Get All Access for $5/mo

Success Through Succession 101 Wills, Trusts, Family Councils, LLPs and more: here are the best practices to follow while dividing a business conglomerate amongst heirs

By Soumya Duggal

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

In late 2016, streaming giant Netflix released The Crown, a historical drama tracing the reign of England's Queen Elizabeth II, to enormous commercial success and critical acclaim, revealing a certain obsession among its global audiences with matters of inheritance, especially when they conflict with tradition. Indeed, the questions of seniority, entitlement, merit and equality have forever dominated the world of family businesses, monarchical (i.e., the 'firm', as the British royal family is aptly nicknamed) or otherwise.

From Walmart Inc. to Reliance Industries, business conglomerates, in particular, must invest time and careful thought into succession planning, lest they find themselves embroiled in bitter family feuds later on. If recent announcements are any indication, Indian billionaire industrialist Mukesh Ambani, for instance, is exhibiting many ideal approaches as he preps his children for eventually taking over the Reliance empire: an early start, transparency and gender parity, to name a few. What other best practices can we add to this list with regards to dividing business conglomerates amongst heirs?

Legal Routes: Wills, Trusts, Family Councils, LLPs and more

Nearly three decades after founding Reliance Industries, business tycoon Dhirubhai Ambani passed away in 2002 without having drawn up a will, leaving his two sons, Anil and Mukesh, fighting for control of the company until its eventual split three years later. "A succession plan is a key necessity for a business family. The plan starts at creating an elaborate will describing the assets and whom such assets will benefit after the patriarch or matriarch's lifetime," explains Neha Pathak, head, Trust & Estate Planning, Motilal Oswal Private Wealth. Setting up trusts is another way to ensure that the intended division of assets is documented clearly for the beneficiaries' benefit without much risk of later disputation due to the extensive legal paper work involved in the process.

Stressing upon the need for transparent and open discussion about the assets, aspirations and values of the family, Pathak also highlights the significance of introducing the heirs to the business systematically and gradually. Apparently keen to not let history repeat itself, Mukesh Ambani has already initiated his succession plan while he is still active and available to lend support. He's been inducting his children at key positions in various businesses after allowing them a few years of experience in the respective spaces: older son Akash in telecom, daughter Isha in retail and younger son Anant in energy. While older reports suggested that Mukesh planned to set up a family council to ensure a smooth transition post his retirement/demise, recent reports indicate that the business tycoon might opt for an LLP route, an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.

Let's Talk Ethics: "I Don't Have a Favourite Child!"

In today's day and age, one would reasonably assume that the 'just' division of a family business should be predicated on the ideals of merit and equality irrespective of age and gender. According to Abhishek Tripathi, founder and partner, Sarthak Advocates & Solicitors, a 'fair' division, especially in those cases where each of the heirs is not blessed with equal entrepreneurial acumen, would involve dividing the value, as against the individual companies, of the business equally amongst all the children. "For those heirs who are uninterested or unable (also consider special needs persons for whom trusts can be set up) to run the business, the right to control the company can be substituted with compensation in cash or kind to ensure a fair value division of the patriarch/matriarch's wealth," explains Tripathi.

Further, as per current succession laws in India, all family members (i.e. spouse, son/s and daughter/s) have an equal right to the assets, both business and personal, of a deceased person. Traditionally, though, the eldest son has been preferred as the natural successor to a family business, especially under the Hindu Undivided Family (HUF) system, while daughters have not even been considered for leadership roles, especially post marriage—perhaps an ode to the practice of patrilineal primogeniture in the country's feudal past. However, in the wake of modernisation and several waves of the Feminist movement, business patriarchs appear to have evolved with the law. Besides Isha Ambani, HCL Technologies chairperson Roshni Nadar is another example of this welcome change. The only child of HCL founder Shiv Nadar, Roshni is the first woman to lead a listed IT company in India and was ranked 54th on the Forbes World's 100 Most Powerful Women list in 2019.

No Heir No Spare

Both Pathak and Tripathi insist that to ensure the long-term profitability and general financial health of a business, patriarchs and matriarchs must divide it and groom their intended successors as per the latter's strengths and temperaments. But what of the circumstance when a business conglomerate is left without heirs to pass on the baton to?

Having contended with the uncertainty of successors several times during its long existence, the Tata group is an interesting example of an Indian business family increasingly separating ownership/leadership from management. In fact, Ratan Tata, Chairman Emeritus, was the last person to hold the chairmanship of both Tata Sons, the principal holding company in the Tata group, and Tata Trusts, which holds a 66 per cent stake in Tata Sons. The two roles have recently been bifurcated by the Tata Sons board in favour of the company being run by a professional (i.e. N. Chandrasekharan for the next five years at least) and the philanthropic body of trusts being headed by a Tata family member (most likely, the newly-inducted trustee Noel Tata). In this way, the Tata family aims to ensure the continued growth of the Tata businesses without giving up its unparalleled sway and control in the empire.

In a similar fashion, last year, Dr. Anish Shah became the first professional managing director and CEO of the Mahindra group after Chairman Anand Mahindra stepped down from his executive role. Although Mahindra has two daughters, Aalika and Divya, the latter haven't joined the company. A few years ago, Anand responded to a query about why that was so: "I think it's a good question because it means that women are being accepted as inheritors of corporate legacies. In my case, my daughters have made their own choice," he said, indicating that his children had no desire to pursue professional careers in the Mahindra group. Moreover, he added, "We don't view Mahindra as a family business... We've never viewed ourselves strictly as a family company. I thought for many years that I'd be a filmmaker and it didn't bother my father at all. There are absolutely no dynastic inclinations in my family... We have a tradition of allowing our children to follow their hearts. And that's what my daughters are doing and I'm very pleased."

Soumya Duggal

Former Feature Writer

Science & Technology

How Generative AI Is Revolutionizing the Travel Industry

GenAI won't displace travel agents; instead, it will enhance their efficiency, enabling them to focus on crafting tailored experiences that resonate with travelers on a deeper level.

Starting a Business

5 Steps to Move Beyond Small Talk and Start the Business You've Always Dreamed of

Make your business idea a reality by following these five no-nonsense steps.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Growing a Business

Free Webinar | July 10: How to Get Your Products Sold in Stores

Join Ross MacKay, co-founder of Daring and founder of Cadence, as he shares his expertise on successfully getting your products onto store shelves. With experience in placing products in over 40,000 stores nationwide, Ross will provide actionable insights on creating a demand-driven brand from the start.

Business News

Mark Cuban's Google Account Was Hacked By 'Sophisticated' Bad Actors

The "Shark Tank" star said someone "called and said I had an intruder and spoofed [Google's] recovery methods."


Inflation's Next Victim Is Your Freedom — Here's Why

We get it… Most people are tired of hearing the same old story about how the American Dream is dead; however, there's a different, more bleak aspect to that reality that far too few people have yet to realize.