The family constitution is a fundamental element of the success of any family business. It serves as the family business’s primary governance instrument by aligning ownership, continuity, and authority according to a specific framework.
Some of the main functions of a family constitution pertaining to family business governance include definition and codifying of family authority, directing the business’s strategic position, specifying rules on ownership, establishing governance bodies, and listing steps and mechanisms for conflict resolution and decision-making.
To maximize the efficacy of a family constitution, at a bare minimum all family members directly involved with the operation and ownership of the business ought to provide input for it while it is being drafted.
Among the main benefits of a viable, well-crafted family constitution are greater ability to defend the family wealth against potential difficulties, elevated levels of family harmony and cohesion, and simplification of family business succession as well as the succession planning process related to it.
Unlike a shareholders’ agreement or a set of bylaws, a family constitution is not legally binding and therefore does not usually contain technical or specialized terminology within its text.
Additionally, a family constitution is differentiated from a legal governance document because every family member involved with the family business is a signatory of the constitution. Conversely, legal governance documents are usually only to be signed by investors and/or owners.
Regardless of whether your family constitution is very simple, extremely intricate, or anything else in between - we at Evoque Advisory will help you ensure that it serves the best interests of your family and business at all times.
Please contact us at enquiry@evoqueadvisory.com to request a consultation or address any other relevant matter.
