Family Business: Protocol, Governance and Succession Planning
Family Business: The concept of a family enterprise is determined by the family as the substratum of the venture. Its characteristics arise from the presence and participation of a family group in the property layer and in the controlling decision-making bodies of the organization. A third feature is the attribute of a natural inclination to ensure the continuity of the family business. The aim of survival is the most visible weakness, since the lack of a well-suited legal framework means the family must face the main challenge with the assistance of standard organizational tools provided by the legal framework.
Family bonds contribute to a strong sense of motivation and involvement, which translates into high profitability and a solid advantage: involved persons, the aim of continuity, a long-term vision, and strong engagement. These same bonds also carry danger. The first achievement is separating roles within the enterprise. The second is ensuring survival by making a successful succession process. The third is delimiting business strategy and family interests.
Family Protocol
A family enterprise must be able to settle into the standard organizational structures available in the market and satisfactorily meet its needs and preferences. Certain singularities, however, require the devising of new components and fixings to achieve smooth functioning. There are two approaches to achieving tailored strategy: setting up family-related bodies acting in parallel, and drafting a family protocol.
Creating Bodies to Promote Efficiency
In creating other bodies to promote the efficiency of the venture, two bodies are established: the Junta de Familia and the Consejo de Familia. The basic structure expands with the setting up of specific committees charged with reviewing the family protocol.
- Junta de Familia (Family Assembly): A strictly family body whose mission is to inform family members about the business and its aims, and to discuss issues concerning the family in relation to the business.
- Consejo de Familia (Family Council): A decision-making board regarding family and business matters. Its functions include settling disputes arising from the relationship between the family and the enterprise, conducting and organizing business succession, protecting rights, and drafting and revising the family protocol.
The mission of the family bodies is to attempt to (1) unite the family around the business by facilitating intra-family communication, and (2) isolate the enterprise from family-related conflicts.
The Family Protocol
The family protocol is an agreement signed by family members aimed at ruling the enterprise's issues concerning management, organization, succession, and the economics of the family business, and at anticipating conflicts by providing dispute resolution mechanisms.
Structure:
- The first part of the document relates a set of values that inspire the family venture and stamps the family seal on business activities.
- The second part establishes rules governing the relationship between family units and the enterprise. Following clauses address issues concerning property.
- Subsequent provisions shape the decision-making process and the managing body of the company.
- The closing provisions include dispute resolution, interpretative rules, and liquidation damages.
The document closes with gratitude to the founders.