Maharashtra Trust Ordinance: Tata, Birla Groups Brace for Governance Overhaul Amidst Succession Reforms

Economy

|

Updated on 16 Nov 2025, 01:15 pm

Maharashtra is set to implement a significant ordinance in 2025 under the Maharashtra Public Trusts Act, fundamentally altering how charitable trusts are structured and managed. The new rule caps the number of perpetual trustees to a maximum of 25% of the total board strength. This necessitates a move away from informal succession arrangements towards documented systems for trustee rotation, reappointments, and future leadership pipelines, especially for large promoter-linked trusts historically characterized by generational continuity and concentrated control.

Experts highlight that this reform will particularly impact major business houses like the Tata and Birla groups, which hold substantial stakes in listed companies. Ankit Rajgarhia, Designate Partner at Bahuguna Law Associates, suggests this may lead to less concentrated control and broader representation within these influential entities. The cap on lifetime trusteeships forces institutions that relied on entrenched leadership to develop more deliberate and forward-looking transition plans. This is crucial where trusts wield influential equity positions, such as Tata Trusts' majority holding in Tata Sons.

B Shravanth Shanker, Advocate-on-Record at the Supreme Court of India, notes that the change could dilute entrenched leadership and mandate careful succession planning, pushing trusts towards formalized policies, clearer appointment criteria, and defined leadership pathways. The ordinance introduces a uniform definition of perpetual and tenure trustees, limiting lifetime positions regardless of past practices. Trusts with ambiguous categories or deeds must reassess appointments and redesign board structures. For instance, the Sir Dorabji Tata Trust is converting life appointments to fixed terms for compliance.

One emerging strategy for trusts is board expansion, allowing them to maintain the maximum permissible number of perpetual trustees while adhering to the 25% limit. Gaurav Ghosh, co-founder of DLC Law Chambers, points out that boards may strategically increase membership. This recalibration helps balance continuity with the legal requirement for broader representation, particularly for promoter-driven trusts with substantial equity stakes.

The ordinance also ensures more regular board turnover, reducing concentrated authority. Alay Razvi, managing partner at Accord Juris, states the reform encourages periodic rotation and necessitates well-defined tenure policies for non-lifelong trustees. Trusts accustomed to long tenures must prepare for structured reshuffling and periodic performance reviews.

The ordinance's immediate applicability, pending ratification, adds urgency. Resolutions passed after September 1, 2025, require scrutiny for compliance. Legal experts also warn of interpretive grey zones for resolutions taken before September 1 but implemented afterward, posing risks for delayed governance redesign. This is exemplified by Venu Srinivasan's tenure at SDTT being changed to three years after an earlier life reappointment.

Overall, the ordinance drives a decisive shift toward structured, transparent, and periodically refreshed governance. Trusts face the dual challenge of preserving their heritage and strategic intent while adapting to a regime designed to broaden accountability and make leadership transitions predictable.

Impact This ordinance significantly impacts the governance structure of charitable trusts in India, particularly those with substantial holdings in listed companies. It will lead to changes in leadership continuity and control mechanisms for major business groups. The direct effect is on the trusts themselves, with indirect implications for the management and strategic direction of companies where they hold significant influence. Rating: 6/10

Difficult Terms Perpetual Trustees: Individuals appointed as trustees for an indefinite term, essentially for life. Succession Planning: The process of identifying and developing future leaders to fill key positions within an organization. Board Strength: The total number of members on a board of directors or trustees. Promoter-linked trusts: Trusts established or controlled by the founders of a business group or their descendants, often holding significant stakes in the group's companies. Equity positions: The ownership stake (shares) a trust or entity holds in companies. Trustee renewal: The process of reappointing existing trustees or appointing new ones after their term ends. Governance redesign: The process of changing the rules, policies, and structures that govern how an organization is directed and controlled.