Family businesses do not usually have specific rules about how the partners must deal with concrete situations that might occur in the future. The most common circumstances that can be solved by a business protocol are the following:
✓ Transfer of shares in the future.
✓ A partner’s right of withdrawal.
✓ Right to earn dividends
✓ Parterns’ retirement age
✓ Remuneration of the working partners in the future
✓ Criteria for work entry in the future
✓ Transfer of shares in “mortis causa” situations, etc.
It is all about ensuring the company’s continuity by establishing a series of rules that will bind all the partners. The family protocol is a commitment signed by the members of the entrepreneur family-owner of a family business, aiming to reach and guarantee the continuity of a business that generates entrepreneurial wealth and bequeath it to the future generations.
The family protocol is especially useful in the event of unforeseen situations such as a partner’s death, the divorce of a partner married in community of property, a partner’s debts that could have implications on the business’s performance, etc.
Family protocol: the commitment that guarantees a company’s continuity
The family protocol serves to take a step further in the professionalization of the family business group.
Regulates the relationships between family owners and the family business.
Regulate a series of aspects, among them, the succession policy of the family business.
The family protocol is a contract that has the force of law among its signers.
This is how management and property tasks get separated in family business
The family protocol is a document that serves to go a step father in the professionalization of the family corporate group, by establishing a clear separation between the management, ruling and property levels. It regulates the relationships between the family owners and the family business so the first ones cannot interfere with the second one. It is usually created and implemented as part of a global corporate-restructuring operation of a family business, though it usually adapts to each company’s features: it is not a sample document. In Leialta we have experience in planning successful family protocols for corporate groups.
Which are the aims pursued by the family protocol
The main goal is to guarantee the family business’s continuity in the future, and that the rules that state how to deal with the different situations that might occur in the future are clear for all the partners. The absence of a family protocol generates an unnecessary instability, so it is good to get it ready in a moment of family peace so all the partners know where they stand in the future.
Which issues are regulated by the family protocol?
The role of the family protocol is to regulate a series of issues such as:
- Family business succession policy
- Shareholder policy, job policy (criteria for the family entry) and salary-remuneration policy for partners.
- Transfer of shares inside of the family in the future
Does the family protocol have any legal effect?
Of course.The family protocol is a contract that has the force of law among the parts, described in the Article 1.091 of the Spanish Civil Code.
How to implement a family protocol
- In a first meeting with the partners, Leialta’s family-protocol experts will draw the attention to a series of recurring aspects that always make up a family protocol, and will practice active listening in order to cover all the possible situations that might occur in the future, so they can materialize a way to solve them in the company’s management statutes.
- The definite text is prepared and written so all the partners can approve it.
- Once approved, the Company’s statutes will be modified and a public deed will be formalized recording both the protocol and the modification of the statutes.
Through our family-business consulting service, we can help you if you recognise here the problems that can affect your company.