The latest trend amongst promoters of Indian listed companies is to park their shareholding in Private Family Trusts. This is very popular in the West with several listed companies, such as, Walmart, being owned via Trusts.
The Promoters of GMR, Dr. Reddy's Laboratories, etc., have adopted this route. Holding shares through Trusts has several benefits, such as, ease of succession planning, avoiding family disputes over Wills, etc. It also assists in Estate Duty planning.
However, it is important to properly structure this transaction and bear in mind the consequences under the Income-tax Act, Stamp Duty and the SEBI Takeover Code in the case of listed shares.
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