More and more wealthy families are starting to create a “Family Constitution”. We are assisting a few clients with setting this up as it fits in perfectly with the planning we do with/for them.

A family constitution, also known as a family charter or family governance document, is a formalized set of guidelines and principles that govern the relationships, roles, responsibilities, and decision-making processes within a family-owned business or wealthy family. Here’s how it typically works:

What is a Family Constitution?

  1. Establishing Shared Values and Vision:

The family constitution begins by articulating the family’s core values, mission, and long-term vision. This process involves open dialogue and collaboration among family members to identify shared goals and aspirations for the family and the business.

What is a Family Constitution?

  1. Defining Roles and Responsibilities:

The constitution clearly defines the roles and responsibilities of family members involved in the business or family wealth management. This includes outlining criteria for employment, succession planning, and leadership positions within the family business.

  1. Setting Guidelines for Decision-Making:

A key aspect of the family constitution is establishing guidelines for decision-making processes within the family and the business. This includes protocols for resolving conflicts, making strategic decisions, and handling issues related to ownership and management succession.

What is a Family Constitution?

  1. Addressing Ownership and Governance Structures:

The constitution outlines the ownership structure of the family business, including rules for ownership transfers, dividends, and voting rights. It also defines the governance structure, such as the roles of the board of directors, family council, and advisory committees.

  1. Ensuring Continuity and Sustainability:

By formalizing the family’s values, vision, and governance processes, the constitution promotes continuity and sustainability across generations. It provides a framework for managing family dynamics, preserving wealth, and fostering harmony within the family and the business.

What is a Family Constitution?

  1. Adapting to Changing Circumstances:

A family constitution is a living document that evolves over time to reflect changing family dynamics, business needs, and external circumstances. Regular reviews and updates ensure that the constitution remains relevant and effective in guiding the family’s decisions and actions.

What is a Family Constitution?

Overall, a family constitution serves as a roadmap for navigating the complexities of family-owned businesses and wealthy family dynamics. It fosters communication, transparency, and accountability while promoting unity, resilience, and long-term success across generations.

It doesn’t have to be too complex, and using a mediator can greatly assist in the process.

Dirk Groeneveld, Certified Financial Plannert. 

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