Family Charters – protecting your family’s business for this generation and the next

A well-drafted family charter can be an invaluable document for the smooth and successful running of a family business.  The charter represents a statement of the family’s hopes and aspirations for its business.

Ordinarily, a family charter is not legally binding on family members.  However, the charter seeks to guide the family’s interactions with the business for the benefit of current and future generations.  There is a wide range of issues that may be covered by a family charter.  For example, the charter may determine how the company’s board should be formed, how new directors should be appointed and which family members are entitled to own shares in the company.

An ordinary shareholders’ agreement is not always suitable for these purposes.  For example, a family member may have a considerable interest in, and influence on, the success of the business without being a shareholder.  This family member would like to have some protection as to his or her interest and, conversely, other family members may wish to regulate his or her influence.  A family charter may achieve this.

The charter could be used to answer, among others, the following important questions:

  • Should the company remain wholly owned by the family or will outside investment be permitted?
  • What are the ethical values of the family and what are the long-term goals of the business?
  • Which family members should be shareholders and how will voting rights be divided?
  • Can the company’s board include directors who are not family members?
  • How should the business be passed on to the next generation?

If a family charter would promote the success of your family’s business, or if you have any queries in relation to the running of family businesses, Stone Rowe Brewer LLP would be happy to help.  Please contact our company commercial department on 0208 891 6141 or email us at j.andrews@srb.co.uk or t.lucas@srb.co.uk.

2013-03-22T10:26:57+00:00 March 22nd, 2013|