End to family drama: How India’s smaller family businesses are investing in succession planning & family constitutions

Venkateswaran Doraisamy did not want to join the family business. His dream in college was to start up and give wings to his entrepreneurial spirit. Fate had other plans.

His father passed away, leaving him—the oldest son—to captain the family business. He toiled alongside his uncle to scale the business his enterprising grandfather had set up in the textile town of Erode in Tamil Nadu. But soon challenges cropped up. A key issue—the presence of multiple family members on the rolls of the company and their effort, or the lack of it. The result? The family split. These days Doraisamy, 63, and his younger brother Shanmugasundaram handle a separate company, CD Technotex, involved in woven packaging. There, the brothers are implementing lessons from their lived experience.

Since the split, they have worked on a family constitution and formalised succession. Shanmugasundaram, 53, recalls, “We started off with drafting the value systems our father had right from our grandfather’s days in order to capture the culture and ethos of the family. Then we found a guide who helped us through the workings of how to draft such a family constitution.”


Doraisamy’s is one among many examples of how tightly held, closely knit, family-run businesses are learning from their bigger brethren.

Formalisation of succession, organised carving of businesses and setting up of family constitutions are no longer limited to conglomerates like Godrej, Murugappa Group, or the TVS Group. In a country dominated by such businesses run by families, formalisation—through succession planning and family constitutions —is changing the foundation of a key growth engine.

THE WRITTEN WORD
The draw of succession planning, according to Falguni Shah, partner and leader, entrepreneurial and private business at PwC India, is driven by experience—conflicts, stagnation, or abrupt leadership changes have shown small businesses the cost of being unprepared. “A well-thought-out succession plan today is the blueprint for harmony and sustainability tomorrow.”

Bringing structure to the entire organisation is seen as key. Shah says small businesses “are drawing up family charters, defining roles and setting up decision-making protocols”.

A key trigger for this has been fundraising. “Whether it’s through venture capital, private equity, or going public, investors expect clarity on leadership continuity and governance. A professionally run business with a clear succession roadmap is no longer optional—it’s expected,” says Shah.

Traditionally, succession was largely driven by familial ties. Decisions were mostly taken by the family patriarch, often prioritising lineage over merit.

The most prevalent structure—the Hindu Undivided Family (HUF)—a tax-saving entity consisting of all direct descendants of a common ancestor, is not considered ideal, partly because the only way an HUF can be dissolved is by partition. With all additions to the family, by way of birth or marriage, becoming a member, HUFs can often be too large to manage.

It often leads to internal conflicts, unclear roles, disruptions in business continuity and a lack of formal planning.

Ninety per cent of listed companies in India are family-controlled, yet only 63% have a formal succession plan in place, according to PwC’s 11th India Family Business Survey. “The risks of not planning are far too high,” says Shah.

HELPING HAND
Where there is demand, there is supply.

Corporate advisories and law firms have built a separate practice to cater to the uptick in succession planning.

The spike in enquiries is keeping Rajmohan Krishnan, principal founder of Entrust Family Office, a wealth management, legacy and succession planning firm, busy. “We are seeing this in every location in India—mostly among old-school businesses,” he says. “Whether it is Chennai, Coimbatore, Pune or even places like Mysuru, there is a huge understanding of the need for succession, and I would say that it is a function of exposure.”

Others agree. “Indian families have increasingly realised the importance of putting together a clear framework to succession planning— to protect wealth for current and future generations, and a means of avoiding conflict. One wants to avoid the risk of a dispute or a poor decision impacting the larger interests of the family,” says Vivek Sriram, partner, Khaitan & Co.

The team at that law firm comprises experts across practice areas, including corporate law, regulatory, tax and succession laws, as well as cross-jurisdictional expertise.

TRICKY TERRITORY
Navigating familial dynamics isn’t easy, and that’s where advisory services come in.

Kanishka Arumugam, co-CEO of Coimbatore-based EKKI Water Technologies, knew that he would eventually inherit his father’s business. Yet, he says, there were differences in style between him and his father when it came to their vision and approach to business growth.

“Personally, we have always shared a strong bond,” he says. “Professionally, however, we are like chalk and cheese, especially in the eyes of those who have worked with him for decades.” That was what prompted Arumugam to seek professional guidance.

A key aspect of the advice he got was to diversify the business and move into new verticals, something that Arumugam could call his own. “I began forging international partnerships,” he says. “This transition not only opened new growth avenues but also helped me build credibility— not as an entitled heir, but as someone creating tangible value.”

Navigati ng such tricky issues is time consuming.

As Krishnan says, “It does take a lot of effort from all stakeholders, and while we have seen many more requests pouring in, the sense of urgency in allocating time to something like this is definitely low.”

That also makes the process a tad expensive. According to Krishnan, if the parties are available, it takes 9 to 12 months to close out a project. That’s one of the reasons why an exercise like these costs upwards of “Rs 50 lakh to some crores”.

In multigeneration families, there could be some who want to continue leading the business, while others might want to branch out as entrepreneurs or as working professionals. As Vivek Subramaniam, founder of advisory firm Above N Beyond, says, “The next generation wants the flexibility to make those choices. In parallel, we need to work out how the wealth and investments are managed and structures like family offices worked out.”

Subramaniam highlights two broad dimensions to the work:

??Multigenerational continuation of the families through protection of wealth, ethos and values, defining the family charter.

? Structuring business ownership, operations and governance mechanisms.

The latter includes how differing points of view are brought to the table and decisions made. This may mean setting up structures like family boards and deciding between family management or professional leadership.

There is no one template that works for every family. There needs to be dialogue, and the outcome is then spelt out in a family charter to avoid future disagreements and litigation.

“Drawing up family charters for businesses needs laser-focus and bandwidth, given how nuanced and detailed they need to be,” says Subramaniam. “At any given point of time, we don’t work with more than two families.”

SUCCESSION OR CONSTITUTION
Krishnan is currently working on a project with a Coimbatore-based textile family that wants to understand how they can preserve their business and grow it without conflict among siblings.

“We have begun working on creating a family constitution that will have a governing council that will ensure continuity of business and conflict resolution,” says Krishnan. “It will also lay down a structure that addresses how conflicts can be resolved, what are the different things that family members can do or cannot do, who will be the arbitrator within the family, or who has a veto.”

While there are many waking up to the value of both succession planning and family constitution, there are some who are not in a hurry to draft the latter, certainly not as a rigid document.

“My grandfather passed away about 11 years ago, so he was the charter when he was around,” says Shankar Vanavarayar, president of Coimbatore-based Kumaraguru educational institutions. “But he also gave us a framework of operation which brought some clarity while also allowing some fluidity to exist because a family has to be mature and accommodative while also being aspirational.”

Vanavarayar adds that the family is thinking more about having a family office or a wealth management practice where it will be defined how the structures will be held and how to plan for the future. “Our approach is more to make it like a matrix rather than a rigid charter,” he says.

Virudhunagar-based spice exporter VPSA Paramasiva Nadar group, which owns the brand Thillais Masala, has not gone down the succession planning route either. “Though we have considered or spoken about it, we have never got down to actually having a written constitution,” says Jaisinh Vaerkar, managing partner, Peninsular Export Company (Thillais Masala), adding that many members are not “comfortable going into a written rigid structure”.

“We are going to have the third, fourth and fifth generations working alongside each other,” he says. “So the family may need to change to accommodate the needs of the next generation,” Vaerkar reckons.

What is clear though is that putting a formalised structure is no longer a nice-to-have. As Shah says, “It’s a strategic imperative for Indian family businesses.”