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Indian family businesses: Governance begins at home
Indian family businesses: Governance begins at home

Mint

time3 days ago

  • Business
  • Mint

Indian family businesses: Governance begins at home

A recent working paper from the Institute of Labor Economics (IZA) ( reaffirms the outsized role that family business groups play in shaping India Inc. It found that even as overall market concentration in India has declined, the top 25 family business groups still accounted for 11-15% of the country's GDP in 2020. Regulatory measures like the Companies Act of 2013 and the Companies (Restriction on Number of Layers) Rules, 2017, were designed to curb excessive complexity. Yet, while these rules aim to check concentration, they overlook a more critical issue: governance. As the paper notes, family business groups, regardless of size, often share a common design principle: intricate 'interconnected governance structures" that consolidate control through concentrated ownership. These structures may make business continuity easier in the short run, but unless carefully stewarded, they risk entrenching poor decision-making, succession disputes and opaque accountability. Also Read: Lodha vs Lodha: Why family names as brand names are always tough to disentangle Why does this matter today? Because Indian family businesses are navigating multiple transitions—generational, structural and financial. Many are preparing for initial public offers, courting private equity or exploring succession. Regulatory scrutiny around related-party transactions has increased. Next-generation members are demanding clearer roles, merit-based advancement and purpose beyond profit. Amid this churn, families are rushing to adopt governance tools, hoping these will future-proof the business. However, governance in promoter-driven companies and family businesses is not one-size-fits-all. Family firms face unique internal agency problems quite different from the classic principal–agent conflict, where managers pursue their own interests at shareholders' expense. In family firms, founders may act out of parental altruism, favouring children even when it harms the business. Siblings and cousins may engage in family opportunism, extracting private benefits or hoarding power. The effectiveness of governance tools hinges on understanding these conflicts and the firm's lifecycle stage. Also Read: The TVS Group's nuclear family pact is path-breaking Indian family businesses urgently need to understand this. Governance failure in family firms is rarely because of missing rules. More often, it is due to unresolved relationships. Early-stage family firms often run on trust, charisma and shared ambition. But as the business scales and the founder ages, these invisible levers weaken. Younger members want autonomy. Non-family professionals want clarity. Ownership begins to fragment. At this point, informal trust must evolve into formal governance—forums for dialogue, decision-making norms and dispute resolution mechanisms. And later, as ownership dilutes and family involvement reduces, the business must transition again—towards institutional governance with independent oversight, performance accountability and delegated authority. But here's the catch: Governance mechanisms are not interchangeable. A board cannot fix a sibling rivalry. A constitution cannot resolve a lack of emotional readiness. A 2017 study by Aaken, Rost and Siedl ( rightly warned against the blunt import of governance tools without an assessment of their fit. Also Read: The Godrej split holds valuable lessons for family businesses So what does good governance look like in this moment of flux? It begins with a sense of shared purpose, which precedes structure. Why does the family want to stay in business together? What values do they share? What trade-offs are they willing to make—say between profit and legacy? Without alignment on these vital questions, governance tools won't work. Governance also requires both management and ownership competence. Being a good owner is a learnt skill. Yet, in India, successors are often thrust into leadership without adequate preparation. Families must invest in the next generation's development, not only through MBA degrees, but through lived exposure to decision-making, conflict and ambiguity. Equally essential is emotional maturity. Governance in family firms is fundamentally about managing multiple loyalties—to the business, to the family and to oneself. It means having hard conversations early and learning to let go with grace. This cannot be outsourced to advisors. It must be lived and led from within. Good governance is also adaptive. What a founder-led business needs is very different from what a sibling partnership or a cousin consortium requires. Over-governing a young tightly knit firm can breed resentment. Under-governing a sprawling third-generation group can spell disaster. Also Read: Raymond Group demerger: The hidden lesson for Indian family businesses Finally, families must resist the urge to conflate governance with professionalization. The two are not the same. A business may have a professional CEO, but without clarity on family expectations, unresolved succession plans or informal interference, chaos is likely to follow. As the IZA study reminds us, India's economy continues to be shaped disproportionately by family business groups. If India's family businesses are to remain not just enduring but enriching forces in the economy, governance must evolve from a box-ticking exercise to a deliberate, values-driven practice. The future of India Inc may well depend on what happens not just in boardrooms, but around family dining tables. These are the author's personal views. The author is professor of economics and policy and executive director, Centre for Family Business & Entrepreneurship at Bhavan's SPJIMR.

One-person companies, LLPs are driving the Indian economy's formalization
One-person companies, LLPs are driving the Indian economy's formalization

Mint

time03-07-2025

  • Business
  • Mint

One-person companies, LLPs are driving the Indian economy's formalization

NEW DELHI : India is witnessing a rise in businesses with simplified compliance requirements—such as one-person companies and limited liability partnerships (LLPs)—indicating growing formalization of the economy, according to data from the ministry of corporate affairs. In the January-May period, 6,281 'one-person companies' were formed, 26% more than the number of such flexible business ownership structures created in the year-ago period. April and May saw the number of such businesses rise by 56% and 36% year-on-year, respectively. Also Read: Investments will help India become the third-largest economy globally: Minister Gadkari These are entities owned by one individual, which, unlike sole proprietorships, have the flexibility of limited liability of a company. This simpler company format gives solo entrepreneurs the flexibility to formalize their businesses, access funds, including bank loans, and keep compliance comparatively easy. A company, on the other hand, requires a minimum of two shareholders and has to comply with more detailed regulatory requirements. In 2021, the government removed a forced conversion requirement for one-person companies to public limited or private limited companies after crossing a paid-up capital and sales-based threshold to improve their appeal and make doing business easier for start-ups. The government also reduced the residency limit for an Indian citizen to set up a one-person company from 182 days to 120 days and also allowed non-resident Indians (NRIs) to set up such structures in the country. While the Companies Act of 2013 allowed one-person companies, LLPs have existed for a longer time. These hybrids between partnerships and companies were allowed in 2008 under a dedicated LLP law. Also Read: Mint Primer: China's economy beats the gloom. Can it do more? Incorporation of LLPs saw a 27% jump in the January-June period in 2025 to 43,489 from the year-ago period. Barring February, when LLP registrations moderated, LLP incorporation so far this year has improved between 18% and 62% annually, data showed. Getting formal The rise in one-person companies and LLP registrations reflects growing formalisation and entrepreneurial activity in the country, said Ritesh Prakash Adatiya, director, NPV Insolvency Professionals Pvt. Ltd. Simplified incorporation processes, lower compliance burdens, and tax incentives have made these structures attractive, especially for solo entrepreneurs and small businesses, he said. 'Also, the rise of the gig economy and digital services has encouraged more professionals to formalize their operations. This trend supports greater economic transparency, access to finance, and job creation," he added. LLPs have become a popular business vehicle for service sector enterprises, especially start-ups, because of the flexibility allowed in the way they can be structured and the benefit of limited liability—partners' personal wealth is not at risk if the firm fails, except in cases of fraud. To be sure, entities that get incorporated either as a company, LLP or as one-person company are far fewer than those that operate as sole proprietorships and other forms of unincorporated enterprises in the country, which are major job creators and are usually referred to as the informal sector. Mint reported on 24 December, citing the statistics ministry's estimates, that the number of non-farm firms comprising proprietorships, partnerships, and self-help groups increased 12.84% to 73.4 million between October 2023 and September 2024. Also Read: Indian economy weakens in May as air travel, PV sales falter, shows Mint tracker Compared to 73.4 million unincorporated enterprises, India has 18.9 million companies, over 401,000 LLPs and over 68,000 one-person companies.

Door Open For New TV Rating Agencies As Ministry Plans Overhaul Of Norms
Door Open For New TV Rating Agencies As Ministry Plans Overhaul Of Norms

NDTV

time03-07-2025

  • Business
  • NDTV

Door Open For New TV Rating Agencies As Ministry Plans Overhaul Of Norms

The Ministry of Information and Broadcasting (MIB) has proposed an overhaul of guidelines governing television rating agencies, including the deletion of two critical clauses from the norms originally notified in 2014, that will likely open the door to more players in the television ratings space. Through these proposed changes, OTT platforms, digital distributors, and tech firms can now apply to become registered rating agencies. The relaxations are part of the ministry's proposal for amending the Policy Guidelines for Television Rating Agencies in India. Public and stakeholder feedback are invited within 30 days. Under the proposal, the Union government plans to make compulsory registration of all TV rating agencies with the Ministry, with a detailed framework on eligibility criteria, operational procedures, data standards, and compliance. The proposal also calls for scrapping of restrictions on a TV rating agency's board members, which prevented them from having ties with media businesses. It also calls for scrapping cross-holding limits, with an aim for wider industry participation. Currently, the Union government's guidelines prohibit any entity or individual from holding over 10% stake in a rating agency and a broadcaster/advertiser. Such regulations are also applicable on holdings across multiple rating agencies and do not apply to industry-led self-regulation models such as the Broadcast Audience Research Council. Besides, the proposal says companies seeking to be rating agencies must be registered under the Companies Act of 2013, instead of the Companies Act, 1956. Companies will also now be explicitly required to not undertake any activity like consultancy or advisory, which might lead to a potential conflict of interest. Earlier, this was required to be mentioned only in the company's memorandum of association. "The above provisions would come into effect immediately and would also be applicable in respect of the existing registered companies," the notice read.

Corporate sector vital to India's growth, progress: President Murmu
Corporate sector vital to India's growth, progress: President Murmu

Business Standard

time18-06-2025

  • Business
  • Business Standard

Corporate sector vital to India's growth, progress: President Murmu

President Droupadi Murmu on Wednesday said that the corporate sector is a key pillar of the nation's economic growth and development. While addressing officer trainees of the Indian Corporate Law Service, she noted that their decisions would influence not only policies and regulations but also the trust that citizens and investors have in the country's institutions. As officers entrusted with the implementation and enforcement of corporate laws, "your role will be central in nurturing a business environment that is transparent, accountable, and conducive" to innovation and entrepreneurship, the President said. "The corporate sector is a key pillar of our nation's economic growth and development," Murmu told the trainees, who had called on her at the Rashtrapati Bhavan here. Referring to the Companies Act of 2013, she highlighted their responsibility to ensure that the law is not only enforced but also understood, respected, and applied in a way that promotes justice, fairness, and opportunity for all. The officer trainees of the Defence Aeronautical Quality Assurance Service and Central Labour Service also met the President. Addressing the trainees, she asserted that quality in military aviation is not just about meeting technical specificationsit is about ensuring operational safety, mission preparedness, reliability, and strategic superiority. "You have a prime responsibility to ensure that all military aviation stores, whether indigenously produced or imported, meet the stringent quality and airworthiness requirements at par with the highest global standards," Murmu said. The president further emphasised that augmenting defence capabilities requires not only strengthening public sector undertakings but also actively handholding and enabling the private sector. "By integrating private enterprises into the defence ecosystem through supportive policies and technology transfers, India can accelerate indigenisation efforts and position itself as a global defence manufacturing hub," she added. Citing 2025 as the 'Year of Defence Reforms', she urged the trainees to develop innovative approaches to transform the armed forces into technologically advanced, combat-ready forces capable of multi-domain, integrated operations. "As you take on the challenges of public service, you should remember that your decisions and actions have the power to transform lives. In your respective domains, you will be the torchbearers of good governance, transparency, and accountability," the president said. In addressing the probationers of the Central Labour Service, she remarked that they are the custodians of the law, responsible for upholding compliance with labour laws that protect workers' rights and dignity. "The decisions you make and the actions you take have far-reaching implications for both industry and society. Your work can bring balance to the complex relationship between employers and employees. You can help create an environment of mutual respect, productivity, and equity," the president said. Murmu asked them to carry out their duties with integrity, a strong sense of justice, and a spirit of humility. "You should always approach your work with empathy. Let your service be defined not only by the enforcement of laws but also by your commitment to fairness, dialogue, and the upliftment of the people you serve," the President said. Calling on the trainees to contribute to the making of a developed India, she said, "You have the potential to be the agents of meaningful change. Let that great responsibility inspire you every day.

Corporate sector key pillar of nation's economic growth, development: President Murmu
Corporate sector key pillar of nation's economic growth, development: President Murmu

Time of India

time18-06-2025

  • Business
  • Time of India

Corporate sector key pillar of nation's economic growth, development: President Murmu

President Droupadi Murmu on Wednesday said that the corporate sector is a key pillar of the nation's economic growth and development. While addressing officer trainees of the Indian Corporate Law Service, she noted that their decisions would influence not only policies and regulations but also the trust that citizens and investors have in the country's institutions. As officers entrusted with the implementation and enforcement of corporate laws, "your role will be central in nurturing a business environment that is transparent, accountable, and conducive" to innovation and entrepreneurship, the President said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Swing Trading: Get Free Access to Mr. Hemant's Elite Strategy! TradeWise Learn More Undo "The corporate sector is a key pillar of our nation's economic growth and development," Murmu told the trainees, who had called on her at the Rashtrapati Bhavan here. Referring to the Companies Act of 2013, she highlighted their responsibility to ensure that the law is not only enforced but also understood, respected, and applied in a way that promotes justice, fairness, and opportunity for all. Live Events The officer trainees of the Defence Aeronautical Quality Assurance Service and Central Labour Service also met the President. Addressing the trainees, she asserted that quality in military aviation is not just about meeting technical specifications-it is about ensuring operational safety, mission preparedness, reliability, and strategic superiority. "You have a prime responsibility to ensure that all military aviation stores, whether indigenously produced or imported, meet the stringent quality and airworthiness requirements at par with the highest global standards," Murmu said. The president further emphasised that augmenting defence capabilities requires not only strengthening public sector undertakings but also actively handholding and enabling the private sector. "By integrating private enterprises into the defence ecosystem through supportive policies and technology transfers, India can accelerate indigenisation efforts and position itself as a global defence manufacturing hub," she added. Citing 2025 as the 'Year of Defence Reforms', she urged the trainees to develop innovative approaches to transform the armed forces into technologically advanced, combat-ready forces capable of multi-domain, integrated operations. "As you take on the challenges of public service, you should remember that your decisions and actions have the power to transform lives. In your respective domains, you will be the torchbearers of good governance , transparency, and accountability," the president said. In addressing the probationers of the Central Labour Service, she remarked that they are the custodians of the law, responsible for upholding compliance with labour laws that protect workers' rights and dignity. "The decisions you make and the actions you take have far-reaching implications for both industry and society. Your work can bring balance to the complex relationship between employers and employees. You can help create an environment of mutual respect, productivity, and equity," the president said. Murmu asked them to carry out their duties with integrity, a strong sense of justice, and a spirit of humility. "You should always approach your work with empathy. Let your service be defined not only by the enforcement of laws but also by your commitment to fairness, dialogue, and the upliftment of the people you serve," the President said. Calling on the trainees to contribute to the making of a developed India, she said, "You have the potential to be the agents of meaningful change. Let that great responsibility inspire you every day."

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