Is a Trust Really a Good Governance Structure?

We often treat a trust as synonymous with good governance.

But should we?

A trust can provide continuity, protect assets from short-term pressures and preserve an institution's mission across generations.

But there is a fundamental trade-off:

Control and economic benefit can be separated.

Unlike a conventional company, beneficiaries do not necessarily have the same direct voting rights that shareholders have over directors. Their ability to influence or challenge trustees depends on the trust deed and applicable law.

That creates a deceptively simple question:

The question becomes even more important when a trust sits above a large operating business.

The further down the chain we go, the greater the potential distance between those making decisions and those affected by them.

01Tata makes the question real

Tata Trusts collectively hold approximately 66% of Tata Sons, the principal holding company of the Tata Group.

For decades, this structure has been presented as a way of preserving the Tata philosophy beyond individual shareholders and generations.

The autumn of 2026 has put that structure under visible strain.

On August 12, N. Chandrasekaran informed the Tata Sons board that he would not seek another term when his tenure ends in February 2027. Tata Trusts accepted his decision and initiated a selection committee to find a successor.

On September 17, the board considered a resolution to reappoint him as chairman for another five years. Chandrasekaran recused himself, and independent director Harish Manwani presided.

The two Tata Trusts nominee directors split. Noel Tata voted against the resolution, while Venu Srinivasan voted in favour. Manwani exercised a casting vote to break the tie between the nominees, and Tata Sons treats the resolution as passed 4–1.

Tata Trusts disputes its validity. Its position is that the affirmative support required from its nominee directors cannot be replaced by a casting vote. It relies on an opinion from former Chief Justice of India D.Y. Chandrachud.

Tata Sons maintains that the resolution is valid. It cites legal opinions from former Chief Justice of India U.U. Lalit, former Supreme Court judge B.N. Srikrishna and senior advocate Sudipto Sarkar, and points to Chandrasekaran's 2022 reappointment as precedent.

These are competing legal positions. No court has ruled on them.

So the question is no longer merely: Who owns Tata Sons?

It is becoming: Who has the authority to exercise that ownership?

02The machinery itself stalls

Tata Sons' AGM on August 18 was adjourned for want of quorum, the first such delay in the group's history.

The immediate cause lay with the regulator. The Maharashtra Charity Commissioner has barred the Sir Ratan Tata Trust from holding meetings pending an inspector's inquiry. Tata Sons' quorum rules require a representative jointly nominated by the Sir Ratan Tata Trust and the Sir Dorabji Tata Trust, and the restrictions prevented that nomination.

According to SRTT's own submission before the Commissioner, the orders restricting it were issued in May on complaints that included one from Venu Srinivasan.

The Registrar of Companies has given Tata Sons until December 31, 2026 to hold the AGM. As of October 21, no fresh date has been announced and no application to the NCLT has been reported.

03The future of Tata Sons is also in dispute

The governance question extends beyond the chairman.

On September 11, the Reserve Bank of India rejected Tata Sons' application to surrender its Core Investment Company registration. This brought the long-deferred question of a public listing to a head.

At the September 17 meeting, the Tata Sons board reportedly approved moving towards a listing. Noel Tata opposed it. He maintained that the RBI's letter did not direct the company to list, and asked the board to examine alternatives.

On September 28, Tata Trusts proposed merging two unlisted operating companies, Tata Electronics Systems Solutions and Tata Consulting Engineers, into Tata Sons. The aim is to change its regulatory classification so that it can remain unlisted. The plan would need the RBI's approval, and the board has yet to act on it.

On October 19, The Economic Times reported that Tata Sons has begun a preliminary review of its rules on board appointments, independent directors and shareholder rights, to align them with SEBI's listing framework. No amendments have been approved.

So the question is not simply whether Tata Sons should remain private or become listed.

It is also: who has the authority to decide the institution's future structure, the controlling shareholder or the board?

04And then another governance question emerges

Recent reporting has brought another relationship into the picture.

Chandrasekaran's wife, Lalitha, and son, Pranav, are directors of Hanno One Warehousing Pvt Ltd, incorporated in March 2025.

About three months later, TVS Motor leased approximately 17 acres near its Hosur plant in Tamil Nadu to Hanno One for 29 years. According to company filings, Hanno One is building a facility on that land which TVS Motor is expected to occupy and pay rent for.

Mint has since reported a second Hanno One project near TVS Motor's Mysuru plant, a proposed industrial park of about ₹330 crore. Together, the two projects carry a reported proposed cost of around ₹436 crore.

TVS Motor's chairman emeritus is Venu Srinivasan, the Tata Sons director who supported Chandrasekaran's reappointment. Srinivasan also serves on the Tata Sons Nomination and Remuneration Committee, which reviews the chairman's performance.

None of this, by itself, establishes wrongdoing or an improper vote.

But it raises a legitimate governance question:

The parties disagree on the answer.

Tata Sons has maintained that Hanno One's incorporation was disclosed to the relevant boards in April 2025, and that the later TVS Motor transaction did not require separate disclosure because TVS Motor is an independent listed company. Reporting has also noted that Hanno One is not a related party of TVS Motor under the statutory framework, since Chandrasekaran is not a TVS director.

Tata Trusts says the relationship was not disclosed to its trustees, and has questioned whether the Tata Sons board was informed.

The issue is broader than whether a transaction falls within a statutory definition. Legal obligations, codes of conduct and good practice on perceived conflicts do not always share the same boundaries.

05The trustees themselves are now in dispute

In October, the disagreement moved inside the Trusts.

Srinivasan and fellow vice-chairman Vijay Singh have complained to the Maharashtra Charity Commissioner about the governance of the Sir Dorabji Tata Trust. Their complaint questions Noel Tata's perpetual trusteeship and the Trust's involvement in Tata Sons' commercial affairs.

On October 19, the Sir Dorabji Tata Trust filed its reply with the Commissioner. Tata Trusts has not disclosed its contents, and the Commissioner has not yet ruled. The interim restrictions the complainants have sought remain requests, not findings.

Four other SDTT trustees, including Noel Tata, have written to Tata Sons. They accuse the two of departing from the Trusts' settled position against a listing, and of taking their disagreements into the public domain.

Noel Tata and his son Neville have also filed a caveat in a Mumbai civil court naming four fellow trustees. A caveat is a precautionary legal step, not a finding against anyone.

Trustees are now asking the regulator to examine the governance of their fellow trustees.

The opening question of this article is no longer theoretical.

06And the deed still speaks

A separate matter before the same Commissioner adds one more dimension.

Former trustee Mehli Mistry has challenged trustee eligibility at the Bai Hirabai Jamsetji Tata Navsari Charitable Institution, an allied Tata trust. He relies on clauses in its 1923 trust deed concerning faith and residence. Tata Trusts disputes his standing to object, and has separately moved to remove those restrictive clauses.

Whatever the outcome, the structural point remains:

A deed written more than a century ago can still shape who may govern today.

That is a trust's greatest strength: permanence. It can also be its greatest rigidity.

07What these disputes reveal

A structure designed to provide continuity beyond individuals is now facing several governance questions at once.

• Trustees have taken their disagreements to the regulator and the courts.
• Directors disagree over a chairman's reappointment.
• The board and the controlling shareholder have taken different positions on listing and restructuring.
• A regulator's restrictions have affected a principal shareholder's ability to participate in corporate decisions.
• Questions have been raised about disclosure and conflicts of interest.
• And a century-old trust deed remains relevant to who may serve as a trustee today.

That does not prove the trust model is wrong.

But it does show the stress points that any trust-controlled institution must be equipped to manage.

08And then there is the SP Group

The Shapoorji Pallonji Group represents a different set of interests.

It is Tata Sons' largest minority shareholder, with approximately 18.4%. Unlike the philanthropic trusts, its interest is fundamentally an economic one: a substantial investment in an illiquid private company.

The SP Group has backed a listing of Tata Sons. It is also seeking to monetise part of its stake. The proposal tabled at the September 17 meeting contemplates a selective capital reduction, in which Tata Sons would buy back about 3% of the company for roughly ₹25,000 crore, in two tranches over 18 months. No board decision has been reported. On October 21, The Economic Times reported that the SP Group has asked Tata Sons to take up the proposal on priority at its next board meeting, with the proceeds to be used for debt repayment.

So we have two shareholders with very different priorities:

Neither objective is inherently illegitimate.

But together they raise a difficult question: how should a trust-controlled institution balance its founding purpose with the legitimate economic interests of minority shareholders?

09Can one ownership architecture reconcile fundamentally different interests over generations?

A trust may be excellent for preserving a purpose.

But preserving purpose and ensuring accountability, transparency and effective decision-making are different objectives.

The lesson extends well beyond Tata.

Any large trust controlling substantial commercial assets should be able to answer these questions:

These are not arguments against trusts. They are tests of whether a trust's governance is strong enough for the responsibilities it carries.

A structure designed to preserve wealth or purpose for generations is only as strong as the accountability built into it.

The Tata situation is a live example. The disputes now span who can appoint the chairman, who can exercise the controlling shareholder's rights, whether the AGM can proceed, how conflicts should be handled, who may serve as a trustee, how the institution should be structured and how minority capital can exit.

That does not necessarily mean the structure has failed.

But it does force us to ask: