The proposed restructuring of Tata Sons proposed by Tata Trusts has triggered a fresh rift within the Trusts, with two senior trustees questioning why the decision on the reorganisation of Tata Sons was taken without consulting all members of the trusts.In a letter to the trustees of Sir Dorabji Tata Trust (SDTT), Venu Srinivasan and Vijay Singh, vice-chairmen and trustees of SDTT, have objected to a September 28 communication of Tata Trusts seeking the Tata Sons board’s approval for a strategic reorganisation involving the merger of Tata Electronics Systems Solutions and Tata Consulting Engineers with Tata Sons.Srinivasan and Singh said the proposed reorganisation may also have serious financial consequences for Tata Sons, SDTT and other stakeholders. “These include the group companies, employees and regulators affected by an amalgamation and a change in Tata Sons’ regulatory status,” they wrote.Both Srinivasan and Vijay Singh had earlier this week written to the Charity Commissioner for regulatory action against SDTT for “violation” of various norms.The two trustees said they were surprised to learn about the proposal and the accompanying public announcement from “public sources”, alleging that no meeting of SDTT was held and that they were not consulted before the communication was issued in the trust’s name. They have also questioned the manner in which the proposal seeks to direct the Tata Sons board to “consider and approve” the restructuring, arguing that a decision of such legal, regulatory, financial and commercial significance should be independently evaluated by the company’s board.“Going by the tone of the September 17 meeting and the latest letter from two trustees, Tata Sons directors are likely to oppose it. Even if the board agrees, the RBI will have to be convinced,” said an observer tracking the Tata group. Venu Srinivasan is also on the board of Tata Sons.“To our knowledge, no meeting of the Trustees of SDTT was held to discuss or deliberate on this issue before the Letter was sent to Tata Sons. We were not consulted, and are not aware that the other Trustees were consulted either. It is accordingly unclear whether the Letter and the proposal it sets out have the support of all the Trustees of SDTT,” Srinivasan and Singh said in the letter.Story continues below this ad“We are equally concerned that press releases are being issued in the name of the ‘Tata Trusts’ without the Trustees of SDTT having been consulted on their content or authorisation,” they wrote. “As no meeting of the Trustees of SDTT authorised the Letter or the Press Release, neither can be said to reflect the collective, institutional position of SDТТ.”They said the proposed reorganisation is a significant decision, involving the merger of two operating companies, RBI approvals, and surrender of Tata Sons’ certificate of registration, with substantial impact on the interests of the Tata Trusts and the business affairs of Tata Sons. “It therefore warrants consideration of its legal, financial, commercial, governance and institutional consequences, and the underlying material and analysis ought to have been made available to the Trustees before any position is expressed in the Trust’s name on a matter of this magnitude,” the letter said.The stated objective of the reorganisation is that the resultant entity – Tata Sons – would neither be a NBFC nor a Core Investment Company. “On the same day of the Letter, a press release was issued in the name of the ‘Tata Trusts’ announcing the reorganisation. We were surprised to receive a copy of the letter and learn about the Press Release from public sources,” they wrote.“We are equally concerned that press releases are being issued in the name of the ‘Tata Trusts’ without the Trustees of SDTT having been consulted on their content or authorisation. As no meeting of the Trustees of SDTT authorised the Letter or the Press Release, neither can be said to reflect the collective, institutional position of SDТТ,” they wrote.Story continues below this adThey said it is questionable whether it is appropriate for a shareholder to instruct a company’s Board to “approve” a matter that the law reserves to the Board’s own independent judgment, rather than to propose the course of action for the Board’s consideration.“Trustees should also be conscious of the impact that such a mode of communication could have on the charitable status of the Trusts, if it were construed as an attempt by a public charitable trust to direct the commercial decision-making of a company rather than to exercise the rights available to it as a shareholder,” they said.These matters, therefore, require appropriate analysis and deliberation, including consideration of the interests of Tata Sons, the letter said. The institutional position of SDTT must be distinguished from the views of any individual Trustee, and all Trustees must have the opportunity to consider the relevant material and participate in the decision-making process — particularly where the communication is made in the name of the Trust and carries its authority and reputation, they wrote.On September 28, Tata Trusts sent a proposal to the Tata Sons board for the merger of Tata Electronics Systems Solutions Pvt Ltd (TESS) and Tata Consulting Engineers (TCE) with Tata Sons Pvt Ltd (TSPL). The move, if approved and implemented, would fundamentally alter the structure and nature of Tata Sons and could take it outside the regulatory framework that triggered the RBI’s listing directive.Story continues below this adIn simple terms, the strategy is to make Tata Sons more of an operating company and less of an investment company. The merger would potentially achieve this in two ways. First, Tata Electronics would bring a large manufacturing and semiconductor business directly into Tata Sons. Second, TCE would add an established engineering and consultancy operation with substantial revenues of its own.Given the power struggle in the group, the million-dollar question is: will the board of Tata Sons agree to the proposal of Tata Trusts. The board, in a majority 4:1 decision, agreed to take steps to go for listing as mandated by the RBI in its meeting on September 17. Four directors — Harish Manwani, Anita M George, Venu Srinivasan and Saurabh Agrawal — okayed the listing process. Only Noel Tata opposed the plan.SRTT, which belongs to Tata Trusts, is unable to conduct meetings and take decisions in view of the restraining order by the Charity Commissioner. SRTT and SDTT control over 50% stake in Tata Sons.