Family governance is the set of rules, processes and institutions a family adopts to make decisions about its assets, businesses and intergenerational cohesion. The family governance charter — sometimes called a family charter or family protocol — is its principal documentary expression. It does not have the force of a legally binding contract (unless otherwise specified), but it constitutes a shared reference framework of considerable value.
Why formalise governance?
Informal governance works as long as the family is small, interests are aligned and decisions are straightforward. As the family grows, the wealth becomes more complex and generations succeed one another, the absence of clear rules becomes a source of potentially destructive conflict.
Field research shows that the majority of family conflicts over wealth do not concern fundamental disagreements about values, but about procedural ambiguities: who decides what? How are roles distributed? How are distributions determined? The charter addresses these questions before they become disputes.
The typical content of a family charter
A well-designed family charter generally covers the following themes, tailored to each family's specific situation:
1. The family vision and values
A common mission statement: why does the family manage its wealth together? What values guide its decisions? This section is often underestimated, but it forms the foundation of all subsequent decisions.
2. Governance bodies
Who decides what? Several bodies are generally defined:
- The family council: the plenary assembly of all adult members, which meets at regular intervals (annually or semi-annually) for strategic decisions.
- The executive committee: a small group responsible for day-to-day operational decisions.
- The investment committee (if relevant): responsible for investment policy and oversight of managers.
3. Decision-making rules
Simple majority, qualified majority or unanimity depending on the type of decision. Who has voting rights? Are spouses included? How are deadlocks resolved?
4. Distribution policy
How are income and capital gains distributed among members? What criteria guide discretionary distributions? Is there an untouchable capital reserve?
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5. Entry and exit of members
What rules govern entry into the wealth structure (marriage, children reaching adulthood) and exit (divorce, death, redemption of interests)?
6. Training and preparing the next generation
How does the family transmit its wealth culture to younger generations? Financial education programmes and progressive responsibility roles are often provided for.
7. Conflict resolution
An internal mediation mechanism (a respected family member) or external mediation (a professional mediator) before any judicial recourse.
The family charter and legal instruments
As a rule, the charter has no binding force: it is a moral commitment. Its real reach therefore depends on how it is articulated with the legally binding instruments that surround it — the succession agreement, shareholders' agreements, the articles and regulations of the family holding company and, where relevant, marital agreements. Good practice is to treat the charter as the document that inspires and the legal instruments as the mechanisms that execute: the charter states, for instance, the principle of a family right of first refusal over shareholdings, and the shareholders' agreement makes it enforceable. This consistency between the spirit and the letter should be checked at each review of the charter, so that the binding documents remain aligned with the values it proclaims. Families that neglect this alignment often discover, at the first dispute, that their charter carries less weight than they assumed.
The drafting process
The drafting of a family charter is as much a process as it is a document. It must be built participatively, with the commitment of all concerned members, lest it be perceived as imposed by the dominant generation.
Typical steps:
- Diagnosis: mapping of members, assets and issues
- Participatory workshops: discussion of values, needs and aspirations
- Drafting a first version: by the coordinating team, with external counsel
- Collective review: amendments and validation by members
- Signature: a symbolic ceremony marking the common commitment
- Periodic review: every 3 to 5 years, or upon major family events
Ridger accompanies families through this process, from the diagnostic phase to the establishment of governance bodies. To discuss your situation in full confidence, we invite you to get in touch.