Sometimes called a family charter, other times a constitution, legally binding or not legally binding, whatever form it may take, appreciating its role in the succession process is vital.
Active Knowledge Question:
Where would you see a family charter fitting into a succession process?
By whatever name it may go, the family charter reflects the beginning and the end of the family business succession process. It has a vital role as the process commences and a vital role at its conclusion and, if well-crafted, it becomes a continual reference point throughout the process.
The family charter and the process of creating it can serve many purposes. Here are some of them:
- A means of discussing sensitive topics in a detached, not so emotional or personal, manner with the family.
- The recording and communicating of what has been agreed upon between family members as the charter takes shape and form.
- Records the goals for the succession process, which will serve as a guide for the entire process and an exit checkpoint at its conclusion.
- A legacy record of values and lessons learnt from generation to generation.
- Establishes the wealth allocation principles for the family and future generations.
- Sets out the corporate governance process that will apply once succession has occurred.
- A tool to instruct various advisors as to the wishes and intent of the family in drawing various legal documents.
- A historical record of the decisions made.
- A means of avoiding future family disharmony.
The charter and the process of crafting it should be used as a tool for drawing the family together across generations in a common goal of preserving, growing and transitioning wealth. But, more importantly, it is a tool to facilitate discussion, turn the spotlight on the elephants hiding in the family dining room, and to allow the next generation to begin to form a relationship between each other that will endure throughout that next generation’s stewardship.
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All the best in the success of your business,
Richard Shrapnel
