Family-run businesses

Create a successful family-business constitution


One way to successfully manage conflict in a family business is to have a family-business constitution. When well drawn-up, such a document can even prevent conflict occurring in the first place.

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

Importantly, it is also a practical guide for running the business and a framework you can use to deal with family business issues that have the potential to cause disputes.

The process of drawing up a family constitution should be collaborative, involving everybody with a stake in the business. The document should be regularly reviewed.

Structure your constitution

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