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The long family feud that followed the death of the founding patriarch Dhirubhai Ambani in 2002 highlights the critical role of succession planning in large family businesses. Succession planning becomes extremely critical in the emerging markets where the legal and institutional arrangements regulating the corporate entities and the corporate governance practices are still being developed. The absence of a solid succession plan observed in the case of Reliance Industries is not uncommon among large business houses in India.

2. when the fissures between the relationships of two brothers surfaced, Mukesh Ambani insisted that his father had settled all ownership issues before his death and that there was no confusion about the leadership of the company which would vest in him thereafter. This message was conveyed to the RIL employees through an E-mail that suggested that Mukesh was the final authority on all matters concerning Reliance. 3. At the heart of the dispute it was clear that both brothers wanted to control the reliance behemoth for its potential to raise capital as well as its ready cash reserves which would be instrumental in setting up of new businesses- telecom for mukesh and energy for anil. The ownership issue seemed to become secondary to this. 4. Both brothers wished to build on the legacy of their father and to diversify from the old and established business arms of petroleum and petrochemicals. 5. Also, being a family dominated business, it was expected that that mukesh would succeed his father in what is known as the popular hindu succession route where the elder son steps into the fathers shoes. 6. Mukesh had majority control at the time of the split through his personal stake as well as the family stake which gave him a sizable voting share. Also, the RIL board and the management had endorsed Mukesh as the next head of the RIL conglomerate. 7. Mukesh further declared that there was no succession crisis within reliance giving rise to speculation that anil may be turned out of the reliance group for good, thus generating a wave of sympathy for anil that also led to the resignation of certain office holders close to dhirubhai and plunging the conglomerate into internal chaos. 8. The net effect of all this uncertainty was that the reliance stock fell drastically. 9. It also led to a caution by S&P that the credit rating of the company would suffer if there was a division of cash and other assets to reach a settlement. 10. Another highlight of this feud was that it invited political interference. The left parties, then having considerable say in central government, were candid and outspoken in their desire that the government should intervene in the dispute involving one of indias biggest conglomerates, sending the markets into a fresh tizzy. 11. It was pointed out that the uncertainty that had already impacted the stock market and small investors, may eventually negatively impact the inflow of foreign direct investment. 12. As the pressure from various stakeholders increased and as Mukesh Ambani realized that the delay in settlement will actually cost him more in foregone assets and control, there were significant efforts on various planes to help reach a settlement. 13. A legal recourse was discounted as it would have been far more public and also far too slow, impacting even the daily running of the company.

14. By mid-December 2004, in a tradition very unique to India, Mukesh and Anil had expressed their desire to have their mother Kokilaben act as arbiter to solve the dispute. They both committed that they would abide by whatever settlement terms Kokilaben proposed. To arrive at a settlement, that would involve corporate restructuring of ownership and control, with help of a well-respected family friend, Mr. K.V. Kamath, Chairman of ICICI Bank, was sought. 15. she proposed a solution in which the brothers would become separate but equal. This meant that Mukesh would retain control over Flagship Company Reliance Industries and IPCL, while Anil would create a separate holding company to contain his interests in three entities carved out of RIL, namely, Reliance Infocomm Reliance Energy, and Reliance Capital. 16. For investors the deal meant that given that RIL and IPCL will remain with Mukesh, the synergy and complementarities have not been lost. On the other hand, separation of non-related businesses of communication, finance, and energy from RIL and IPCL, will actually unlock value for the shareholders. 17. Yet there were many things left out of the agreement. For one thing, even though the deal offered some clarity as to the public traded companies making up Dhirubhai Ambanis Reliance empire, it was not clear as to how the host of privately held companies in this group were to be divided between the two brothers. Other family assets were to go to the sisters and the mother yet these were not specified clearly. 18. However, within almost an year in2006, the dispute resurfaced with the brothers accusing each other of mala fide behaviour vis--vis the settlement. There were also charges of insider trading, corporate misgovernance, lack of transparency, improper exchange of securities, and unfair treatment of RIL shareholders, which necessitated sebi investigation.

19. SEBI also had to interject in order to resolve several issues like transfer of carved-out corporate entities from the RIL to the ADAG through listing at the stock exchanges, Inter-business transactions among the various entities carved out of RIL but now under two separate control groups, covered under agreements. 20. These agreements included Gas Sales Agreement , Non-Competition Agreement , Trademark Management Agreement, etc. 21. The dispute also had a negative impact on the hard won indian reputation as an investment destination for oil and petroleum industries. 22.

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