The most important characteristic of a family business is the interplay between family members, the owners and the company itself. This interplay strengthens family businesses, but sometimes also makes them vulnerable - for example, where control and management are concerned. A family constitution can provide answers to important questions concerning the control and management of family businesses.
Control and management within family businesses
The important issues concerning the control and management of family businesses often relate to the transfer of the business to the next generation. Consider, for example, questions such as the following:
- To whom is leadership of the family business to be transferred?
- Under which conditions is the leadership of the family business to be transferred?
- Should family members always be part of the management of the family business?
- Under which conditions can an owner withdraw from the family business?
Family constitution and contingencies within family businesses
Family businesses need to have their affairs well organised in case of unforeseen circumstances. This might be the case, for example, if the founder or director of the family business suddenly dies. It can save a lot of time and uncertainty if there is a family constitution setting out who obtains control, whether temporarily or permanently, within the family business.
Family values and roles in the family constitution
We advise you to also enter into consultation with your family on other, non-critical subjects within your family business, and to document this in a family constitution. For example, together, identify and note down the family values which are important for business operations. And make arrangements concerning the roles both of those family members who are active in the family business, and those who are not. Such a conversation can prevent a situation wherein the expectations of certain family members are not aligned, or do not fit with the family business.
Consider the future in the family constitution
Do not live only in the here and now where your family business is concerned. And not only that, but also take time for issues which will affect you only in the future, but which are nonetheless very relevant. For example, how will you involve your children in your family business in the future? And how do you prepare them for the task at hand?
Need help with your family constitution?
A good family constitution can strengthen your family business. Do you need assistance in drafting a family constitution? Meijburg & Co’s advisors are here to advise your family business on the tax aspects involved, and to help with drafting a family constitution. Please call one of our specialists. They will be pleased to assist.