Family-run businesses

A family-business constitution - sometimes known as a family charter or family protocols - is partly a statement of general principles. It outlines your business' core values and vision, and your family's commitment to them.

It helps successfully manage conflict in a family business, and a well-drafted document can even prevent conflicts before they start.

Importantly, it is a practical guide for running the business and a framework for handling family issues that may cause disputes.

The process of drawing up a family constitution should be a team effort. It should involve everyone with a stake in the business. The document should be regularly reviewed.

How to structure the constitution of your family business

A typical family-business constitution might include the following sections:

• business goals, vision and values
• leadership
• rights and responsibilities of shareholders
• management structure
• entry principles for family members
• criteria for succession
• exit policies
• rights, responsibilities and obligations of family appointments - pay, incentives, performance management and reporting lines
• rights, responsibilities and obligations of family members not working in the business
• appointment and rights of non-family board members, management and employees
• training, remuneration and appraisal of employees - both family and non-family
• developing the next generation
• involvement of non-executive directors and other outsiders
• communication channels
• dispute-resolution procedures