Why India’s Top Business Houses Want ‘Bahus’ Named as Relatives

In the Indian business context, the daughter-in-law has always been placed at the heart of the family. Some of the most prominent business families in the country are now interested in giving her a formal seat at a decision-making table, albeit nominally.

It is reported that about a dozen of the leading business houses are going to the Securities and Exchange Board of India (SEBI) with a particular request: to take official consideration for the daughter-in-law under the takeover and ownership laws in the country.

A Loophole in the Law

At the current moment, the regulations of SEBI are quite limited. Sons and daughters are always considered as relatives, but sons-in-law and daughters-in-law often occupy some grey space in the rule. The problem does not just end with the nomenclature; it has major implications in wealth management.

In the past ten years, many wealthy promoters have sold their stocks to family trusts, which are designed to provide a smooth intergenerational flow of business. However, this absence of acknowledging daughters-in-law as legal family members in the scheme implies that nomination as a trustee or a beneficiary will raise intricate compliance issues or provoke the takeover clause that the family aims to avoid.

Protecting the Next Generation

One of the main driving forces behind such a move is the security of small heirs. In situations in which the successor is too immature in age to handle the leadership of the business, a family would wish that the mother, the daughter-in-law, should be given powers to be the trustee without going through the rigorous process of regulations.

The families also demand the right to allow external professionals to act as trustees in the case where the heirs are underage members, so that the businesses are handled by professionals in order to keep the family vision in the long run.

Why Now?

Succession has also become a burning concern in the corporate corridors in India. As large sums of money are about to change hands and even more family conflicts emerge, the need to establish proper legal systems has only become more and more necessary.

With daughter-in-law added to the legal meaning of relative, such business houses are trying to bring modernisation in the administration of family offices. Such an initiative reflects the changing nature of Indian families, where daughters-in-law are increasingly becoming the heads of the families and, as such, becoming the cement that holds family fortunes together during the change.

It is not clear whether SEBI will agree to such expansion, but in the eyes of these families, the change is an inevitable measure of defusing the legal issues surrounding succession planning.