Tata Trusts' opposition may delay Chandrasekaran's fresh term and Tata Sons' IPO by months, warns governance expert

Tata Trusts' opposition to N Chandrasekaran's reappointment as Executive Chairman of Tata Sons could trigger months of uncertainty over both his tenure and the group holding company's proposed listing, Shriram Subramanian, Founder and Managing Director of InGovern Research Services, has warned.

The Tata Sons board on Thursday approved Chandrasekaran's reappointment for a further five-year term after he agreed to reconsider his earlier decision to step down when his current tenure ends on February 20, 2027. The board's decision was not unanimous.

Also read: Tata Sons approves five-year extension for N Chandrasekaran to prepare for IPO


Tata Trusts chairman Noel Tata voted against the resolution, and the Trusts have since called it a "legal nullity" under Tata Sons' Articles of Association, arguing that Trust-nominated directors must vote unanimously on such matters.

Subramanian told ANI that most board members appeared to favour continuity ahead of Tata Sons' impending IPO, and that the board's move also reflected efforts to comply with Reserve Bank of India norms applicable to an Upper Layer NBFC. He said the standoff was fuelling friction between the Trusts and Tata Sons and could eventually land in court.

Both the reappointment and the proposed IPO will need shareholder approval, Subramanian said, and Tata Trusts, which along with the Sir Ratan Tata Trust and Sir Dorabji Tata Trust holds around 66 per cent of Tata Sons, could vote down both decisions at the Annual General Meeting later this year.

He argued that shareholder rights take precedence over board decisions under the Companies Act, adding that Noel Tata's opposition could ultimately prove decisive. As he put it, "Mr Noel Tata and Tata Trust's views may overall prevail."

The reappointment saga has played out over several months. Chandrasekaran first told the board on August 12 that he would not seek another term, citing unresolved differences after a February board meeting failed to back his extension.

Also read: Tata Trusts opposes Chandra’s return as Tata Sons' chairman, calls it ‘illegal’

The Nomination and Remuneration Committee subsequently asked him to reconsider on September 3, setting up Thursday's vote. Tata Trusts maintains that his August 12 decision had already "attained finality" and had advised Tata Sons to begin selecting a successor.

The episode comes as the RBI pushes Tata Sons toward a mandatory listing after rejecting the company's bid to surrender its registration as a core investment company. Shares of Tata group firms, including Tata Chemicals and Tata Investment Corporation, both of which hold stakes in Tata Sons, rose sharply on Thursday following the reappointment news.

(With inputs from ANI)