EVOLUTION

A successful family business is one that works harmoniously through the four
stages of its evolution: entrepreneurship, growth, governance, and maturity.

Each stage has challenges and differentiating factors inevitably determining

the long-term viability of the business, and it is helpful for entrepreneurs to
understand the macro and structural issues at play.

The first stage, entrepreneurship, is when the family aspect first provides an
advantage over non-family companies. In getting established the family is
often the chief provider of labour and therefore more devoted to the
company’s success. During this stage some firms may also finance through
the family, better aligning costs and benefits.

In the growth stage the company focuses on increasing its market share,
bringing new and innovative products to market, expanding into other regions
or geographies, increasing capacity, and attracting additional financing.

Family businesses are commonly viewed as being risk averse but the Credit
Suisse data indicate otherwise. All survey respondents have expansion plans,
with small family businesses focusing on increasing capacity while larger ones
are expanding into new countries and industries.

Family dynamics can play a large role in governance. Public firms may face
agency costs if the interests of owners and managers are not properly aligned
but the costs can be avoided in family firms where the owner-manager has
more at stake.

However that doesn’t mean family businesses are immune to governance

issues. They might result from things like favoritism towards other family
members or failure to deal with discipline, but the company should have
mechanisms in place to deal with such possibilities.
Succession is the final hurdle in the family business life cycle and it is when
family relationships can be a problem. It is particularly challenging in the
transition from first to second generations, when sibling disputes can override
good sense.

DEFINITIONS

Family business is a corporation that is entirely owned and managed by members of a single
family. Family firm is a corporation that is entirely owned by members of single family. It is also
known as company owned, controlled and operated by members of one or several families.

CHARACTERISTICS OF FAMILY BUSINESS

Family business are ideal in nature as they are loyal to the principles of the founder and thus ensure
uniformity in their operations.

Succession is one important decision which determines future effectiveness in terms of company
operation.

family business comprises of family members in business operations ensuring effective utilization
of in house talent in family.

Single minded dedication of family members ensures survival of family business through toughest
times.

Effectiveness and existence of family business is determined depending on understanding persisting

within the family.

Family business may be comprised of one or more than one family in business operations.

Family members who are not contributing or not involved in business are part of business.

Family business values are reflection of values possessed and followed by family members.

Members of family have legal control over business.

TYPES OF FAMILY BUSINESS

Family owned business : is a profit organization were number of voting shares, but not necessarily
majority of shares are owned by members of single extended family but significantly influenced by
other members of family.

Family owned and managed business : is a profit organization were number of voting shares, but not
necessarily majority of shares are owned by members of single extended family but significantly
influenced by other members of family. In this business has active participation by one family
member in the top management of company so that one or more family members have ultimate
management control.
Family owned and led company : is a profit organization were number of voting shares, but not
necessarily majority of shares are owned by members of single extended family but significantly
influenced by other members of family. In this business has active participation by one family
member in the top management of company so that one or more family members have ultimate
management control. But in this method one member has major influence on business activities
who in charge of regulating activities of business and members of family business.

GOVERNANCE OF FAMILY BUSINESS

There are three components to governance of family business :

1.Perodic assemblies of family

2. Family council meeting : if the size of the family is small in size than members of family can meet
on frequent basis, when the operation of the family business expands geographically each team has
to choose in representative for every unit who on behalf of every area can meet on regular basis to
decode on plans, create policies, and strengthen family business communication.

Family constitution : family policies and guiding vision and values that regulate members
relationship in business. Developed plan may be detailed or simple in nature but every family is
benefited by the same.

BENEFITS OF CONDUCTING FAMILY ASSEMBLY OR COUNCIL MEETING

Develop clarity on roles, rights and responsibilities of family members. Encourage members of
family, family employees and owners family to act responsibly towards the family and business.
Regulate appropriate family and owner inclusion in business discussion.

DUTIES PERFORMED BY FAMILY COUNCIL MEETING Plan assembly meetings, which otherwise has to
be arranged by CEO in company. discuss current business, ownership, family issues and keep
family informed about the issues. help family reach decisions and collectively focus on attainment
of single goal. Keep the board of directors informed about family views on company and keep in
touch with the board about key business policies and plans. Develop plans and policies in line with
the board, that regulate family activity with business.

REASONS FOR CONDUCTING FAMILY BUSINESS planning employment standards for next
generation Career development policies for family employees Family employee compensation
Succession process, including retirement ages Ownership agreements which comprises of buy
and sell agreements dividends

SUCCESSION IN FAMILY BUSINESS

1. First family succession plan, then business succession plan : family business plan must
recognize and accommodate the needs, goals and objectives of each member of family.
Family succession plan has to be developed first as if business plan is designed in advance it
proves to be difficult for owner to coordinates goals of family members towards business
2. Family first business or business first family : important issue to be determined before
beginning family succession plan is whether yours is family first business or business first
 family. It is often seen that most of the business fail to succeed when managed by second
and third generation of business.
3. Succession management : business families take advice of business advisory board who
suggest on eligible person for transition. Advisory board are not experts in managing
business but are consultants who suggest strategies for effective succession management.
4. .Business valuation : may not be formal written report but is required as part of annual
strategic planning process. Reasons for valuing family business are as follows : Buying or
selling shares to employees Retiring or selling to other family members Planning gifts
for hires Anticipating estate tax problems Providing adequate key man insurance
coverage Tracking of business plan towards achievement of results
5. Buy or sell agreement : is used to transfer share ownership for buy and sell agreement. This
agreement is established between related parties and shareholders in family. It is an
agreement to transfer a business interest to hires for less than fair market value The
agreement is real ; it is part of bonafied business arrangements

KEY POINTS TO BE CONSIDERED BEFORE SUCCESSION PLAN

Quick decision on business plan process will provide more alternatives to the process. A child
than having right to inherit business should have ability to manage family business. Children's must
be encouraged to out of family business so that they have better insight about competition
persisting in market and accordingly develop strategies for development of own business.
Establishing an outsider as advisor for family business may prove to be risky for which experts in
succession planning should be chosen from management team with in the family business

Conducting family meeting on regular basis will help establish and keep the family focused on rules,
goals and objective Develop non business interest Develop financial resources that are
independent of business Evaluate component successor : which requires to assess whether
person to be chosen as successor has potential to lead the business, will he be accepted by all
members in family, check his willingness to control the business. Person who will be chosen as
successor should be give an appropriate standard to be achieved which will help him deign
effective strategy and have yardstick to compare his actual performance with expected one.

PITFALLS/ DEMERITS /PROBLEMS OF FAMILY BUSINESS

lack of focus and strategy : family business initially perform in effective manner but at later point
of time when aspect of transition comes into picture family business tends to lose its track from its
actual vision .

Lack of professionalism : data maintenance practice in family business usually will not be in par
with that of private companies which proves to be major hurdle during decision making process.

Difference in educational levels of family members which drives some people to follow obsolete
method while others may focus on implementing latest technology and practices in business

Rivalries between sibling in company which may end up in separation of family business.
 Difference of attitude towards employees in company Inability to separate family interest from
the interest of business

Short term approach towards business , leading to an absence of investment in employees and
product development.

Insensitivity towards customers due to uncompetitive market resulting in weaker market skills

KARTA OF HUF
The Karta is the manager of HUF and have wide powers by way of controlling the
affairs of the HUF. The Karta enjoys his position in the HUF by operation of law
without any agreement and consent of other members of HUF. He stands in a
fiduciary relationship with other members, but he is not accountable to anyone.
Article 236 of the Mulla Hindu Law defines “Karta” as follows:
“Manager – Property belonging to a joint family is ordinarily managed by the father
or other senior member for the time being of the family: The Manager of a joint family
is called Karta.”
The Karta is entrusted not only with the management of properties of the family but
is also entrusted with the general welfare of the family. Karta is the head of the family
and acts on the behalf of all members of the family but an agent of members of the
family.
Who can be ‘KARTA’?
1. The Karta is the senior most male coparcener of the HUF.
Even if the Karta becomes aged, infirm, ailing, or even a leper, he may continue to
be Karta. Where the senior most member is not Karta, the next senior male member
takes over as Karta. [Man vs. Gaini ILR (1918) 40 All 77].
2. A junior coparcener can be Karta
Only if the senior most member gives up his right, a junior coparcener can become
Karta of the HUF, with the consent of all other members as held by Supreme Court
in Narendra Kumar J. Modi Vs CIT (1976) 105 ITR 109 (SC).
3. There can be more than one KARTA of a HUF
Darshan Vs Prabhu ILR (1946) All 692
4. Only Coparcener can become Karta
The Supreme Court in CIT vs. Seth Govindram Sugar Mills [1965] 57 ITR 510
(SC) held that coparcenership is a necessary qualification for the managership of a
joint Hindu family.
5. Minor as Karta
In absence of the father, the elder minor son could act as the Karta of the family.
Therefore, a minor can be the managing member of a Hindu undivided
family.[BudhiJena v. DhobaiNaik (AIR 1958 Orisss 7)]
POWERS OF KARTA
 1. Managing the affairs of HUF
2. Control & become custodian of the finances
3. Can borrow money for & on behalf of HUF
4. Spend money for the family & not accountable for it.
5. NOT liable to submit account to anybody.
6. Can make partition of the family suo moto.
7. Quantum of partition shall be with KARTA’s liking.
8. HUF cannot enter in to contracts, or form partnership firm, or represent except
through Karta, however Karta may allow others to represent HUF.
9. Can Gift away the movable properties of HUF for natural love & affection but
within reasonable limit.
10. May transfer immovable properties for pious purposes or for the benefit of the
family.

BACKGROUND MATERIAL ON DIRECT TAXES

Position of Female in HUF
After amendment made by Hindu Succession (Amendment) Act, 2005, daughter can
be coparcener of HUF like the sons of HUF. After her marriage she becomes
member of her husband’s HUF and continues to be a coparcener of her father’s
family. Being a coparcener, she can also seek partition of the dwelling house where
the family resides and she can also dispose of her share in coparcenery property at
her own will. If a Hindu dies, the coparcener property shall be allotted to the daughter
as is allotted to sons. If a female coparcener dies before partition, then children of
such coparcener would be eligible for allotment, assuming a partition had taken
place immediately before her demise. A widow of a pre-deceased son even though
remarried is now eligible for share in property as legal heir of the pre-deceased son
of the family.
Female as Karta
Many courts had held that only a coparcener can become Karta of HUF. Since, a
female was not considered as coparcener, she was not empowered to act as Karta
prior to amendment in Hindu Succession Act. However, w.e.f. 6 thSeptember, 2005,
after amendments made by Hindu Succession (Amendment) Act, 2005 in respect of
position of female member, the daughter of coparcener shall by birth become a
coparcener in her own right in the same manner as the son.

THE IMPORTANCE OF BUSINESS GROWTH

Your business' focus changes as it moves beyond the start-up phase. Identifying opportunities for
growth becomes a priority to ensure the enterprise's sustainability. You can measure growth by
looking at key statistics such as your:
 turnover
 market share
 profits
 sales
 staff numbers
 Many small businesses grow by taking opportunities to diversify, although there are risks because of
limited resources on all fronts. Businesses should weigh up the risks and costs of opting for growth
carefully against the benefits.
Diversification can take several forms, including:

 new, related products or services to existing customers

 new markets for existing products
 new products for new markets
Deciding how and when to diversify depends on your having:

 thorough market and customer research for the new product or service
 a clear development strategy - including trying a new line or service for a short test period with prototypes and
test marketing before totally committing to the new project
 sales, marketing and supply chain operations that can cope with the added demands

You can also expand your business by joining forces with another business. While this can create
more shared decision-making and possible management and staff issues to resolve, there can be
clear advantages.

Successful co-operation can deliver:

 more resources
 sharing of the managerial load
 larger skills and talent base
 bigger pool of contacts
 increase in markets
 diversification and organic growth using increased resources
 reduced commercial risk

To choose the best strategy for growth, you'll need to undertake an analysis of your business' current
performance.

Once you've carried out the review, focus on the option that looks the most logical. The pages in this
guide outline some of the most common choices.

Next, make sure this option is also the most practical. Check that the strategy reflects the things your
business does well.

A stationery supplier might identify the following growth options:

 increasing market share by starting a mail order operation

 diversifying by adding computer printer consumables to its range
 entering into a joint venture with an educational book publisher to sell books and stationery to schools

internal growth strategy

Advantages

 Economies of Scale - larger firms can produce at lower average cost and they pass on
these economies of scale to consumers at lower prices helping them increase sales,
market share and profit.

 Diversification - can produce more products and can sell into different markets. Reduces
risks that declines in sales of one product will harm the business leading to less threat in
profits.

 Access to finance - larger firms are less likely to go bust due to easier access of money
from banks/Government to survive cash flow problems.
  Personal Vanity - some owners enjoy the power and status from owning large
businesses.

 Domination of the market - the larger the market share a firm has, the more it can control
the price of its products.

 To remain competitive - It faces fewer threats from competitors and can even eliminate
some as they cannot compete with the businesses new competitive pricing it has gained
form growth.

 Not much change - the firm is still making its existing products so it is doing what it is
already good (exception of diversing into making new products) so less likely to go
wrong.

 Very inexpensive.

Disadvantages

 Time - it can take a long time to achieve growth, some owners arent prepared to wait
long.

 Potential financial input - capital investment can be lost, this affects the outflows on the
businesses cash flow, consider short term cash flow vs long term potential benefits.

 Impacct of failure - this cost cost the business financially, damage their reputation and
affect thier oppurtunity cost (the cost of the choice you dont make).

 Will expansion make you more competitive? - depending on the circumstances of the
business, the situation that the business is in and the competition will the expansion to
the business be worth the benefits to the business over their competition?
External growth options

Advantages

 Can maintain current management style, culture and ethics

 Less risk - expanding what the business is good at

 Usually financed using profits so less risk

 Easy for the business to manage internal growth

 Easy to control how much the business will grow

 Less disruptive changes mean workers' efficiency, productivity & morale remain high

Disadvantages

 Can take a long time to grow internally

 Can take a while for the business to adapt to big changes in the market

 Market size not affected by organic growth

 If market not growing, business is restricted to increasing its market share or finding a
new market to sell products to

 Businesses might miss out on opportunities for more ambitious growth by only growing
internally
Salaries and Compensation

Another challenge frequently encountered by family businesses involves paying

salaries to and dividing the profits among the family members who participate in the
firm. In order to grow, a small business must be able to use a relatively large
percentage of profits for expansion. But some family members, especially those who
are owners but not employees of the company, may not see the value of
expenditures that reduce the amount of current dividends they receive. This is a
source of conflict for many family firms and an added level of difficulty in making the
necessary investments into the business for continued success. To ensure that
salaries are distributed fairly among family and non-family employees, business
leaders should match them to industry guidelines for each job description. When
additional compensation is needed to reward certain employees for their
contributions to the company, fringe benefits or equity distributions can be used
STRATEGY FOR GROWING FAMILY BUSINESS

1. Identify strengths. Determine exactly what knowledge and skills each

person can contribute to the business, then accept those strengths for what
they are. If you’re terrible with numbers but your brother happens to love
bookkeeping, just be happy that you’ve got your bases covered.

2. Set clear expectations. Knowing everyone’s strengths will help define

roles in the organization. Who’s in charge of marketing? What about hiring?
Are you better suited to handle operations or close business deals? No matter
where the responsibilities fall, set expectations and establish boundaries for
each role. You don’t want someone playing in your sandbox when he’s got
his own.

3. Be flexible. In a perfect world, we’d each have one job to do. But being an
entrepreneur is another story. You need to be willing to offer help when
needed, even if it’s outside your comfort zone. You will make mistakes, but
staying flexible and being unafraid to try new things will make you more
resilient and ultimately benefit your business.

4. Use every excuse to keep learning. Five years from now, your job won’t
look like it does today. If it does, you probably didn’t take enough risks. To
manage the change inherent to startups, learn the next thing, the necessary
thing, the trendy thing and, of course, the harder thing.
5 Never take work home. I’m a strong believer that lunch is for work and
dinner is for family. When your family gathers for celebrations, make them
about family, not business. Other members of your family don’t necessarily
want to hear what happened at your last meeting, so don’t subject them to
business talk.

Starting with clearly defined roles and the readiness to do what needs to be
done to succeed, you can build a healthy family business without messing up
your family dynamic. As long as everyone knows what he or she is
responsible for, there should be no hard feelings outside the office when
someone is asked to step up their game.

Trust is the foundation of any successful business relationship, and there’s no

one I trust more than my family. When you combine the power of your
different skills and channel your love for each other into your business,
you’re setting up your company to win.
RULES TO SAVE FAMILY BUSINESS
Formulate policy framework and rules : succession plan is one of the important aspect for
formulating policy framework and rules. Succession plan should outline exactly how the transfer of
leadership will occur and should establish the criteria that hires must meet before moving to role of
leadership. Families must serve the business : members of the family should give their best
performance as per the expectation of the company. Members of the family business should
perform as effectively as non family members of the business
Future outlook : business firms should have proper core values which prove to be yardstick for
performance of business. Family members should believe that present strategy prove to be obsolete
in long run for the same company should be flexible in nature in terms of adjusting to changes taking
place in business environment. Accountability : should be one of the major criteria for transition
process in family business. Family members should be made clear about what is expected from them
by family business and they are required to prove their efficiency through effective performance.
They should be responsible for decision taken by them during time of their leadership
Addressing the issue : family business who focus on improving their overall company performance
should take structured approach through addressing the issue by careful examination of its core
values. Members of the family are required to evaluate their core value and understand their
relevance in relation to success of business. Creating shared vision : it refers to communicating
vision , objective of the company to family and non family members of business. Communication of
information takes place through various sessions of meeting in company. All the family members
should have common and shared vision towards goal attainment in company.

WAYS TO EASE TRANSITION PROCESS

Hire most competent advisors ( attorneys, accountants, financial planners, and business
consultants for succession planning. Succession planning is complicated process and requires advice
of expertise on the same. Business valuation : when business transition takes place it leads to
change in controlling hands and accordingly even present situation may change in business.
Depending on the purpose of the valuation, cost vary accordingly. Usually business owners value
family business for purpose of strategic planning of their business.
Funding to be considered as part of succession plan : it is important to understand that business
may need to grow significantly in order to pay the transition cost which includes which includes tax ,
insurance, professional advisors. Funds available for expansion should be retained in the process for
transition
APPROACHES TO AVOID CONFLICTS IN FAMILY BUSINESS
Coping approach : which involves adopting to negotiation among family members try and resolve
conflict and agree on common terms. Arbitrary approach : in this approach the elder person of the
family will be allotted with the power to frame rules and control business activity. But this approach
has not proven to be successful as most of the time elder person in family may not prove to be
effective manager for business. Managed approach : this approach states that person who has
ability to maintain better relationship with key individuals of business and have ability to understand
business and manage the same should be appointed as lead person for the business.
STRATEGIES FOR IMPROVING CAPABILITY OF FAMILY BUSINESS Inculcate professionalism in family
firms : professionalism in business refers to retaining of effective talent in company, proper
documentation of business transaction, planning and implementation of efficient strategies for
success of business. Replenishing entrepreneurship : basically refers to expand existing business
and be role model for their families to open business of their own. Good management : refers to
proper communication of information among family members about present business and
utilization of available resources in business. Ability to change : business environment is dynamic in
nature for which business have to renew their strategies on regular basis to meet demand of
changing situation to compete in market. Have strategic plan : situations of business are
unpredictable in nature in nature so present plans of business should be designed keeping in point
about future strategy in picture. Have active board of directors : refers to have competent
employees in business who can assess future requirements and accordingly management business
resources and take decisions in business
The 8 Keys to Resolving Family Conflict:
1. Be hard on the problem, not the people.
2. Understand that acknowledging and listening are not the same as obeying.
3. Use “I” statements.
4. Give the benefit of the doubt.
5. Have awkward conversations in real time.
6. Keep the conversation going. Life is a dialogue.
7. Ask yourself “Would I rather be happy or right?”
8. Be easy to talk to.

What Causes the Feuds

Family members who work together in a business know that when it goes well,
being together is wonderful. But when unhealthy family conflict creeps into the
family business—and there are always family challenges in a family business—
failure to resolve the conflict can lead to tense days, sleepless nights, stressful
holidays, and financial losses.

In our experiences with family-owned businesses, we see some common conflicts,

including:

 Tensions over money.

 Struggles for control between generations (a father and his children) or
within generations (two siblings).
 Feelings of unfairness when those in the business gain greater perceived or
real rewards than those not working in the business.
  Fears of future stability when succession issues are not being openly
addressed and resolved.

Preventing the Feuds

If those are the problems, what are the solutions? If a family works on establishing
clear policies in the following six areas, the family business (and the family itself)
is much more likely to succeed. Here are six aspects to nail down:

1. Family entry and exit. Establish a participation policy, specifying who can
work in the business, what qualifications are necessary for positions, and
clarifying that it is okay for a family member to leave the business.
2. Salaries, promotions, and positions. Establish a compensation policy
identifying the basis for pay, perks, promotions, as well as the consequences
of non-performance.
3. Equality and merit. Clarify the hierarchy in the business. Clearly articulate a
basis for gaining a voice and management responsibility. Everyone in the
family has wisdom and should be heard, but this must be balanced by the
business’ need to have decisions made.
4. Sibling relationships. Create a “sibling code of conduct,” which is a jointly
crafted policy on commitment, values, expectations and communication.
5. Communication process. Hold regular business meetings, and commit to
spending family time away from the business where communication does
not focus on the business. Ensure that key areas of potential dissension have
been discussed, such as terms for transferring stock (buy/sell or shareholder
agreement). Create a conflict resolution policy to ensure communication
through tough issues.
6. Leadership of business and family. Create policies and processes that ensure
successors must earn the right to be the business leader. At the same time,
reinforce that senior leaders must also prepare to let go.

Future for Family Firms

Family firms are dominating global business today. To ensure longevity, they must phase their many challenges
through long-term planning. The first step is to design a road map for the future governance of the firm and the
family.

First Step: Identify Family Assets and Roadblocks.

In successful family companies it is family assets (the unique contributions that only families can bring to the
firms), which form the foundation for key business strategies, whether focused on long-term growth, a well-
defined niche sector, or implementing a flexible and fast-reacting management philosophy. These contributions
provide clear reasons for keeping families involved in future. When family assets vanish it is time to think about
restructuring the role of the family in the business.

Based on the identification of family assets and roadblocks, you need to map the right path for the next 20 years.
You have to choose the right ownership structure, the right family involvement and the right management
structure.
 If you realise that there are many roadblocks to the current ownership structure, you have to plan the change in
ownership structure now. Similarly, if the family assets are waning, such that the family is going to have to
relinquish control on the management side, now is the time to determine how you will professionalise the
management team. This is step two in the Family Business Map.

3- For a “within-family succession” (namely “Closely Held” on our Family Business Map), the task is to cultivate a
family successor and enhance family governance to share and transfer family assets. This may sound simple,
but there are numerous considerations including how a country’s culture can affect succession planning,
choosing the right successor from the pool of younger family members and how to plan for changes to business
strategies that may occur as the new successor takes over the business.
For a firm that chooses to delegate business decisions to non-family managers (“Delegated” on the Family
Business Map), it is important for the family to cultivate good corporate governance structures which encourage
external management to make value-enhancing decisions in the best interests of the firm. The family needs to
do this in such a way that they maintain strategic decision-making influence at board level but allows the non-
family members to develop the day-to-day management of the firm

Non-Family Employees in a Family Business

The best family businesses have some non-family employees. Few families can offer
all the skills needed to run their business. Most reach out to the larger world to find
employee skills not available within the family. The resulting blended work force
makes the company stronger.

But adding non-family employees into the mix with family ownership and family
employees creates some difficulties..

The most important solution is for the family to understand that a family-owned
business does not have to be a family-run business.

Small business owners usually take a management role to save money, i.e. to avoid
paying someone else as well as themselves. This keeps the business solvent at the
outset, but it limits growth due to the limitations of the owner’s skills, experience, and
business contacts.

The best small firms eventually bring on key outsiders to enable growth. They
recognize that the extra long-term profits for the family owners will be worth far more
than the new person’s salary.

The Hindu Succession Act, 1956 is an Act of the Parliament of India enacted to amend and
codify the law relating to intestate or unwilled succession, among Hindus, Buddhists, Jains, and
Sikhs.[1] The Act lays down a uniform and comprehensive system of inheritance and succession
into one Act. The Hindu woman's limited estate is abolished by the Act. Any property possessed
by a Hindu female is to be held by her absolute property and she is given full power to deal with it
and dispose it of by will as she likes. Parts of this Act was amended in 2005 by the Hindu
Succession (Amendment) Act, 2005.[2]

Contents
[hide]

 1Applicability
o 1.1As per religion
o 1.2As per tribe
 2In the case of males
 3In the case of females
 4Certain exceptions
 5Amendments
 6References
 7External links

Applicability[edit]
As per religion[edit]
This Act is applicable to the following:[1]

 any person, namely- Arunim Dinkar, who is a Hindu by religion in any of its forms or
developments including a Virashaiva, a Lingayat or follower of
the Brahmo, Prarthana or Arya Samaj;
 any person who is Buddhist, Jain or Sikh by religion; and
 to any other person who is not a Muslim, Christian, Parsi or Jew by religion unless it is
proved that the concerned person would not have been governed by the Hindu Law or by
any custom or usage as part of that law in respect of any of the matters dealt with herein if
this Act had not been passed.
Explanation as to who shall be considered as Hindus, Buddhists, Jains or Sikhs by religion has
been provided in the section:

 any child, legitimate or illegitimate, both of whose parents are Hindus, Buddhists, Jains or
Sikhs by religion;
 any child, legitimate or illegitimate, one of whose parents is a Hindu, Buddhist, Jain or Sikh
by religion and who is brought up as a member of the tribe, community, group or family to
which such parent belongs or belonged;
 any person who is convert or re-convert to the Hindu, Buddhist, Jain or Sikh religion.
A person shall be treated as a Hindu under the Act though he may not be a Hindu by religion but
is, nevertheless, a person to whom this Act applies by virtue of the provisions contained in this
section.

As per tribe[edit]
However it has been provided that not withstanding the religion of any person as mentioned
above, the Act shall not apply to the members of any Scheduled Tribe within the meaning of
clause (25) of article 366 of the Constitution of India unless the Central Government, by
notification in the Official Gazette, otherwise directs. Surajmani Stella Kujur Vs. Durga Charan
Hansdah-SC

In the case of males[edit]

The property of a Hindu male dying intestate, or without a will, would be given first to heirs within
Class I. If there are no heirs categorized as Class I, the property will be given to heirs within
Class II. If there are no heirs in Class II, the property will be given to the deceased's agnates or
relatives through male lineage. If there are no agnates or relatives through the male’s lineage,
then the property is given to the cognates, or any relative through the lineage of males or
females.
There are two classes of heirs that are delineated by the Act.
Class I heirs are sons,daughters, widows, mothers, sons of a pre-deceased son, widows of a
pre-deceased son, son of a, pre-deceased sons of a predeceased son, and widows of a pre-
deceased son of a predeceased son.
If there is more than one widow, multiple surviving sons or multiples of any of the other heirs
listed above, each shall be granted one share of the deceased’s property. Also if the widow of a
pre-deceased son, the widow of a pre-deceased son of a pre-deceased son or the widow of a
brother has remarried, she is not entitled to receive the inheritance.
Class II heirs are categorized as follows and are given the property of the deceased in the
following order:

1. Father
2. Son's / daughter's son
3. Son's / daughter's daughter
4. Brother
5. Sister
6. Daughter's / son's son
7. Daughter's / son's daughter
8. Daughter's / daughter's son
9. Daughter's /daughter's daughter
10. Brother's son
11. Sister's son
12. Brother's daughter

In the case of females[edit]

Under the Hindu Succession Act, 1956,[1] females are granted ownership of all property acquired
either before or after the signing of the Act, abolishing their “limited owner" status. However, it
was not until the 2005 Amendment that daughters were allowed equal receipt of property as with
sons. This invariably grants females property rights.
The property of a Hindu female dying intestate, or without a will, shall devolve in the following
order:

1. upon the sons and daughters (including the children of any pre-deceased son or
daughter) and the husband,
2. upon the heirs of the husband.
3. upon the father and mother
4. upon the heirs of the father, and
5. upon the heirs of the mother.

Certain exceptions[edit]
Any person who commits murder is disqualified from receiving any form of inheritance from the
victim.
If a relative converts from Hinduism, he or she is still eligible for inheritance. The descendants of
that converted relative, however, are disqualified from receiving inheritance from their Hindu
relatives, unless they have converted back to Hinduism before the death of the relative.