Governance · 7 minute read
A family constitution, in plain language
The phrase sounds formal and slightly intimidating. At heart it is a written agreement about how a family wishes to make decisions together.
Many families tell us they do not need a constitution because they get on well. We are always glad to hear it. Good relationships are the best foundation a family can have, and a written agreement is not a substitute for them. It is a way of protecting them.
A family constitution sets out a few simple things. What the family's shared assets are for. Who takes part in decisions, and how. How new members, including in-laws and the next generation, are introduced to family affairs. What happens when someone wishes to leave a shared investment, or when the family cannot agree.
The document itself matters less than the conversations it requires. Drafting it gives every generation a chance to say what they value and what they worry about. Often the most useful moments come from questions that nobody had thought to ask before.
We usually suggest keeping the first version short and readable. It can be refined over time, and it should be revisited whenever the family changes, through marriage, birth, a business sale or the passing of a founder.
A constitution is not legally binding in most cases, and it does not need to be. Its strength comes from the fact that the family wrote it together and chose to be guided by it. Where formal structures are needed, such as foundations or shareholder agreements, the constitution helps the family's lawyers draft them in the family's own spirit.
This essay is general commentary and not investment, legal or tax advice.