Succession planning at Emami may go the family trust way

At a time when succession planning is becoming a contentious issue in India Inc, the promoters of Emami group are hammering out their own version of family office. The Kolkata-based FMCG-to-cement conglomerate is in discussions to transfer shares into a family trust to avoid complications and disputes associated with succession plans in large family businesses. All five children of the two unrelated promoters, RS Agarwal and RS Goenka, have taken up profit and loss responsibility of group businesses, while the promoters have barred their sons-in-law and daughters-in-law from being involved in any of the Rs 10,000-crore plus group’s commercial businesses as part of its succession plan being put in place. “The grand children can always join the family business depending on their interest,” said RS Agarwal. “A family trust may also be a practical move since we are a very large family. We are giving it a very serious thought.” Succession planning through a private family trust allows the promoter to control the trust and have the freedom to transfer assets to the beneficiaries, which is set out in the trust deed. The trustee may be a beneficiary, family member, relative, or there can even be a professional trustee appointed for the management of the trust. The Emami group has already set up a family advisory board with representation from the younger generation of the two promoters, who are also consulting US-based Family Business Consulting Group to help in this process, according to group insiders. Non-family professionals heading various businesses in the group will report to the advisory board that comprises Agarwal’s children Aditya Agarwal, Harsh Agarwal and PritiSureka, Goenka’s sons Mohan Goenka and Manish Goenka, his brother SushilGoenka and nephew PrashantGoenka. “We have ensured that the next generation in the family shares a close relationship similar to Agarwal and me and all of them are not different from each other in their values, mind sets and approach to business,” RS Goenka said. Rajesh Narain Gupta, managing partner at law firm SNG Partners, said families feel that sons-in-law cannot be reprimanded if there is a rift after being inducted in the business. It can affect families emotionally and businesses financially, he said. “Many families do not like their family wealth or business to be managed outside their bloodline unless the successors are only daughters,” Gupta said. The Emami group is governed by a family constitution. The apex family council comprises second generation promoter directors, headed by the two founders. Charting out the succession plan for Emami family will be a very challenging and sensitive task as any move could ruffle a few feathers, group watchers said.