Tata Trusts seeks legal advice to revise the Trust deed: Report

Ratan Tata with his late dog Tito (Image: @ratantata/Instagram)

The Tata Trusts are contacting legal experts to explore the potential of inserting a phrase in the trust deeds stating that the same individual cannot lead them and holding company Tata Sons while upholding the founders' wishes, The Economic Times reported on August 12 quoting top executives familiar with the matter.

According to them, this is a crucial component of a corporate governance effort that also involves succession planning. There is no such clause in the wills left by the original Tata family members. JRD Tata and Ratan Tata both held the position at the same time.

Moneycontrol could not independently verify the report.

The Tata family's charity trusts hold about 66 percent of the share capital of group holding firm Tata Sons. The Sir Dorabji Tata Trust and the Sir Ratan Tata Trust are the two largest of them.

The Tata Trusts are governed by Ratan Tata, the former chairman of Tata Sons. According to the executives, he is concerned about safeguarding the interests of both the Tata Trusts and Tata Sons. After JRD Tata, he was the final individual to serve as chairman of both Tata Sons and the Tata Trusts.

According to ET, the process of amending the trust deeds will take a while and include shareholders, trustees, and several agencies. Before formally implementing changes, the group is engaging attorneys to resolve all outstanding difficulties.

The Tata Trusts are considering all legal options, including modifying the trust deeds, to accomplish this. Reportedly, sources claimed that the trustees had been debating the issue for some time.

The Tata Trusts remained silent on the subject.

At the meeting where a new five-year term for chairman N Chandrasekaran was agreed, Tata Sons discussed a special resolution altering the Articles of Association, according to a report from ET in February. As a special invitee, Ratan Tata, chairman emeritus of Tata Sons, attended the conference, reported ET.

Amendments to the trust deeds should take less time than changes to the Tata Sons Articles of Association (AoA). At the Tata Sons annual general meeting (AGM), which will take place at the end of this month, a resolution to alter the AoA is anticipated.

"It was a completely different situation when a person with the stature of Ratan Tata and JRD Tata before him was at the helm of these institutions," said one of the persons cited by ET. "For corporate governance purposes and to protect these institutions, changes need to be done accordingly. The purpose of seeking a legal view is to ensure that the founders' wills are honoured, the strategic needs of the Tata Group are also taken care of and to ensure suitable checks and balances."

By preventing the concentration of power, the programme seeks to improve corporate governance inside the organisation.

"The move is aimed at ensuring that one person does not become the chairman of both Tata Sons and Tata Trusts is to prevent the misuse of power and protect the future of the institutions, whether a Tata family member or a non-family professional occupies any of the two roles," an insider was reported as saying by ET. "The move is critical to also avoid the kind of conflict that arose during the tenure of former chairman and shareholder Cyrus Mistry."

In 2016, Mistry lost his position as chairman of Tata Sons.

To make the necessary changes to the trust documents, the Tata Trusts must make an application to the charity commissioner.