Tata Trusts, the group of charitable organizations holding a 66% stake in Tata Sons, is reportedly considering formalizing the governance structure of the Sir Ratan Tata Trust. This move potentially involves exploring a formal trust deed to codify operational procedures and responsibilities.

The move towards formalizing governance within the Sir Ratan Tata Trust comes amid increased scrutiny of the Tata Trusts' structure and operations. Recent reports have highlighted internal divisions and power struggles within the Trusts, particularly after the passing of Ratan Tata. These divisions have, in some instances, led to calls for government intervention to ensure stability and proper governance.

The heart of the matter appears to be disagreements over board appointments, oversight of Tata Sons' board meetings, and the level of transparency in how nominee directors report back to the Trusts. After Ratan Tata's death, a rule was passed requiring annual reappointment for any nominee director of Tata Sons over the age of 75, which sparked conflict among the trustees.

The Tata Trusts have been under scrutiny regarding potential violations of Indian laws related to charitable trusts claiming tax-exempt status while engaging in share trading. While the Income Tax Appellate Tribunal upheld the tax-exempt status of Tata Trusts in December 2020, the organization has been reorganizing its internal governance to ensure stricter audits and tighter internal controls. This includes potentially clarifying the roles and responsibilities of key actors within the Sir Ratan Tata Trust.

The Trusts have been taking steps to professionalize their leadership team, including the appointment of a CEO. External consultants have also been engaged to advise on streamlining operations. These actions indicate a commitment to modernizing the Trusts' governance framework and aligning it with best practices.

Tata Trusts' structure ensures that profits from Tata Group companies are channeled into philanthropic activities supporting education, healthcare, and rural development. The Trusts also exert significant influence over Tata Sons' board, including the appointment of nominee directors. The formalization of the Sir Ratan Tata Trust's governance could further solidify this structure and ensure its long-term sustainability.