Not consulted on Tata Sons reorganisation letter: SDTT vice-chairmen

Sir Dorabji Tata Trust (SDTT) vice-chairmen and trustees Venu Srinivasan and Vijay Singh have said they were not consulted before a September 28 letter was sent to the board of Tata Sons proposing a reorganisation of the group’s holding company.

In a letter dated September 30 addressed to the trustees of SDTT, Srinivasan and Singh noted, “We were surprised to receive a copy of the letter and learn about the Press release from public sources.”

“To our knowledge, no meeting of the Trustees of SDTT was held to discuss or deliberate on this issue before the Letter was sent to Tata Sons. We were not consulted, and are not aware that the other Trustees were consulted either. It is accordingly unclear whether the Letter and the proposal it sets out have the support of all the Trustees of SDTT,” the letter by the vice-chairmen said.

The September 28 letter, issued on behalf of Tata Trusts in their capacity as majority shareholders of Tata Sons, called upon the Tata Sons board to consider a reorganisation involving the merger of Tata Electronics Systems Solutions and Tata Consulting Engineers into Tata Sons.

The stated objective of the proposed reorganisation is for Tata Sons to cease being a non-banking financial company (NBFC) or a core investment company (CIC), and in the process help it avoid going public.

Singh and Srinivasan said they were equally concerned that press releases were being issued in the name of “Tata Trusts” without the trustees of SDTT having been consulted on their content or authorisation.

“As no meeting of the trustees of SDTT authorised the letter or the press release, neither can be said to reflect the collective, institutional position of SDТТ,” they added.

The two trustees also questioned the manner in which the proposal was communicated to Tata Sons.

They said a shareholder could express its considered wishes or propose a course of action to a company, but decision-making on such a proposal was entrusted to the company’s board under law and its constitutional documents.

The Tata Sons board, they said, should independently evaluate the proposal, including its legal, regulatory, financial and commercial implications, and discharge its responsibilities in accordance with the law.

The proposed reorganisation involves the merger of two operating companies, regulatory approvals and the surrender of Tata Sons’ certificate of registration, the trustees said.

Given its implications, they said the proposal warranted consideration of its legal, financial, commercial, governance and institutional consequences, along with the underlying material and analysis, before any position was expressed in the trust’s name.

The trustees also raised concerns about the implications for the charitable status of SDTT and Sir Ratan Tata Trust (SRTT) if their communication were construed as an attempt by a public charitable trust to direct the commercial decision-making of a company, rather than exercising shareholder rights.

“This is an issue which the Trusts had fought during RNT’s time,” they said, referring to Ratan Naval Tata.

They questioned whether the current actions could endanger the position of the trusts and the underlying asset value of the trusts.

Srinivasan and Singh also referred to the Reserve Bank of India’s (RBI’s) September 11 response to Tata Sons’ application to surrender its certificate of registration, where the RBI directed Tata Sons to comply with norms applicable to an NBFC-Upper Layer.

The trustees said, “That regulatory change means the 2025 decisions, though appropriate when taken, cannot be treated as determinative of the options now available to Tata Sons, which warrant fresh consideration in light of the RBI's response.”

Srinivasan and Singh, in the September 30 letter, also questioned the assertion in the September 28 letter that the proposed reorganisation would be in the best interests of the Tata Group and its stakeholders.

They said such a conclusion required careful and informed consideration of the consequences for Tata Sons, the Trusts and their respective interests, as well as the implications of alternative courses available to Tata Sons following the RBI’s recent position.

They added that the proposed reorganisation “may also have serious financial consequences” for Tata Sons, SDTT and other stakeholders, including group companies, employees and regulators affected by the amalgamation and a change in Tata Sons’ regulatory status.

The two vice-chairmen called for collective deliberation by SDTT trustees, saying the trust’s decisions derived their legitimacy from collective deliberation and proper governance processes.

They said all trustees should have an opportunity to consider the relevant material and participate in decision-making, particularly when communication was made in the name of the trust and carried its authority and reputation.