Drafting a Family Charter
The drafting of a Family Charter is not a difficult task, as long as its author is fully aware of what to provide in it.
The best Family Charters are those that the largest number possible of Family members contributes to. Participating in the drafting of a Family Charter, or contributing to its contents, is an important step that is indicative that the participant, or contributor and, of course, all Family members who sign it off have the intention to abide by its provisions.
The Charter is the baby of those who bring it to life. They will cherish it. The best way to tackle this task is to select, from the items addressed in the above sections, and other items that are of relevance or concern to the Family, those to be dealt with in the Charter.
The first draft of the Charter shall consist of provisions to be submitted to the Family members and circulated to all of them, through the “head” of the Family, or its patriarch, or through any other member who launches this project, if a different person. The initiator shall preferably own the assignment to manage the whole process, unless another person is found to be more appropriate to assume this task.
Once all comments are received, a second draft may be generated and circulated, in anticipation of a meeting to which the largest possible number of Family members will be invited to attend, in order to sign off the execution copy of the Charter; if there is no final agreement, many subsequent drafts may be required in order to reach a real consensus.
All discussion sessions are supposed to be open ones; each attending Family member being allowed to bring in new ideas and raise issues, opinions, concerns etc. The person leading the discussions about the Charter should always keep the participants in focus and aligned, to the extent possible, with the interests of the Family in mind.
The main objective of the Charter is to set a roadmap, not only for the existing and participating, or even non-participating, Family members, but more importantly for the future of the Family and those of its future members who are not born yet.
Family members should be allowed and even encouraged, if they so wish, to seek outside professional advice on any particular matter to be dealt with in the Charter. While the size or length of a Charter does not necessarily suggest the weight that such Charter carries in terms of clarity, we believe that a great deal of details ought to be included in a Charter to make sure it is comprehensive enough and does address all concerns.
Amending a Family Charter
Family Charters are not set in stone and need to be looked at as living frameworks, to be updated, as and when appropriate. While they may stay with the Family for many years to come, a great number of the variables that they will have been drafted under or along are doomed to change over the years.
These relate to the evolution that the world and the Family, invariably and continuously, witnesses. These variables affect the regulations and laws, societies and social units with what it entails in repercussions on the Families and their businesses. Family Charters have to follow. This is why the drafting of the Family Charter ought to adopt great flexibility in order to avoid any deadlocks in their implementation or amendment.
Withdrawing from a Family Charter
There are various reasons for leaving the Family business. The most common one being the wish to be independent, using his/her share of the Family wealth to create and develop own business. There are other reasons such as disagreements with Family members, or with the way the Family Office is being managed, or the Family wealth invested
One other reason is the ipso facto retirement resulting from the death of a Family member and the unwillingness of his/her heirs to continue in the Family business, or to join the Family Charter, and this even if the latter does provide for such situations. The real question is, since getting out of a Family charter does not mean getting out of a Family, the conduct of which the Charter is supposed to govern, can a Charter be still enforced on the retiring member?
The simplest answers is that all provisions of the Charter, which are of a monetary nature, such as investment and divestment of Family funds and distribution of Family funds, should remain in full force and effect vis-à-vis the retiring Family member.
The only exception will be in the event, by mutual consent, or by application of the Charter itself or similar document/agreement to the same effect, the assets attributable to the retiring member are automatically liquidated. As for the non-monetary provisions, I do not believe that they can be enforced on the retiring Family member. In all events, it will be wise, if not already included in the Charter, to regulate a Family member’s retirement in an addendum to it.