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Example of a Family Business Constitution


Mission

The xxxxx family is committed to ensuring the financial success of yyyyyyy Ltd (‘the company’) as a means of achieving and maintaining a source of revenue and employment for family members. We are also committed to working together in the interests of both the business and the family, respecting each other’s views and acting in a manner beneficial to the business, its financial success and the stability of employment for its staff.


Definition of ‘The Family’.


For the purpose of this constitution the family is defined as (the members of the family).  


Family values

The family is committed to conducting business to a strongly held set of core values and a desire to meet specific commercial goals. The following values and goals should always guide our actions and behaviour in dealing with customers, suppliers, employees and each other.

  • Our customers have a right to expect superior performance from us.
  • We will always treat our suppliers with respect as an intrinsic part of our supply chain and as commercial partners
  • In all our business dealings we will conduct ourselves with the highest level of integrity, honesty and goodwill.
  • We will treat all employees and ourselves with dignity and a desire to do what is fair and appropriate.
  • Open communication, translucency and candor should be characteristic of our dealings with each other.
  • Family members should have the opportunity to progress and add value to the business through appropriate training, personal development and education along with supportive help from other family members, directors and external advisers.
  • We recognise a responsibility to the wider community in which we live and work and work and will make every effort to support communities or causes where we feel we can make a difference.
  • We desire to be seen as responsible, professional and ethical employers with a reputation for fair play, staff development and relations and good place to work.

Continuity

It is our objective to maintain the company as a family business in terms of both ownership and management. Dilution of shares away from the family may be considered in the future if this is beneficial to the business and the family. However, the family would always seek to maintain a controlling interest.

We will continue to provide employment for family members where they are suitably qualified. However, family members do not have an automatic right to employment in the company or to become a director or shareholder. We will also employ non family members who are suitably qualified who may also be promoted to the board of directors if appropriate and agreed by a majority of family member shareholders.


 Composition of the board of directors.

The criteria for the composition of the board are:

  • The chair will always be a member of the family or be appointed by the family council.
  • The chair will have the casting vote
  • The composition will be such that the voting rights of family members will always outnumber those of non-family members.
  • Should a family board member retire or cease to be a director for any reason then the voting rights will be adjusted if necessary to ensure that the family has a majority.

Remuneration & benefits

Family members will be remunerated appropriately according to their responsibilities and status in the company and the affordability of the business. They will be paid a combination of salary, dividends, bonus and other benefits as being considered appropriate. Remuneration packages, dividends and bonuses will be approved only by directors who are also family council members.

Benefits may include company cars or car allowances, pension contributions, health care, school fees or any other benefits as deemed appropriate by the council.

The family will always ensure that there is sufficient working capital retained in the business for current and future trading and potential investment prior to agreeing on levels of remuneration.


Disciplinary matters

Where a family member is in a position that disciplinary action is required for such things as lack of performance, unacceptable behaviour etc then the family member will initially be disciplined by the council and if appropriate processed through the company’s normal disciplinary procedure.


Shareholding

The family will always retain a minimum of 75% of ordinary and voting shares unless it is unanimously agreed that, in the interests of the business and/or the family a sale of all or part of the business is appropriate.


 


A shareholding agreement will be put in place whereby appropriate pre-emption rights will be incorporated to ensure that family members always have first rights to acquire shares that may be offered for sale by any shareholders.


Succession Planning.

The family will put in place appropriate succession plans to ensure the continuity of the business and retention of control within the family for as long as required by the family. Should there not be a successor(s) from within the family then non-family members will be considered providing they meet the values and ethics of the family.