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Family Office – Conflict of Interest

Family charters make sense for family businesses, in particular for those controlled by the second or later generations. But what exactly is a family charter, and what advantages can it bring?

 

According to EY broadly speaking, a family charter is a framework, usually in document form, that defines how the family is expected to relate to the business – as employees, owners and family members. They can be particularly beneficial for businesses with revenues of over US$50m, and for when a family member moves from an operational role into more of a shareholder role.

  • The family’s vision and philosophy. This is a good starting point for any charter. Setting this out clearly can help to establish the principles of the business, which will be constant from one generation to the next.
  • What the requirements are to sit on the board, and at what age succession needs to be in place.
  • A family council. This will probably operate outside of the operational business, but will report into the main board. Family councils typically meet quarterly to discuss many of the issues listed above. And there may be a conflict resolution mechanism within the council to deal with disputes between family members.

more can be found @ http://bit.ly/1Ic6ENg

An article blogged by KPMG states that it can be difficult for a family business to notice crossing the line between favouring a relation or close friend because they are the best choice, and choosing to work with them out of personal ties instead.

This on-going issue needs to be at the forefront for the company’s board, in order to ensure that every business decision is made to the benefit of the company as a whole, and not to simply favour family members.

  • Boards should act idependently
  • A mix of family members and non-family members can help reduce any grey areas leading to possible conflicts of interest for the company
  • A smart board takes a step back from the business as a whole to accurately analyse the right course in any business decision

interested in the full article? http://bit.ly/1OafnM0

 

Take action to make sure the family charter is in place and in good order

Make sure vision and mission are clearly communicated and lived across generations

Install a board that best meets your clients interest

For further information please contact us directly or follow us on Twitter @stefan_becker

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