No advanced economy compels a solvent private company to sell shares to the public. India is about to – and the company is Tata Sons.
Nitin Potdar Sr. Corporate & M&A Lawyer
I have advised on Tata matters in the past and write this as an academic question rather than a brief for any party.
Consider a proposition. A company is profitable. It owes nothing to any bank, takes no money from the public, holds no deposits and lends to no one. Its accounts are audited and its board is known.
The state now tells it to sell a quarter of itself to strangers.
Ask where in the world this is the law.
In the United States, it is not.
No statute requires a private company to list. Where a company grows large and widely held, the answer is reporting. Under Section 12(g) of the Securities Exchange Act of 1934, an issuer with over $10 million in assets whose equity is held of record by 2,000 persons — or 500 who are not accredited investors — must register with the SEC and report annually and quarterly. It opens its books entirely. It need never trade a share. Cargill, Koch, Mars and Bechtel are among America’s largest enterprises. None is listed. And when Congress addressed finance companies big enough to threaten the system, its answer in Dodd-Frank was Federal Reserve supervision, not a stock exchange.
In the United Kingdom, it is not.
Britain’s answer to the large private company came in the Companies (Miscellaneous Reporting) Regulations 2018. Companies above 2,000 employees, or £200 million turnover and £2 billion of balance sheet, must disclose their governance arrangements and explain how directors have discharged their duties. Most adopt the Wates Principles. Its answer to concealed ownership came earlier, in the 2016 register of people with significant control, obliging every company to identify anyone holding more than 25 per cent. Disclosure, and naming the real owner. Never dispersal. John Lewis, Dyson and Ineos remain private.
In the European Union, it is not.
Large financial groups are supervised on a consolidated basis under the Financial Conglomerates Directive. The Transparency Directive binds only issuers admitted to a regulated market — those who chose to list. The anti-money-laundering directives require registers of beneficial owners at 25 per cent. Not one requires a share to be sold.
Germany goes further.
Robert Bosch Stiftung, a charitable foundation, holds about 94 per cent of the share capital of Robert Bosch GmbH and lives on its dividends. The voting rights sit separately, with an industrial trust. The company employs around four hundred thousand people and spends over €7 billion a year on research. No German government has suggested it should list. Denmark protects the same design at Novo Nordisk, the Netherlands at IKEA, Switzerland at Rolex.
Foundation ownership of major industry is not a European anomaly awaiting correction. It is a model Europe protects, because a charitable owner can hold through a decade of losses no market tolerates for a quarter.
That is the structure India is now treating as a problem.
Tata Sons makes nothing and sells nothing. It owns shares in the Tata companies and lives on their dividends. Two-thirds of it belongs to public charitable trusts. It has no debt — it repaid about $2.5bn in 2024 and now owes nothing. It has never taken a deposit or lent to an outsider.
Indian law still treats it as a finance company, because its assets are shares. Registered as one and above a size threshold, it falls into the Reserve Bank of India’s “upper layer” — the top rung of a four-tier system covering the country’s biggest lenders, carrying the heaviest supervision and, alone among the four, a duty to list within three years.
Because it borrows nothing, Tata Sons asked to be taken off that register. This is not a loophole; the rules expressly exempt companies that take no public money. The RBI has neither agreed nor refused. It has now been two years.
So ask the simpler question. What is listing supposed to achieve?
If the answer is openness, openness is available without it. The RBI and SEBI can order Tata Sons tomorrow to publish accounts on a listed timetable, obtain independent approval for related-party deals, seat independent directors, and accept a permanent bar on public money. Everything listing reveals can be required by order — as it is of banks that will never list.
What listing adds is not information. It changes who owns the company. A disclosure rule asks a company to show what it does. A listing rule forces it to hand a quarter of itself to the public and live with a permanent market in its own control. One governs behaviour. The other changes what the company is. And the RBI’s powers exist to protect depositors, lenders and the banking system — none of which Tata Sons touches. A power given for one purpose does not stretch to another because the company is big.
What makes this harder to accept is who is never asked.
Who really owns a large Indian company has always been anyone’s guess. Ask any senior professional to draw one chart showing who finally owns a business house here. Nobody can. Not because the information is lost, but because no such chart was ever meant to exist.
The pattern is familiar. Private companies stacked on private companies. A family trust whose beneficiaries are named in a document filed nowhere. An HUF, then one for the son, then one for the grandson. A slice held abroad. No name appears twice.
The purpose is not tidiness. It is to spread one family’s income across a dozen taxpayers, to keep it out of the higher brackets, and above all to ensure that when a question is finally asked, there is no individual to whom it can be put.
Parliament has tried. Section 186(1) of the Companies Act permits no more than two layers of investment companies; Section 2(87) no more than two layers of subsidiaries. Both miss. They look downward, at what a company owns, never upward at who owns it. And a layer counts only where one company controls another — so a chain taking nine per cent here and fourteen there creates nothing to count.
None of this is illegal. That is exactly the trouble. The maze is the lawful product of rules that measure in the wrong direction, and no regulator has gone behind the chain to ask who stands at its end. Where no owner can be named, dealings between a group and its own people cannot be checked either. No filing connects the other side of a transaction to a person.
Against all that stands one company with one board, one set of audited accounts, one place where its money decisions are taken. That is the one told its structure needs the discipline of a public market.
There is a further problem, and it should give a regulator the longest pause.
Tata Sons was not built to earn a return for its owners but so its income would fund charity. That is design, not sentiment. Two-thirds sits with trusts obliged to spend what they receive on public purposes, and they have done so for a century.
Bring in public shareholders and a second purpose enters the same balance sheet — legitimate, but different. They will want bigger dividends, faster sales of assets, exit from businesses that lose money for a decade before they earn. They will also vote on related-party dealings. Money flowing to the charitable owners then needs the approval of investors with no interest in charity.
Two purposes, one balance sheet, no way to reconcile them. Not an inconvenience to be managed, but a contradiction at the centre of the structure.
Now set this beside what India has spent thirty-five years doing.
Since 1991 the country has opened almost every sector to foreign capital. A foreign company may enter as a wholly owned subsidiary and keep every share — whatever its size at home, whoever ultimately owns it, and in most sectors without asking permission. If it already has a listed Indian arm, SEBI’s delisting rules let it buy out the public and return to full ownership. Foreign parents have done exactly that, repeatedly.
So the settled policy for foreign capital is: own all of it, tell us little about who you are, and concentrate as you please.
And the proposal for India’s largest home-grown group is that it must hand a quarter of itself to shareholders it will never meet.
Compelled dilution is not unknown. But look where it is found. Nigeria’s indigenisation decrees. Malaysia’s thirty per cent Bumiputera requirement. Indonesia’s rule that foreign miners sell down to local hands. India’s own foreign exchange law of 1973, under which IBM and Coca-Cola left rather than reduce themselves to a minority. Every one is about the nationality of the owner. Never the size of the company, or the openness of its books.
Tata Sons has done what any regulator would want.
It cleared its debt and applied for the exemption the rules provide, promising never to touch public money again. A regulator convinced the law requires listing could say so and defend it. One satisfied the exemption applies could grant it in a fortnight. Neither has happened.
Whatever the answer, it will travel further than this file. Consider which company this is happening to. Not one that hid, or borrowed recklessly, or left the state to clean up after it. The one that consolidated when it could have layered, repaid when it could have refinanced, and gave its ownership to charity when it could have kept it. If that record attracts a demand to dilute, every promoter in India has been taught which behaviour is expensive. And every investor abroad has been shown that here, scale and probity are not rewarded but noticed.
The question is not whether Tata Sons should list. It is what a country says about itself when the cleanest structure it has produced in a century sits waiting on a file nobody will close.