1. Family Business Management

A Family business is the pillar of Family assets. A special attention should be given to it in a Family Charter. Who manages the Family Business? Family members and/or others? They may be assisted by consultants and advisers. How are Family directors and officers appointed? Are they remunerated? If yes, what is their legal status? Are they employees of the Family? How to remunerate them? The Family Charter should provide answers to these questions. An intricate matter not to be ignored, when drafting a Family Charter, is to clarify and set out the management roles of Family members and of non-Family members.

Who will manage the Family Business? A Family member? An outsider? What are the prerequites for a Family member to sit on the Board of the Family Business? Are young Family members admitted to play a part in the management of the Family Business? On what conditions? How are the Family Business managers and/or directors remunerated? How to evaluate their performance? How are shares in the Family business transferred?

The easiest way to approach this matter is to assimilate the Family to a legal or a corporate entity, having its own existence and interests independently of its members’. The reason for this approach is to set a tested framework for the purpose of managing the Family and its assets in the most professional and businesslike manner. Ultimately, the Family members shall benefit from such an overall unbiased management. Consequently, and as a result of such simulation, a Family may have a number of bodies to manage it. The Family Charter shall provide for a structure which may comprise of the following bodies:

(a) A Family Assembly

It comprises of all direct Family members. Its operation and decision-making process follow the pattern of a general meeting of a company.

(b) A Family Board

This board is the executive management arm of the Family. It runs its affairs. Its members are appointed by the Family Assembly from amongst Family members or non-Family members. As a matter of fact, the independent executive Board members play a crucial role within the Board, as their input and contribution are made without any outside influence or pressure.

(c) A Family Council

It is the body that comprises of Family members elected by the Family Assembly. In families, with a large number of members, it is more practical and more efficient to have a Family Council. In its capacity as the Family’s representative, this Council deals with Family matters on behalf of all Family members. The Family Charter shall set out the role and powers of the Family Council. Its most important role is to inter-act between the Family Assembly and the Family Board.

(d) Family Committees

These are specialized committees comprised of the Family members who share common interests. Relevant matters of concern to the Family may be submitted to them for perusal and issuance of related recommendations.

(e) Family Office

This appointed body runs the Family day-to-day affairs. It implements the Family Board decisions. Typically, it consists of administrators, legal counsels and fund managers. Family Office executives are recruited on the basis of their education, skills and experience. Their main task is to tend to the needs of the Family and its members in all respects. Family Office services range from concierge services to the provision of highly technical financial and legal advices and opinions, which cover current or contemplated investments of the Family.

2. Family Finances

The Family Charter provides also for the management of Family funds, as well as for the rules governing their spending and distribution. The Family Board sets the strategies for the achievement of the Family financial objectives within guidelines normally set by the Family. It also provides for the regular financial reporting to g members (annual, quarterly, monthly). This reporting helps keep all Family members abreast of the performance of Family liquid and non-liquid assets and help them plan their own individual finances and investments.

3. Settlement of Family Disputes

Disputes among Family members are inevitable, especially when they share the ownership, and/or participate in the management, of a Family business. A well thought Charter addresses all possible controversial issues that may arise within the Family and is, in this respect, a mitigator of Family disputes, and a reducer of their frequency. It helps settle such disputes to a large extent. These disputes normally arise as a result of unclear situations. All members of a Family may not agree on the way profits realized by the Family are to be disposed of. A Family Charter usually addresses financial matters, such as the acquisition and preservation of valuable assets, the maximization of the return of such assets. If the management and disposal of these assets are regulated, the occurrence of disputes over them is automatically reduced. Having said that, neither a Family Charter nor any other type of documents may prevent or help avoid acute Family disputes. It is only the will and determination of at least one, or one clan, or one branch of the Family members who are in dispute, that are likely to minimize the adverse consequences of the non-settlement of the disputes, not only between or among them, but mainly on the Family as a whole. This may require concessions to be made. These concessions will prove to be precious gifts to the Family. The Charter sets out a whole procedure for the settlement of the Family disputes: how to initiate the process? Who, or which body, to submit the disputes to? Arbitration by an arbitration panel? Private arbitration? Or, in a worst case, litigation before a specific court?