30 September 2026 (Navroze Bureau) Tata Trusts has the right as a major shareholder to propose changes to the structure of Tata Sons, including a proposed merger involving two Tata Group companies, but Tata Sons’ board can challenge or reject the proposal through the appropriate corporate and legal processes, according to legal experts.
The latest dispute comes as Tata Trusts seeks to restructure Tata Sons in a bid to alter its regulatory classification and potentially avoid a Reserve Bank of India (RBI)-mandated stock-market listing. Tata Trusts owns about 66% of Tata Sons.
What Is Tata Trusts Proposing?
Tata Trusts has backed a plan to merge Tata Electronics Systems Solutions (TESS) and Tata Consulting Engineers (TCE) into Tata Sons.
The proposed restructuring would increase the operating-business component of Tata Sons and potentially help it move away from the regulatory definitions that currently bring it under the RBI’s framework for upper-layer NBFCs or core investment companies.
The proposal is significant because Tata Sons has faced an RBI requirement to list its shares after being classified as an upper-layer NBFC. The company had sought to surrender its regulatory registration, but that request was rejected by the RBI, leaving the listing issue unresolved.
Can Tata Trusts Seek Such a Merger?
As a shareholder holding a majority stake, Tata Trusts can put forward proposals concerning Tata Sons, but a merger cannot simply be implemented by shareholder instruction alone.
The proposal would have to go through the company’s governance procedures and obtain the necessary approvals from the Tata Sons board, shareholders and regulators, including the RBI where applicable.
This means Tata Trusts can seek consideration of the merger, while Tata Sons can contest the proposal if its board believes it does not comply with the company’s Articles of Association, applicable company law or regulatory requirements.
Why the Board’s Role Matters
The dispute is taking place against a broader governance conflict between Tata Trusts and the Tata Sons board.
Tata Trusts has challenged the board’s recent decisions concerning the reappointment of N. Chandrasekaran as Tata Sons chairman and the possible listing of the holding company. The Trusts argue that Tata Sons’ internal governance framework gives their nominees specific rights over important decisions. Tata Sons has disputed that interpretation.
The disagreement has therefore expanded beyond the proposed merger into a wider question of how the Articles of Association should be interpreted.
Merger Could Change Tata Sons’ Regulatory Status
The proposed merger is designed to make Tata Sons more of an operating-cum-holding company rather than an entity whose activities are predominantly investment-related.
Adding businesses such as Tata Electronics and TCE could substantially increase operating revenues and alter the composition of Tata Sons’ assets and income.
Legal experts have said the restructuring could be legally viable, but the final regulatory classification would remain a matter for the RBI and other relevant authorities.
RBI Approval Remains Important
Even if Tata Sons and its shareholders agree to a restructuring, regulatory approval remains a key hurdle.
The RBI would need to assess whether the reorganised Tata Sons actually falls outside the regulatory criteria that triggered the listing requirement. A change in the balance sheet or corporate structure alone would not automatically guarantee a change in regulatory status.
Tata Sons Can Challenge the Proposal
Legal experts cited in reports say Tata Sons would have avenues to challenge or oppose a merger proposal if it considers the move inconsistent with corporate law, its Articles of Association or regulatory requirements.
The dispute could potentially move into formal legal proceedings if the two sides cannot reach agreement through the company’s internal governance mechanisms.
Tata Trusts’ position as the largest shareholder does not eliminate the board’s statutory and fiduciary responsibilities or the need for regulatory approvals.
Governance Dispute Adds Complexity
The proposed merger comes at a particularly sensitive time for Tata Sons.
The company’s board recently reappointed Chandrasekaran despite opposition from Tata Trusts chairman Noel Tata. Tata Trusts has also opposed steps toward a potential public listing. The disagreement has raised broader questions about the balance between majority shareholder rights and board authority.