In a significant move impacting corporate governance and succession planning, major Indian business groups are actively petitioning the country's capital market regulator for a crucial regulatory change. They are urging the Securities and Exchange Board of India (SEBI) to broaden the interpretation of 'relatives' within its takeover regulations to formally include daughters-in-law.
The Core of the Corporate Appeal
The push, reported on January 08, 2026, centers on aligning SEBI's rules with other Indian laws to facilitate smoother transitions of power and ownership within promoter-led family businesses. Unlike the provisions under the income tax law, the current Sebi takeover code does not classify sons-in-law and daughters-in-law as 'relatives'. This creates a complex legal and compliance hurdle for families planning the transfer of shares and management control to the next generation, which often includes married children and their spouses.
Why This Regulatory Gap Matters
This discrepancy has tangible consequences for succession planning. When a promoter wishes to transfer shares to a daughter-in-law as part of a family arrangement or inheritance plan, the transaction might not benefit from the exemptions or simplified procedures available for transfers between 'relatives' as defined by SEBI. This can trigger mandatory open offer obligations under the takeover code, making intra-family transfers unnecessarily cumbersome, expensive, and publicly scrutinized.
Corporate advocates argue that recognizing daughters-in-law as relatives is a pragmatic step that reflects the contemporary reality of Indian family structures. In many business families, daughters-in-law are integral to the business and are actively involved in leadership roles. The current regulatory framework is seen as outdated, failing to account for their legitimate position within the promoter family ecosystem.
Implications for Governance and Family Businesses
If SEBI accepts this proposal, it would mark a notable shift in how India's market regulator views family relationships in a corporate context. The change would:
- Simplify succession by allowing more flexible and private transfers of shares within the extended family.
- Reduce compliance costs and legal complexities for promoter families during ownership transitions.
- Bring SEBI's regulations closer in line with other statutes like the Income Tax Act, reducing contradictory legal definitions.
The debate underscores the ongoing tension between robust corporate governance designed to protect minority shareholders and the need for sensible rules that accommodate the unique nature of India's predominantly family-run business landscape. The outcome of this corporate lobbying effort will be closely watched by legal experts, family business advisors, and investors across Mumbai and India's major financial centers.
