Family business protocol

The family business provides values that contribute to its development. Still, sometimes it manifests some particular limitations in very critical situations. One of these situations (very common in SMEs) is the challenging task to create a transgenerational vision that facilitates a serene family succession. This is an especially conflictive situation when the property is in the hands of several families.

We understand a family business as the organisation in which the property and management are in family hands. Although a family owns them in many cases, we can find situations where the property is in several families’ hands.

Family businesses have a vocation of perpetuity, a clear and defined perspective of survival in the long term. They also have other traits that characterise them:

Stability of employment. Greater responsibility towards workers,
Greater capitalisation to overcome periods of crisis,
Agility in decision making,
Greater geographic linkage.

But due to its particular characteristics, certain limitations also appear. They become clear with the growth of the company and become critical at the time of succession.

Much of the limits to which family businesses are subject have their origin in issues related to the relationships that must be established between family groups, ownership and management. Problems related to communication, leadership and succession are frequent.

Disagreements between partners or siblings who own a company usually acquire a more significant dimension at the time of family succession and endanger the company’s stability.

Succession in the family business is one of the most critical moments because it manifests the company’s latent tensions. The average age of family businesses demonstrates this, 25-30 years, compared to other types of companies whose average ranges between 40 and 50.

The preparation of a succession protocol in the family business is a fundamental aspect in companies and awareness about its importance is critical for its continuity.

protocolo familiar

The organisational by-laws regulate the relationships and agreements between the ownership of a company. They are effective against third parties, but insufficient to handle all aspects that affect the life of the family business:

Access and departure of family members from the management and ownership of the company, succession, resistance to succession,
Training of future managers,
Remuneration policies,
Entry of new generations,
Intrafamily agreements,
Code and ethical values,
Formulas for conflict resolution.

At the time of succession in the family business, It’s recommended to open communication forums where all members can express themselves and reach agreements, facilitating the governance.

As the shareholders’ agreement, the Family Business Protocol (generational replacement plan, family constitution or family business succession protocol) is a specific instrument of the family business that helps to regulate the aspects that facilitate the company’s continuity, anticipating eventual discrepancies and acting as a guarantee of progression.

All of these aspects must be agreed before discrepancies could arise. The family protocol, in this sense, is shown as the most appropriate instrument.

We provide solutions

As a consultancy specialised in the organisation, OAK within its Government, Risk and Compliance business line, has developed a specialised line in the family business succession process. Our services cover four lines of work:

Family governance: future of the company, agreements in the field of property and generational renewal,
Asset management: duties and rights of property, income and dividends,
Management and organisation of society: professionalisation, clarification of responsibilities and establishment of codes of conduct,
Social and family agreements: family patterns of solidarity and maintenance of traditions.

A multidisciplinary team develops our family succession projects. Personnel from the consulting area take part with legal experts. Indeed this multidisciplinary vision differentiates us as it allows us clear and transparent advice both in business management and in the legal aspects that a shareholder agreement governed by the Civil Code implies.

The Family Business Protocol structure could vary depending on the complexity of the family groups, the company, and its system. There is no one application model for all situations.

At present, it is possible to register family protocols in the commercial register. This initiative is widespread in the US and provides transparency to generational change and the limits of participation of family groups in the company, generating trust and security in moments of financial limitation, entry of new partners or operations of venture capital.

What our customers get

Report that includes the critical aspects of family succession agreed upon in consensus by all parties involved, advised by a multidisciplinary team of organisational consultants and experts in taxation and commercial and civil law.

Family business protocol

We provide solutions

Satisfied customers

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