â?¢ For a solo family and two unit residence – minimum five percent down payment is required.

â?¢ For up to a four unit residence – minimum of ten percent down payment is essential.

But it should be remembered that only Canadian citizens can apply for CMHC Mortgage Loan Insurance.

CMHC Mortgage Loan Insurance has many advantages â??

1. It can be applied to various kinds of housing.

2. It is available everywhere in Canada.

3. It has several flexible products and options to help the buyer in going for the best investment.

In a normal case, the buyer pays the minimum down payment. Sometimes, first time homebuyers receive gifts from the relatives for the down payment. Any promotions offered by the lender and money borrowed from friends and family is acceptable as additional sources of down payment for the borrowers through CMHCâ??s Flex Down product.

Before applying for CMHC, a person should keep following points in mind -

â?¢ The qualifying criteria

â?¢ Is the lender approved by CMHC?

â?¢ The total housing cost including Principal amount, Interest accrued, property tax and heating costs (P.I.T.H.) should not be more than thirty two percent of the gross household income.

â?¢ The total debt should be less than forty percent of the gross income. To get the Total Debt Service (TDS) ratio add up the P.I.T.H. and payments on all other debt / gross annual household income and 50% of condominium fees (if applicable).

â?¢ Take the closing cost (like the lawyer fees, adjustments, land transfer tax if applicable, PST and GST as applicable etc.) into account. This is usually two to four percent of the purchase price.

â?¢ There are certain details which may vary from case to case and one needs to get in touch with the lender to know about them.

The premium of the CMHC Mortgage Loan Insurance is based on the amount of the down payment made and is proportional to the cost of the house or the value that one borrows. The higher the value of the house the higher will be the insurance premiums. This insurance is paid by the lender, who later passes on the charges to the actual buyer.

So, in order to pay less interest rates and avoiding the administrative charges, one should go for the mortgage insurance.

Number of Words: 523

Keyword: insurance

Frequency: 12

FIABCI stands for “Fédération Internationale des Administrateurs de Biens Conseils et Agents Immobiliers,” and was founded in France following the second world war, at a time when many ambitious businessmen envisioned global organizations to promote cooperation among nations. Many groups of this nature took years to find widespread support, but this one was quickly successful. The organization held its first international congress in 1951 with delegates from Belgium, Canada, Switzerland, Denmark, the United Kingdom, and Holland. Over the following decade FIABC would attract dozens of additional nations and hold several more international congresses. In 1964 at a meeting in Tel Aviv, the organization adopted the International Real Estate Federation moniker, but kept the FIABCI abbreviation, since it was already recognized worldwide.

Today FIABCI has more than two million individual members in 65 countries. At its most basic level, the organization promotes information sharing and networking on all levels of real estate. Almost anyone connected to the industry can become a member, provided they have enough experience, good standing in their market, and can work on an international level. Members of FIABCI include brokers, property managers, appraisers, developers, lawyers, insurers, architects, urban planners, and other professionals.

FIABCI is especially useful in markets where foreign investment is high and a strong economy has produced demand for commercial real estate – a weaker US dollar in recent quarters has also brought more international buyers and sellers to the market. In the case of Austin, businesses and residents from all over the globe need help finding office space and homes quickly, and FIABCI facilitates this. The organization’s broad-based membership can help speed up transactions and enable professionals from different continents to collaborate quickly on client work. At the political level, FIABC FIABCI also works to promote high real estate standards and ethical business practices around the world as a special consultant with NGO status to the United Nations’ Economic and Social Council.

Real estate professionals who work in a few residential neighborhoods or cities may not ever need to deal directly with FIABCI, but they may still find it useful as a resource on the evolution of the industry. For agents and brokers working internationally or commercially, FIABCI is definitely a worthwhile resource, and could mean the difference between a solid local business and one with the potential to expand overseas.

The first step however is not necessarily looking at homes for sale. This is tempting and it is certainly worth your while to ensure that there are homes in the market that suit your needs at a cost you can afford – but you don’t really know at this stage what you can afford. Begin by getting a copy of your credit report and ensuring that everything in it is correct. There are often mistakes in credit reports. Then next step is reducing your consumer debt. That’s credit cards including Visa, MasterCard, gas company and department store cards. Once you have your debt service down to an amount that is in ratio with your income you can then begin saving. You will need a down payment plus cash for other home purchase related expenses.

Now determine how much you can afford to borrow by first determining the amount you can pay monthly. Remember this should not be the maximum that you can pay monthly as there are other expenses involved in home ownership such as property taxes, utilities, insurance etc. Also remember that this is a 25 year process and during that time you need money to enjoy some standard of living as well as to save to meet unexpected expenses. Choose the amount per month that you believe that you can reasonably pay, then using any of the free mortgage calculators available on the web calculate what this monthly payment translates to in terms of purchasing price and add your down payment to this amount. Now you know the price range you can afford. Begin by applying for the PEI real estate either with your bank or with a local mortgage broker. Your realtor will know the area’s mortgage brokers and will be able to make a recommendation.

Before you do any serious house-hunting make sure that you have a pre-approved mortgage certificate. This is an agreement to lend you a certain amount of money with in a certain period, usually 90 days. Now you can begin the fun part. Choose the city or area that you are interested in. If you are looking at purchasing a home in Summerside you probably wouldn’t choose a realtor located in Charlottetown, so once you have choosen your area find a company and realtor who works in that area. Don’t be afraid to ask friends or family about their experiences with realtors and if they have been happy with one in particular you might choose him/her.

Make sure that you well apprise your realtor of the type of property you are looking for and the amount you have to spend. Make a list of features that you are looking for in a home but keep it real. Your realtor will search for homes that fit your price and criteria and you will being to visit them. Ensure that you make notes illustrating the pros and cons of each property and ask for cut sheets (MLS flyers) on each listing as after a day of house hunting you wont be able to remember the first home. It is a good idea to look at 2 and then on the third one eliminate one of those 3 so that you have a constant top 2 in your mind.

Once you have chosen a contendor have your agent search comparables that have sold in the area and this will help you determine the true value of the home. From this information decide how much you believe is a fair offer. Keep it fair, you are wasting time if you low-ball and most likely this will end negotiation on the part of the vendor. Your realtor will write an offer and this can be accepted, rejected or the vendor may counter-offer. You can also insert conditions or “subjects” such as obtaining financing or selling your home. Always have the home inspected as this will result in far fewer unexpected problems later and gives you a chance to ask the vendor to pay for some of the repairs.

When you have a fully signed offer it is time to go to the lawyer for conveyancing and to sign the mortgage forms. You will soon be in full possession of a property in beautiful PEI and the proud owner of your very own PEI real estate.

Corruption is a major systemic-problem in many developing countries and is of particular importance for India. Studies by the World Bank (World Development Report 2005) have found that corruption was the number one constraint for firms in South Asia and that the two most corrupt public institutions identified by the respondents in India (as well as in most countries in South Asia) were the police and the judiciary. Based on Transparency International’s Corruption Perception Index, India has a score of 2.9 out of 10 in 2005 (a higher score means less corruption), which ranked 88 out of 140 countries (with the range being 1.5 to 9.7), and the ranking relative to other countries has not improved much over the past ten years.

Next, we have two measures for the quality of accounting systems. The disclosure requirements index (from 0 to 1, higher score means more disclosure; LLS 2006) measures the extent to which listed firms have to disclose their ownership structure, business operations and corporate governance mechanisms to legal authorities and the public. India’s score of 0.92 is higher than the averages of all LLSV subgroups of countries, including the English origin countries, suggesting that Indian firms must disclose a large amount of information. However, this does not imply the quality of disclosure is also good. In terms of the degree of earnings management (higher score means more earnings management; Leuz, Nanda, and Wysocki 2003), India’s score is much higher than the average of English origin countries, and is only lower than the German origin countries, suggesting that investors have a difficult time in evaluating Indian companies based on publicly available reports. It seems that while Indian companies produce copious amounts of data, form triumphs over substance in disclosure and with an accounting system that allows considerable flexibility, there is enough room for companies to hide or disguise the truth.

The efficiency and effectiveness of the legal system is of primary importance for contract enforcement, and we have two measures. First, according to the legal formalism (DLLS 2003) index, India has a higher formalism index than the average of English origin countries, and is only lower than that of the French origin countries. The legality index, a composite measure of the effectiveness of a country’s legal institutions, is based on the weighted average of five categories of the quality of legal institutions and government in the country (Berkowitz, Pistor, and Richard 2003). Consistent with other measures, India’s score is lower than the averages of all the subgroups of LLSV countries, suggesting that India’s legal institutions are less effective than those of many countries, and that it will be more difficult; for India to adopt and enforce new legal rules and regulations than other countries.

Finally, as for the business environment in India, a recent World Bank survey found that, among the top ten obstacles to Indian businesses, the three which the firms surveyed considered to be a “major” or “very severe” obstacle and exceeding the world average are corruption (the most important problem), availability of electricity, and labor regulations. Threat of nationalization or direct government intervention in business is no longer a major issue in India. With rampant tax evasion, the shadow economy in India is significant. It is estimated to be about 23% of GDP. Creditor and investor rights were largely unprotected in practice, with banks having little bargaining power against willful defaulters. Large corporate houses often got away with default, or got poor projects financed through the state-owned banking sector, often by using connections with influential politicians and bureaucrats.

Since the beginning of liberalization in 1991, two major improvements have taken place in the area of creditor rights protection – the establishment of the quasi-legal Debt Recovery Tribunals that have reduced delinquency and consequently lending rates (Visaria (2005)); and the passing of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act in 2002 and the subsequent Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act in 2004. These laws have paved the way for the establishment of Asset Reconstruction Companies and allow banks and financial institutions to act decisively against defaulting borrowers. In recent years,-recovery has shown significant improvement, presumably because, at least in part, of a well-performing economy (Table 2.1).

2.1. Comparison of Legal Systems: India, Country Groups and Major Emerging Economics*

Creditor

Rights

Anti-director

Rights

Corruption Perception Index

Legal Formalism

Index

Legality

Index

Disclosure

Requirement

Earnings

Managem Score

India

2

5

3.3

3.51

11.35

0.92

19.1

English-origin Ave.

2.28

4.19

5.33

3.02

15.56

0.78

11.69

French-origin Ave.

1.31

2.91

4.39

4.38

13.11

0.45

19.27

German-origin Ave.

2.33

3.04

5.58

3.57

15.53

0.60

23.60

Nordic-origin Ave.

1.75

3.80

9.34

3.32

16.42

0.56

10.15

LLSV Sample Ave.

1.828

3.3729

5.24

3.5830

14.98

0.6031

16.00

China (G)

2

1

3.3

3.40

N/a

N/a

N/a

Pakistan (E)

1

4

2.2

3.74

8.27

0.58

17.8

S. Africa (E)

3

5

4.6

3.68

11.95

0.83

5.6

Argentina (F)

1

2

2.9

5.49

10.31

0.50

N/a

Brazil (F)

1

5

3.3

3.83

11.43

0.25

N/a

Mexico (F)

0

3

3.3

4.82

10.79

0.58

N/a

Malaysia (E)

3

5

5

3.21

13.82

0.92

14.8

Sri Lanka (E)

2

4

3.1

3.89

9.68

0.75

N/a

Thailand(E)

2

4

3.6

4.25

10.70

0.92

18.3

Egypt (F)

2

3

3.3

3.60

10.14

0.50

N/a

Indonesia(F)

2

4

2.4

3.88

8.37

0.50

18.3

Peru(F)

0

3.5

3.3

5.42

9.13

0.33

N/a

Philippines (F)

1

4

2.5

5.00

7.91

0.83

8.8

Turkey (F)

2

3

3.8

3.49

9.88

0.50

N/a

Korea (South )(G)

3

4.5

5.1

3.33

12.24

0.75

26.8

Taiwan (G)

2

3

5.9

3.04

14.26

0.75

22.5

Average of EM

1.69

3.63

3.60

4.00

10.59

0.63

16.61

Source of EM

* Including all emerging economies from Table 1 for which information was available. Notation (E), (F), or (G) against a country indicates that the said country belongs to English, Fresh or German legal origin groups.

28 : DMS average 30 : DLLS (2003) average

29 : DLLS (2007) average 31 : LSS (2006) average

To summarize, despite strong protection provided by the law, legal protection is considerably weakened in practice due to an inefficient judicial system, characterized by overburdened courts, slow judicial process, and widespread corruption within the legal system and government. While the need for judicial and legal reforms has long been recognized, little legislative action has actually taken place so far (Debroy (2000)). Currently, the government is trying to emulate the success of China by following the Special Economic Zone approach rather than overhauling the entire legal system.

Financial/Business Laws and Regulations in India

Red tape and regulations still rank among the leading deterrents for business and foreign investment in India leading to its latest ranking of 116 out of 155 in the World Bank’s Ease of Doing Business indicator in 2006 (World Bank, 2006). India features consistently in the second half of the sample for all aspects of business regulation (and is out of the top 100 for most aspects) except for investor protection. To start a business in India entrepreneurs have close to twice the number of procedures to follow as in OECD countries, about three and a half times the time delay and close to nine times the cost (as a proportion of per capita income). Delays and costs of dealing with licenses in India is roughly in corresponding proportions with their respective OECD values. Very recently (second half of August 2007), the Government of India has decided to improve this situation and has announced a drastic reduction in the number of approvals and permits necessary to start new business. Whether and when this translates to actual practice is yet to be seen.

It is almost twice as hard to hire people in India as in OECD countries and almost three times as hard and costly to fire them. With have considerable variation in their labor laws across states, Besley and Burgess (2004) show that during the three and half decades before liberalization began in 1991, Indian states that followed more pro-worker policies experienced lower output, investment, employment and productivity in the registered or “formal” sector and higher urban poverty with an increase in informal sector output.

In the area of credit availability, India lags behind not because of creditors’ rights (which is close to OECD standards) but because of the paucity of credit quality information through the use of public registry or coverage of private bureaus. However, India’s excellent investor protection provisions in the law should be viewed together with her performance in contract enforcement where the number of procedures and time delays are about double that in OECD countries and the costs of contract enforcement over four times that in OECD countries.

As for securities markets regulation, using the framework of La Porta et al (2006) that focuses on disclosure and liability requirements as well as the quality of public enforcement of the regulations controlling securities markets, India scores 0.92 in the index of disclosure requirements third highest after the United States and Singapore. As for liability standard, India’s score is the fifth highest, 0.66 while the sample mean is 0.47. In terms of the quality of public enforcement, i.e. the nature and powers of the supervisory authority, the Securities and Exchanges Board of India (SEBI), India scores 0.67, higher than the overall sample mean as well as the English-origin average of 0.52 and 0.62 respectively and ranks 14th in the sample.

In comparing the regulatory powers and performance of SEBI with those of the SEC (Securities and Exchanges, Commission) in the USA, Bose (2005) concludes that while the scope of Indian securities laws, are quite pervasive, there are significant problems in enforcing compliance, particularly in the areas like price manipulation and insider trading. Between 1999 and 2004, Bose finds that SEBI took action in 481 cases as opposed to 2,789 cases for the SEC even though the latter regulates a significantly more mature market. As a ratio of actions taken to the number of companies under their respective jurisdictions, SEBI’s figure comes out to be an unimpressive 0.09 while that of the SEC is 0.52. Also the ratio for action taken to investigations made is quite low for SEBI (e.g. 1 out of 24 cases of issue related manipulation in 1996-97, 7 out of 27 in the 5 year period 1999-2004). As for appeals before higher authorities – the Securities Appellate Tribunal (SAT) or the Finance Ministry – in 30 to 50% of cases, the decision goes against SEBI. Though SEBI has had some success prosecuting intermediaries, it has failed to convince the SAT in its proceedings against corporate insiders and major market players. Thus the quality of public enforcement of securities laws appears to be a problem in India.

The institution of Debt Recovery Tribunals (DRTs) in the early 90’s and the passing of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002 were aimed at remedying the slowness of the judicial process. The SARFAESI Act paves the way for the establishment of Asset Reconstruction Companies (ARCs) that can take the Non-Performing Assets (NPAs) off the balance sheets of banks and recover them. Operations of these ARCs would be restricted to asset reconstruction and securitizatipn only. It also allows banks and financial institutions to directly seize assets of a defaulting borrower who defaults fails to respond within 60 days of a notice. Borrowers can appeal to DRTs only after the assets are seized and the Act allows the sale of seized assets. The SARFAESI Act itself, however, does not provide a final solution to the recovery problems. With the borrower’s right to approach the DRT, the DRAT (Debt Recovery Appellate Tribunal) and, in some cases, even a High Court, a case can easily be dragged for three to four years during which time the sale of the seized asset cannot take place. It is perhaps too soon to evaluate its effects on reducing defaults but, public sector banks have had some success recovering their loans by seizing and selling assets since the Act came into existence. The recovery rates of bad debts have registered a sharp rise in 2005-06, but it is difficult to separate the contribution of the booming economy to this from that of the improvement in corporate governance.

Another positive development in the area of disclosure has been the adoption of Accounting Standards (AS) 18 by the Institute of Chartered Accountants in India (ICAI) in 2001 which, among other things, makes reporting of “related party transactions” by Indian companies mandatory. Related parties include holding and subsidiary companies, key management personnel and their direct relatives, “parties with control exist” which includes joint ventures and fellow subsidiaries; and other parties like promoters and employee trusts. Transactions include purchase/sale of goods and assets, borrowing, lending and leasing, hiring and agency arrangements, guarantee agreements, transfer of research and development and management contracts. This step has gone a long way in bringing transparency to the dealings of Indian companies, particularly the group-affiliates.

The area of the Ease of Doing Business index where India fares worst is undoubtedly that of closing a business. India has the dubious distinction of being among the countries where it takes the longest time to go through bankruptcy in the world (10 years on an average). Consequently recovery rates are very low too – below 13% as opposed to about 74% in OECD countries. Kang and Naya’r (2004) point out that there is no single comprehensive and integrated policy on corporate bankruptcy in India in the lines of Chapter 11 or Chapter 7 US bankruptcy code. Overlapping jurisdictions of the High Courts, the Company Law Board, the Board for Industrial and Financial Reconstruction (BIFR) and the Debt Recovery Tribunals (DRTs) contribute to the costs and delays of bankruptcy. The Companies (Second Amendment) Act, 2002 seeks to address these problems by establishing a National Company Law Tribunal and stipulating a time-bound rehabilitation or liquidation process to within less than two years as well as bringing about other positive changes in the bankruptcy code.

Stock Exchanges in India

India currently has two major stock exchanges: the National Stock Exchange (NSE) established in 1994 and the Bombay Stock Exchange (BSE), the oldest stock exchange in Asia, established in 1875. Up to 1992, BSE was a monopoly, marked with inefficiencies, high costs of intermediation, and manipulative, practices, so that external market users often found themselves disadvantaged. The economics reforms created four new institutions: the Securities and Exchanges: Board of India (SEBI), the National Stock Exchange (NSE), the National Securities Clearing, Corporation (NSCC), and the National Securities Depository (NSDL). The National Stock Exchange (NSE), a limited liability company owned by public sector financial institutions, now accounts for about two-thirds of the stock exchange trading in India, and virtually all of its derivatives trading.

The National Securities Clearing Corporation (NSCC) is the legal counter-party to net obligations of each brokerage firm, and thereby eliminates counter-party risk and possibility of payments crises. It follows a rigorous ‘risk containment’ framework involving collateral and intra-day monitoring. The NSCC, duly assisted by the National Securities Depository (NSDL), has an excellent record of reliable settlement schedules since its inception in the mid-nineties.

The Securities and Exchanges Board of India (SEBI) has introduced a rigorous regulatory regime to ensure fairness, transparency and good practice. For example, for greater transparency, SEBI has mandated mandatory disclosure for all transactions where total quantity of shares is more than 0.5% of the equity of the company. Brokers disclose to the stock exchange, immediately after trade execution, the name of the client in addition to trade details; and the Stock exchange disseminates the information to the general public on the same day.

The new environment of transparency, fairness and efficient regulation led BSE, in 1996, to also become a transparent electronic limit order book market with an efficient trading system similar to the NSE. Equity and equity derivatives trading in India has sky­rocketed to record levels over the course of the last ten years.

In 2005, about 5000 companies were listed and traded on NSE and/or BSE. While the dollar value of trading on the Indian stock exchanges is much lower than the dollar value of trading in Europe or in the US, it is important to note that the number of equity trades on BSE/NSE is ten times greater than that of Euronext or London, and of the same order of magnitude as that of NASDAQ/NYSE. Similarly, the number of derivatives trades on NSE is several times greater than that of Euronext/ London, and of an order of magnitude comparable to US derivatives exchanges. The number of trades is an important indicator of the extent of investor interest and investor participation in equities and equity trading, and emphasizes the crucial importance of corporate governance practices in India.

Enforcing Corporate Governance Laws

Enforcement of corporate laws remains’ the soft underbelly of the legal and corporate governance system in India. The World Bank’s Reports on the Observance of Standards and Codes (ROSC) in its 2004 report on India (World Bank (2004)) found that while India observed or largely observed most of the principles, it could do better in areas like the contribution of nominee directors from financial institutions to monitoring and supervising management; the enforcement of certain laws and regulations like those pertaining to stock listing in major exchanges and insider trading as well as in dealing with violations of the Companies Act – the backbone of the corporate governance system in India. Some of the problems arise because of unsettled questions about jurisdiction issues and powers of the SEBI.

Indian Courts-an assessment

Djankov et al (2003) (DLLS) in. their analysis of “formalism” in the judicial process around the world, gave India a score of 3.34 on its formalism index, higher than the English-origin average of 2.76 but slightly lower than the average for all countries, 3.53. Among the 42 English-origin countries in their sample, India has the 11th highest level of formalism. India has the 16th longest process of evicting a tenant (212 days) among English common law origin countries (average 199 days). For collection on a bounced check, however, India has the 16th shortest duration (106 days) among English common law origin countries (average 176 days). In both cases India’s total duration of the process is significantly shorter than the overall mean duration of all the 109 countries considered (254 for eviction of tenant and 234 for collecting on bounced check). Thus, in spite of its formalism, Indian courts do not seem to perform that poorly (relatively speaking) on these two types of eases considered.

The DLLS assurance notwithstanding, case arrears and decade-long legal battles are commonplace in India. In spite of having around 10,000 courts (not counting tribunals and special courts), India has a serious, shortfall of judicial service. While the USA has 107 judges per million citizens, Canada over 75, Britain over 50 and Australia over 41, for India the figure is slightly over 10, (Debroy (1999)). In April 2003, for instance, the Supreme Court of India had close to 25,000 cases pending before it (Parekh 2001). Hazra and Micevska (2004) report that there are about 20 million cases pending in lower courts and another 3.2 million cases in high courts. A termination dispute contested all the way can take up to 20 years for disposal. Writ petitions in high courts can take between 8 and 20 years for disposal. About 63% of pending civil cases are over a year old and 31% are over 3 years old. Automatic appeals, extensive litigation by the government, underdeveloped alternative mechanisms of dispute resolution like arbitration, the shortfall of judges all contribute to this unenviable state of affairs in Indian courts. Since the same courts try both civil and criminal matters and the latter gets priority, economic disputes suffer even greater delays.

The Small and Medium Enterprises (SME) sector in India

Allen et al (2006) conduct surveys to study the extent to which the formal legal environment directly supports and regulates businesses, particularly small and medium enterprises which form an increasingly important part of the Indian industry. This seems to indicate that the small firms sector operate in a system virtually governed through informal mechanisms based on trust, reciprocity and reputation with little recourse to the legal system and deals with widespread corruption.

Over 80% of the firms surveyed needed a license to start a business, and for about half of them obtaining it was a difficult process. Government officials were most often the problem solved usually through payment of bribes or friends of government officials to negotiate. Clearly, networks and connections are of crucial importance in negotiating the government bureaucracy.

As for conducting day-to-day business, legal concerns are far less important to

them than the unwritten codes of the informal networks in which firms operate. In cases of default and breach of contract, the primary concern is loss of reputation, followed closely by loss of property, with the fear of legal consequences being-the least important concern.

About half of the firms surveyed did not have, a regular legal adviser and less than half of those that did had lawyers in that capacity. For mediation in a business dispute or to enforce a contract, the first choice was “mutual friends or business partners”. Only 20% of the respondents mentioned going to courts as the first option indicating that the legal system, while not as effective as the informal mechanisms, is not altogether absent.

The informal system, however, is not perfect in resolving disputes and has its costs. About half of the respondents experienced a breach of contract or, non-payment with a supplier or major customer in the past three years. Over a third of them renegotiated while over 40% did nothing but continued the business relationships with the offending parties.

In general, the business environment of the SME sector is marked by strong informal mechanisms like family ties, reputation and trust. Legal remedies though present, are far less important than the rules of the informal networks.

References

Allen, F., R. Chakrabarti, S. De, J. Qian and M. Qian, 2006, “Financing Firms in India”, Working paper, The Wharton School.

Bose, Suchismita and Dipankar Coondoo, 2004, ‘The Impact of FII Regulations in India’, Money and Finance, July-December.

Bose, Suchismita, 2005. “Securities Markets Regulation: Lessons from US and Indian Experience”, Money and Finance, Jan-June, 83-124.

Besley, Timothy and Robin Burgess, 2004, “Can Labor Regulation Hinder Economic Performance? Evidence from India” Quarterly Journal of Economics.

Debroy, Bibek, 1999, “Some Issues in Law Reform in India”, in Jean-Jacques Dethier ed. Governance, decentralization, and reform in China, India, and Russia,. Boston; Kluwer Academic Publishers.

Djankov, Simeon, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer, 2002. “The Regulation of Entry,” Quarterly Journal of Economics, “Courts,” Quarterly Journal of Economics, 118 (2), 453-517.

Hazra, Arnab K. and Maja Micevska, 2004, “The Problem of Court Congestion: Evidence from Indian Lower Courts”, Working Paper, University of Bonn.

Kang, Nimrit and Nitin Nayar, 2004, “The Evolution of Corporate Bankruptcy Law in India”, Money and Finance, Oct 03 – Mar 04.

It all happened on a trip home to see his parents in the summer of 2007. Peter stumbled upon the TrolleyBasket, a shopping basket on wheels, which allows people to shop without carrying heavy items. At the time it was sold exclusively in Europe, with headquarters in Norway. With no business experience, Peter couldn’t imagine how he would write a marketing plan to give to the company’s owners. However, he used some grant-writing experience to convince them to let him and his wife-who would be the business’s co-owner-give it a shot, but the deal came with little support and no long-term agreements. They were on their own.

Lo and behold, Peter and his wife came across SCORE while on the Internet. “I applied for a meeting, with four people of very diverse backgrounds, expertise and personalities.” SCORE helped the couple identify first steps to get their company off the ground. “They were things that would be obvious to any business person, but they were critical to us,” he recalls.

Counselors also put the couple in contact with investors, customers, lawyers and designers, and Peter is still thankful for the SCORE relationship, which he still uses two years later. “It’s been a great learning experience-challenging in many ways, but great to have many people along the way offer advice and help us.”

The most support has come from Peter’s business partner, his wife. Together they equal one full-time owner. “The best thing is that the business gives us something to work on together,” he explains. “We share the excitement and disappointment, and we work really well together since we have different specialties. Her profession is psychotherapy, so she is a really good people person, and I’m much more of an organizer.”

Peter’s first purchase was 1,500 TrollyBaskets and, in total, he recalls investing roughly $100,000 to get going. “It’s hard to walk out into the garage and see this mountain of baskets you need to do something with!”

But again, Peter and his wife somehow managed to fight the odds, and sold some 17,000 carts the first year, from supermarkets and department stores to hardware and liquor stores. He has become the North American distributor, and describes himself as proud that he has penetrated the corporate structure with a product that people never really knew about beforehand.

Despite the recent recession, the TrolleyBaskets have managed to stay afloat, as Peter and his wife have consistently pitched their product to supermarkets-one area that has always had steady business through tough times.

While lamenting that he has never been able to dedicate his full time to the part-time business while staying at Yale to keep his benefits and steady income, Peter still calls the learning process “tremendous,” and explains that there is always a new challenge for him to overcome. He also credits his lean organization (a home office and 10 coworkers) to his success.

Nevertheless, Peter’s goals may shortly come to fruition, with the possibility of moving his business forward. “If we can get a couple of big contracts, I will take on CEO of TrolleyBasket North America and organize for TrollyBasket International, in which case I would have to leave my job and take on the responsibilities.” Additionally, he hopes to be able to expand to expand to Canada, and Central and South America. “It’s been a huge culture shift for me,” he observes, of the transition from the science to retail world.

“I was always taught to be very cautious and not take any chances… that was the Swedish mentality. But that’s completely gone. And it spills over in many aspects of life, basically to take the chance when you have it, try to have fun and do something good with opportunities to present yourself.”

Honda Recalls 646,000 Vehicles Worldwide Over Faulty Switch

News Source: JusticeNewsFlash.com by EIN, 2010/02/02Legal news for product liability attorneys. Honda recalls the Fit after discovering a switch poses a fire hazard. Product liability attorneys alert- Honda recalled the Fit over the power window switch, which poses a fire hazard to consumers.

Headline:

Toyota’s other pedal problem: Lawsuits

NEW YORK, Feb 1 (Reuters) – Toyota Motor Corp is facing a growing number lawsuits from consumers who complain their vehicles suddenly accelerate or may do so, and want the world’s largest automaker to pay for it. Last week, Toyota stopped selling eight models in the United States and Canada, including its popular Camry and Corolla, because of possible unintended acceleration. Some 8 million vehicles are up for repair worldwide over problems including alleged faulty accelerator pedals made by the supplier CTS Corp, and the possibility that floor mats could jam the accelerator pedal.

Headline:

CPSC Recalls 15,000 Horse Figurines Over Lead Paint

January 30, 2010 (NewYorkInjuryNews.com – Injury News)

New Source: JusticeNewsFlash.com Minneapolis, MNâ??The U.S. Consumer Product Safety Commission (CPSC) http://www.cpsc.gov/ and Blip Toys have voluntarily recalled Nature Wonders HD pinto horse toy figures, after it was revealed that the toys violate the federal lead paint standard. The recall was announced by the CPSC on Tuesday, January 26, 2010.

Headline:

Tree Stands and Brackets Recalled Due to Fall Hazard

New Source: JusticeNewsFlash.com CPSC announces recall of tree stands and brackets due to fall risk. Product liability lawyer alerts- Tree stands recalled due to fall risk, CPSC reports. Decatur, ALSummit Treestands LLC has participated in the voluntary recall of Talon Hunting Hang-on Tree Stands and Brackets due to the fall hazard they pose to consumers. The U.S. Consumer Product Safety Commission (CPSC) http://www.cpsc.gov announced the recall on Thursday, January 28, 2010. The CPSC reported, The tree stand can unexpectedly detach from the tree when the brackets fail, posing a fall hazard to consumers. Approximately 6,800 tree stands, brackets and straps are involved in the recall.

What is more disturbing than the content of these four news stories is that they were from the FIRST TWO DAYS of February, 2010. The numbers are staggering. The cost is mind-boggling. The impact is global. The long-term consequences cannot be measured because the manufacturers will only have the opportunity to fix a small number of the products. Lack of notification and consumer apathy will ensure that many of these faulty products will be in the hands of consumers for decades. The release of these products to the public by the manufacturers is not only keeping the Consumer Products Safety Commission busy, it continues to overload the civil court dockets with products liability lawsuits. This epidemic borders on criminal behavior because the vast majority of these defects were avoidable!

When Lexus was introduced by Toyota as their high-end line of ultra-reliable vehicles, we in the quality assurance field studied their processes and training to learn proactive techniques for process excellence. The Toyota quality model had been a benchmark of success in minimizing defects, so we were eager to learn of the ongoing advances. During that period, there was a popular case study that made all of the quality assurance journals as an example of proactive quality management.

A customer complained that the gas pedal on her Lexus caused her shoe to become jammed between the pedal and the floor mat, resulting in the heal breaking from a very expensive pair of Ferragamo shoes. As the legend was told, the dealer immediately replaced the shoes and within a week Toyota had flown an engineer from Japan to New York to study the problem. Within a month, a fix was designed and all Lexus were voluntarily retrofitted with an improved gas pedal.

While the exact details of the case study may have been embellished in the retelling, this example of customer service and proactive defect avoidance has been used as a benchmark for teaching continual process improvement and customer satisfaction. Fast forward to the above story of millions of Toyota vehicles being recalled (and production halted) to fix a gas pedal problem. Is this the definition of irony? What has happened to Toyota over the last twenty years?

Since I have not been commissioned to perform an exhaustive quality audit of Toyota, I can only present a scientific hypothesis based on 40+ years as a quality control engineer, 20 years as a management consultant and ten years as an expert witness in products liability and organizational negligence litigation. It is a phenomena we have termed Enterprise Entropy©.

(Enâ?¢troâ?¢py – noun: The inevitable and steady deterioration of a system)

Enterprise Entropy typically manifests itself as follows: A company is launched to fill some perceived gap in a market. The principals are determined to make the product or service â??better and of higher valueâ? (or some such superlatives) than those currently in the market. They execute per their vision and values and rise to prominence in their industry. Their name becomes synonymous with quality and value. Then the business â??changes hands,â? either by sale of the company or generational transition from the older to the younger, the â??Boomers to the Gen X to the Gen Y.â? The new leadership rides the crest of their public reputation while on a mission to drive down costs, increase profits and penetrate new markets.

Many companies that rose to stardom during the second half of the twentieth century have become mostly entropic skeletons of their former majesty. Production of their products and services are now outsourced, off-shored, throw-away hermaphrodites of what was designed and produced by the founders. The vision and values of the founders have been methodically diluted as time and business pressures and loss of focus caused systematic decay. Oftentimes, customer service issues begin to surface signaling an increase in the probability of impending product failures. This priceless message from consumers is, tragically, too-often dismissed as customer stupidity or buyerâ??s remorse.

We are utilizing the lessons learned from our expert-witness assignments as the basis for making executives aware of the potential liability issues within their organizations.  Just as we have used our assessment and diagnosis tools to help improve processes, we are applying ourselves to uncover the warning signs of pending catastrophes that may have become embedded in product and service enterprises. As best-selling author Malcolm Gladwell points out in his books Tipping Point and Outliers, we are often unaware of when symptoms turn into epidemics until it is too late. Gladwellâ??s research goes on to make the case that well-meaning leaders are prone to misdiagnosing the problems and then trying to fix the wrong root causes. He also points out that those attempting to communicate the message of impending disaster are often ignored.

The disease of Enterprise Entropy has also permeated the quality assurance disciplines set the stage for inherently unsafe products to reach a critical mass and explode into an epidemic of a country producing the equivalent of â??Japanese Junkâ? as seen in the 1950â??s. Currently however, rather than defective products simply being thrown away, we have cadres of attorneys ready to sue your company into non-existence.