Ever-growing conglomerates always pose one big risk to investors — the prospect of a family settlement that impacts minority shareholders. Often, the division of assets and companies turns out to be bitter and acrimonious between siblings and family members due to lack of family agreements or proper legal backing.

However, of late, news of amicable settlements at business groups is heartening.

Earlier this week, the 127-year-old Godrej Group, worth $20-billion, split its operations into two factions, amicably, after five years of negotiations. Per agreement, Adi Godrej and Nadir Godrej get control of all the listed entities (Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet and Astec Lifesciences) in the group; while Jamshyd Godrej and Smita Crishna have control of the unlisted entities comprising Godrej Boyce & its affiliates, which includes the over 3,000 acres owned by the group in Mumbai.

Last year, members of Chennai-based Murugappa Group ended an almost five-year-long battle for control in the ₹74,220-crore group. The dispute between Valli Arunachalam and Vellachi Murugappa and the rest of the family members was settled among the members.

The family added that none of the listed companies in the Murugappa Group, including Carborundum Universal, Cholamandalam Investment and Finance Company, Cholamandalam Financial Holdings, Coromandel Engineering Company, Coromandel International, EID Parry (India), Tube Investments of India, Kartik Investments Trust, CG Power and Industrial Solutions, Shanthi Gears and Wendt (India) are party to family arrangements.

In 2005, a battle broke out between Mukesh Ambani and Anil Ambani, sons of the Reliance patriarch Dhirubhai Ambani, to divide the $20-billion industrial power house that had interests in various fields. Thanks to the efforts of veteran banker KV Kamath, and Nimesh Kampani of JM Financial, the Ambani brothers called a truce

TVS’ pucca plan

Among these settlements, however, the 2022 settlement of TVS group stands out, as it was a smooth affair especially given the complex structure of the business that needed changes in crossholdings. With nearly 50 companies having interests in various fields, and a workforce of over 50,000 employees, the task was challenging. However, the group, being run by the third- and fourth-generation members of the family, segregated business interests through what it called “Family Arrangement.”

Taking it a step further, Venu Srinivasan, Chairperson of TVS Holdings Ltd (formerly Sundaram-Clayton Ltd) and Chairman Emeritus of TVS Motor Company, in February this year announced that family members (Mallika Srinivasan, Lakshmi Venu and Sudarshan Venu) have executed a memorandum of understanding to avoid competition among themselves. The MoU covers the usage of TVS brands and other associated areas.

Disputes galore

However, there are still a number of buisness families where disputes are on among stakeholders at various fora such as Court, NCLAT, etc, impacting both the company and economy. To name a few — the Kirloskar brothers of Pune; Baba Kalyani and his sister Sugandha Hiremath over Hikal; Prakash Chhabria and Deepak Chhabria for Finolex Cables; and Kailas Chandra Nuwal and Satyanarayan Nuwal over Solar Industries.

In July last year, on its part, the Securities and Exchange Board of India had directed promoters to disclose to exchanges their family settlement agreements or arrangements that have a bearing or influence on management control of listed entities for such deals to remain legal.

Clearly, there are lessons from the above instances, for family-owned business, on how to approach family settlements and succession plans. It is time for the heir apparent to demonstrate their professionalism in resolving disputes through legal advisors and other family members. There are various templates available for India Inc from which they can adopt the ones best suited. This will not only help the company, employees, shareholders, investors and lenders but the entire value chain as well. Are they listening?

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