Bengaluru | Mumbai: The Tata Sons board succeeded in rebelling against the majority shareholder’s view on on Thursday. But Chandrasekaran’s appointment as a director won’t get majority approval even if one of the two main Tata Trusts does not vote.
Tata Trusts is an umbrella entity that comprises 14 philanthropic entities, seven of which own shares in Tata Sons. Sir Dorabji Tata Trust (SDTT) and Sir Ratan Tata Trust (SRTT) are the largest shareholders, owning 27.98% and 23.56%, respectively. Cumulatively, the two principal shareholders own 51.54%.
SDTT oversees eight smaller trusts, three of which own shares in the group’s holding company. JRD Tata Trust, Tata Social Welfare Trust and RD Tata Trust own 4.01%, 3.73%, and 2.19%, respectively. The SDTT alliance has 37.91% voting rights.
SRTT has four smaller philanthropic entities, two of which also own shares of Tata Sons. Tata Education and Development Trust and Sarvajanik Seva Trust own 3.73% and 0.1%, respectively. So, the SRTT bloc has 27.39% voting rights.
A small philanthropic entity, MK Tata Trust, outside Tata Trusts, owns 0.6%.
Put together, all philanthropic entities own 65.9% of Tata Sons.
The Shapoorji Pallonji family owns 18.38%, while nine Tata Group companies own 12.86% of Tata Sons. Seven individuals own the remaining 2.87% of Tata Sons shares, bringing the total non-trustee shareholding to 34.1%.
Incidentally, Noel Tata is the single largest individual shareholder, owning 1% of the shares. Ratan Tata owned 0.83%, while his brother Jimmy Tata owns 0.81%.
Permanent trustees
A 15 May Maharashtra Charity Commissioner order SRTT from undertaking any business. This was after Tata Trusts vice chairman Venu Srinivasan, who is also a Tata Sons board member, complained to the charity commissioner that the number of permanent trustees at SRTT exceeded what the new rules allowed.
Starting 1 September last year, the charity commissioner said the number of permanent trustees cannot exceed a fourth of the total trustees. Three of SRTT’s five trustees are permanent trustees. Tata Trusts maintains that all three SRTT trustees—Noel Tata, Jimmy Tata and Jehangir HC Jehangir—were made permanent trustees well before the Maharashtra Public Trust rule took effect late last year.
“It is the understanding of the Tata Trusts that the said amendment is prospective in nature and does not affect the appointments of perpetual trustees made prior to its coming into force on 1st September 2025. This is substantiated by both opinions and clarifications obtained by the Tata Trusts,” said Tata Trusts.
For now, SRTT cannot undertake any business. SRTT and its five related smaller trusts, which own 27.39%, cannot use their voting rights at the shareholder meeting.
This means only 72.61% shareholders can vote to reappoint Chandrasekaran as a director of Tata Sons, a decision shareholders were supposed to approve on 18 August at the annual general meeting. However, because SRTT and SDTT could not send a representative together, and it was deferred because not enough members were present.
Chandrasekaran’s reappointment needs approval from half of the voting shareholders, since it is a simple resolution. This means approval from 36.31% of the shareholders.
Against Chandrasekaran
As at Thursday’s meeting and Tata Trusts called the decision “illegal.” Noel’s 1% shares—along with the 37.91% owned by the SDTT bloc—bring the total to 38.28%. This means 52.7%, or more than half of the shareholders who vote, are against Chandrasekaran continuing as director of Tata Sons.
Simply put: Even if all the non-trustee shareholders vote together, they cannot keep the current chair of Tata Sons as director.
“Tata Sons’ board has violated the basic governance principle of shareholder supremacy. The mutiny of the board against the controlling shareholder is possibly a first, and not the right precedent for corporate India,” Institutional Investor Advisory Services, a proxy advisory, wrote in a note on Friday. “We are not arguing who is right, just that despite both Tata Trust nominees not forming consensus, the board took decisions that may not carry if voted on, rather than having them deferred till consensus between the two Tata Trust nominees was reached.”
However, this calculation depends on when Tata Sons holds its AGM and if that meeting can happen without SRTT taking part.
For now, the ministry of corporate affairs has given Tata Sons a three-month extension, meaning the privately owned company must hold a meeting before 18 November.
Tata Sons did not respond with a timeline for convening a shareholder meeting and did not reply to the questionnaire. An email sent to Tata Trusts seeking comment went unanswered.
“The Tata Sons board has not fixed a problem today. It has created a much bigger one,” said Nitin Potdar, a Mumbai-based independent corporate lawyer. “A board owes a fiduciary duty to all its stakeholders: shareholders, employees and the public who trust the Tata name. Here, it seems to have acted in a hurry. Was it not worth discussing with the majority shareholder first? The damage to the group’s reputation is far too big, and those directors must take responsibility for it.”