. Introduction. 1.1. Meaning, importance and scope of corporation finance. 1.4. Capital needs – capitalization – working capital - securities – borrowings – deposits debentures. 1.5. Objectives of corporation finance – profit maximization and wealth maximization. 1.6. Constitutional perspectives – the entries 37, 38, 43, 44, 45, 46, 47, 52, 82, 85 and 86 of List 1 - Union list; entry 24 of list 11 – State List. 2. Equity Finance. 2.1. Share capital. 2.1.1. Prospectus – information disclosure. 2.1.2. Issue and allotment. 2.1.3. Shares without monetary consideration. 2.1.4. Non-opting equity shares. 3. Debt Finance. Debentures. 3.1.2. Nature, issue and class. 3.1.3. Deposits and acceptance. 3.1.4. Creation of charges. 3.1.4.5. Fixed and floating charges. 3.1.5. Mortgages. 3.1.6. Convertible debentures. 4. Conservation of Corporate Finance. 4.1. Regulation by disclosure. 4.2. Control on payment of dividends. 4.3. Managerial remuneration. 4.4. Payment of commissions and brokerage. 4.5. Inter-corporate loans and investments. 4.6. Pay-back of shares. 4.7. Other corporate spending. 5. Protection of creditor 5.1. Need for creditor protection. 5.1.1. Preference in payment. 5.2. Hights in making company decisions affecting creditor interests. 5.3. Creditor self-protection. 5.3.1. Incorporation of favorable terms in leading contracts. 5.3.2. Right to nominate directors. 5.4. Control over corporate spending. 6. Protection of Investors. 6.1. Individual share holder right. 6.2. Corporate membership right. 6.3. derivative actions. 6.4. Qualified membership right. 6.5. Conversion, consolidation and re-organization of shares. 6.6. Transfer and transmission of securities. 6.7. Dematerialization of securities. 7. Corporate Fund Raising. 7.1. Depositories – IDR (Indian depository receipts). ADR (American depository receipts), GDR (Global Depository receipts). 7.2. Public financing institutions – IDBI, ICICI, IFC and SFC. 7.3. Mutual fund and other collective investment schemes. 7.4. Institutional investments – LIC, UTI and banks. 7.5. FDI and NRI investment – Foreign institutional investments (IMF) and World bank. 8. Administrative Regulation on Corporate Finance. 8.1. Inspection of Accounts. 8.2. SEBI 8.3. Central government control. 8.4. Control by registrar of companies. 8.5. RBI control. Select bibliography. 1. Ramaiya A, Guide to the Companies Act (Latest Edition) 2. S.C. KuchhalCorporation Finance : Principles and problems (6th ed. 1966). 3. V.D. Kulshreshtha, Government Regulation of Financial Management of Private Corporate Sector in India (1986). EXIM LAW INTRODUCTION : 1. 1.1. State control over import and export of goods -from rigidity to liberalization. 1.2. Impact of regulation on economy. 2. The Basic Needs of Export and Import Trade. 2.1. Goods. 2.2. Services. 2.3. Transportation. 3. International Regime. 3.1. WTO agreement. 3.2. WTO and tariff restrictions. 3.3. WTO and non-tariff restrictions. 3.4. Investment and transfer of technology. 3.5. Quota restriction and anti-dumping. 3.6. Permissible regulations. 3.7. Quarantine regulation. 3.8. Dumping of discarded technology and goods in International market. 3.9. Reduction of subsidies and counter measures. General Law on Control of Imports and Exports. 4.1. General scheme. 4.2. Legislative control. 4.2.1. Power of control : Central Government and RBI. 4.2.2. Foreign Trade Development and Regulation Act 1992. 4.2.3. Restrictions under customs law. 4.2.3.1. Prohibition and penalties. 4.3. Export-Import formulation : guiding features. 4.3.1. Control under FEMA. 4.3.2. Foreign exchange and currency. 4.3.2.1. Import of goods. 4.3.2.2. Export promotion councils. 4.3.2.3. Export oriented units and export possessing zones. Control of Exports. 5.1. Quality control. 5.2. Regulation on goods. 6. Exim policy : Changing Dimensions. 6.1. Investment policy : NRIs. FIIs. 6.2. Joint venture. 6.3. Promotion of foreign trade. 6.4. Agricultural products. 6.5. Textile and cloths. 6.6. Jewellery. 6.7. Service sector. 7. Law Relating to Customs. 7.1. Prohibition on importation and exportation of goods. 7.2. Control of smuggling activities in export-import trade. 7.3. Levy, of and exemption from, customs duties. 7.4. Clearance of imported goods and export goods. 7.5. Conveyance and warehousing of goods. 8. Regulation of investment. 8.1. Conservation of foreign exchange. 8.2. Foreign exchange management. 8.3. Currency transfer. 8.4. Investment in foreign countries. 8.5. Borrowing and Lending of money and foreign currency. 8.6. Securities abroad – issue of 8.7. Immovable property – purchase abroad. 8.8. Establishment of business outside. 8.9. Issue of derivatives and foreign securities - GDR (global depositories receipts), ADR (American depository receipts) and Uro. 8.10. Investment in Indian banks. 8.11. Repatriation and surrender of foreign securities.