Family constitutions can otherwise be known as family charters or family protocol. They provide a framework that engages with family members, the family businesses, family investment companies, the family office and the trustees of family trusts.
A family constitution is a written statement which records the family's heritage, culture, hopes and aspirations for future success and plans how to achieve that success. The document enables the smooth running of family affairs and interests by containing a number of provisions for different events. Those events include:
- Where do we come from?
- Where are we now?
- Where do we want to go?
- What are our guiding principles?
- Should the business always be owned by the family?
- Can the family release their interest in the business?
- What criteria should there be for employment of family in the business?
- How do we make decisions?
- Who should lead?
- Should that leadership rotate?
- Should there be a family council?
- Should there be tag along provisions?
Though a family constitution is not binding it helps to avoid dangerous and catastrophic family fall-outs by looking at what would happen should a major family event occur. The document takes out surprise and gives an opportunity for each family member to express their views on these questions. Although not all family members may like the outcome of the particular decision they will respect that they have been consulted and have taken part in reducing the constitution and they are less likely to protest if decisions are not in their favour.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.