The Hindu Business Line : Ambanis may maintain status quo in face of huge tax incidence

DIVIDING the ownership of Reliance Industries even if the family members agree to a particular pattern is likely to be a non-starter because of the huge taxation incidence that such an action would involve.

According to senior legal sources, considering the various options available for division, the family may still decide to maintain a sort of status quo.

Legal sources said that the family members had more or less been zeroing in on a 4:3:3 ratio for the 46.67 per cent stake directly and indirectly controlled by the Ambani family.

The arrangement would mean that the ownership of the total stake would be clearly defined.

Going by this, 40 per cent of this 46.67 per cent stake would be owned by Dhirubhai's wife Ms Kokilaben and the two daughters Ms Nina and Ms Dipti while Mr Mukesh and Mr Anil would have a share of 30 per cent each.

This would mean that 18.67 per cent of RIL ownership would be in favour of the mother and the two sisters and Mr Mukesh and Mr Anil each would own around 14 per cent of the country's largest private sector companies.

However, though there would be no major problem in dividing the 12.63 per cent stake directly held by the promoters, extremely complicated legal issues are involved in dividing the 34.04 per cent stake held through the numerous investment companies. Out of the 34.04 per cent, 28.40 per cent stake is held by known entities while 5.64 per cent is held by unknown entities.

The entire 28.40 per cent stake is owned by a number of investment companies.

Other small investment companies again own these investment companies, in their turn.

Transferring the ownership of these shares from one investment company to another investment company have to be shown as sales and purchases and for that the necessary tax has to be paid.

That would, probably, mean that even if the Ambanis are able to cross one third of the well, they would still fall in the well or pay a substantial tax commensurate with the huge value of these shares.

Additionally, dividing the 5.64 per cent stake held by unknown companies would be even more complex.

According to an old timer, during Dhirubhai's lifetime a few investment companies based in tax haven British Virgin Island (BVI) held some of the shares. BVI offers a unique opportunity through its International Business Companies Ordnance (IBCO) that allows companies to issue shares to an unnamed bearer along with voting rights.

The current position of these holdings is still not in the public domain, he pointed out.

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