Family businesses have always been an integral part of nation’s growth story. In India, majority of the businesses are family-run. There is enough and more data to prove how difficult it is for Indian family businesses to survive across generations with challenges of evolution of the extended family and their role in business. There are only a handful of family businesses who had the vision for succession planning and were able to preserve their business and personal assets across multiple generations. Globally, only around 30% of family businesses make it to the second generation, and a mere 10–15% survive into the third. In India, the challenge is just as stark.
Family business houses such as the Muruguppa group, Dabur Goup and Godrej have successfully managed their ownership and management succession. Improper succession planning, non-professional management and conflicting businesses & family interest have hurt the fortunes of many Indian business houses. The case of Vijaypat and Gautam Singhania has turned out to be a classic case of lackadaisical attitude towards appropriate structure for management continuity and aligning ownership interest. An effective plan ensures that the families retain control over the business and a smooth transition of leadership and ownership. One of the biggest challenges in case of family businesses is to protect economic interest of the family members along with continuity and growth of business.
The split in family businesses can be attributed to various factors such as Asian families are now becoming increasingly exposed to western influences, with younger generation having a radically different outlook on life and success. The new generating aggressive management style and growth plans clash with the previous generation conservative stance. There are essentially three distinct dimensions that needs to be addressed in any family business: the survival of the clan, relationship and interaction amongst family members (values succession) and future ownership of the assets, including shares in the operating business (ownership succession).
Adopting Trust route…
Earlier, India had estate duty (1953 - 1985). The Trust structures were primarily set up for avoiding estate duty that was imposed on total wealth transferred to legal heirs at the time of death. After abolition of estate duty, families have been skeptical of Trust structures. However, there has been a gradual shift in the landscape where wealthy patriarchs and matriarchs are beginning to consider formal arrangements in terms of succession planning for their businesses and family.
Traditional structures like the Hindu Undivided Family (HUF), once popular for succession, are now increasingly seen as inadequate to deal with today’s complexities. Families are turning to Trusts for their flexibility, ability to handle multiple asset classes, and protection from unforeseen future liabilities, such as creditor claims, family disputes, or divorce settlements. Additionally, with recurring speculation about the possible reintroduction of inheritance tax in India, many families are proactively using Trusts to safeguard wealth.
Increasingly, business-owing families are transferring their shares in Trust rather than transferring stocks outright to family members. For instance, the Ambani family has reportedly used a Trust-based structure to manage family shareholding in Reliance, ensuring alignment between ownership and governance across generations. Similarly, the TVS family, which successfully completed a peaceful split of its businesses among family branches in 2022, relied on carefully crafted family agreements and Trust frameworks to achieve an amicable division. The Burman family of Dabur has also used family Trusts to centralize ownership while delegating management roles to professional leaders, ensuring that business interests are protected from family-level disagreements.
Without adequate succession planning, growth can stagnate, management may become disillusioned and value destruction could follow at alarming speed. The inability to communicate with family members on their role in the business has resulted in conflicts that have ruined family businesses. The owners of closely held businesses should consult experts/professionals for setting up a suitable structure that supports family businesses in different areas that would aid enhanced happiness of individuals, strengthen bonds of family members, and make their personal and business wealth more robust.