Succession Dilemma at Hamdard India

Case Code: BECG167 Case Length: 9 Pages Period: 1906-2019 Pub Date: 2021 Teaching Note: Available

Price: Rs.300 Organization: Hamdard Laboratories Industry: food and beverages; Medicines Countries: India Themes: Family Business,

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

India-based traditional Health and Wellness company Hamdard Laboratories (Hamdard) was founded in 1906 by Hakeem Abdul Majeed (Hakeem) as a Unani (a form of medicine that evolved from Greece and is followed in several Islamic countries) clinic. Hakeem made medicines which became highly popular. After his death, the company was run by his wife and two sons (Hamid and Said). They executed a deed to manage Hamdard. The deed specified that the trust would be run by one or two trustees and Hamid and Said would have all the rights to manage the trust (Hamdard). They had all the authority to appoint or remove people from the trust, and also to manage all the income. The second son Said moved to Pakistan when India was partitioned in 1947, while Hamid continued to run the Indian operations of Hamdard. Under Hamid’s leadership, the company started using modern manufacturing techniques and it established contemporary production facilities. He also made Hamdard into a trust dedicated to charity, service, and social responsibility. Hamid later appointed his two sons, Abdul Mueed and Hammad Ahmad, as members of the trust. The deed was changed in the 1970s. As per this, the trust would have five members including the head and the chief. The chief was to be the oldest descendent of the head. After the head passed away, the trust would be run by the chief and the position of head could not be claimed by anyone else. After the chief, his eldest son would become the next chief, whose responsibilities included administration of the trust, allocating duties to other members, and efficient running of the trust.

Mueed was appointed as chief of the trust and after Hamid died in 1999 he took over the trust. In 2015, after Mueed passed away, Mueed’s son, Abdul Majeed, wanted to be the chief of the trust as per the trust deed. But Mueed’s brother, Hammad Ahmed, wanted to lead the trust as the oldest surviving member of the family and direct successor to Hamid. The rift between them grew further with each party claiming ownership of the trust and all the departments of Hamdard.

Hammad Ahmed then approached the courts, which ruled in his favor. Mueed’s sons also approached the court challenging the order and alleging that Hammad and his son had misused the organization’s funds. The court then cancelled Hammad Ahmed’s appointment as chief of the trust. But a higher court ordered that Hammad Ahmed should continue to head the trust till the final verdict was given. Meanwhile, some religious groups claimed that the company belonged to them as per the prevailing trust laws.

Business, in the meantime, had come to a standstill. The production of Hamdard’s signature product Rooh Afza and other products was adversely affected. The ambitious growth plans the company had embarked on – to enter new segments like cosmetics, start wellness centers, spruce up distribution, etc., were put on the back burner due to the raging feud.

Issues

The case is structured to achieve the following teaching objectives:

• Explore how a family business is built.
• Understand the role of a trust in managing a business owned by a family.
• Examine the reasons for conflicts in a family business.

Contents

Introduction
Background
The Hamdard Trust
Changes in the Deed
The Next Generation Takes Over
The Disputes Arise
Exhibits

Keywords

Family business; Hamdard; family constitution; Trust Deed; succession planning; Family business governance, family business conflicts, managing a family trust, succession in family business, transition issues

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