Notable families such as the Waltons, Mars, Hermès, Rockefellers, and Rothschilds have long adopted comparable governance structures under different names.
It provides a framework through which all relevant family members can participate in defining shared objectives and a collective vision for the future. It establishes guiding principles that promote cohesion, accountability, and clarity regarding the family’s long-term goals.
Although each Family Charter is unique and tailored to the individual circumstances of the family, common areas addressed may include education, marriage, investment strategy, philanthropy, ESG, and participation in family business activities.
Inclusive engagement in the drafting process ensures all voices are heard. This not only fosters a sense of ownership but also helps to prevent potential resistance, particularly from younger generations, who may otherwise be reluctant to be bound by provisions imposed unilaterally by senior family members.
A tool for managing family conflict
It is not uncommon for trustees and advisers to encounter family disputes, particularly in matters involving wealth management and business succession. In such circumstances, a Family Charter can serve as a valuable mechanism for reducing tension, setting expectations, and preserving harmony. By defining roles, responsibilities, and decision-making processes, the Charter provides a constructive framework within which disagreements can be addressed.
Facilitating challenging discussions
The process of establishing a Family Charter may initially give rise to differing opinions. However, engaging family members in open dialogue during the drafting stage often mitigates friction when future conflicts emerge.
This collaborative approach also provides professional advisers with an opportunity to act as facilitators, strengthening their relationships with the wider family, particularly with younger generations whose involvement in governance may previously have been limited.
Developing the charter
The creation of a charter typically involves extensive discussions and careful consideration of complex issues, including matters that may be emotionally or strategically sensitive. The process itself often proves as worthwhile as the final document, as it encourages communication, transparency, and mutual understanding among family members.
Typical contents of a Family Charter
A well-structured Family Charter may include provisions addressing:
- Family values and guiding principles
- Definition of family membership (for example, inclusion of spouses, stepchildren, or adopted children, in-laws)
- Purpose of the family business (such as wealth creation, employment for family members, or philanthropic objectives)
- Employment and remuneration policies for family members
- Governance structures
- Experience and qualifications required for board participation
- Communication protocols between the family and the board
- Education and development
- Philanthropy and social responsibility
- Procedures for conflict resolution
- Lifestyle and conduct
- Marriage and relationship matters.
The growing popularity of charters reflects the increasing complexity of modern families, which may be blended, extended, and geographically dispersed.
At the same time, the process can present challenges. Entrepreneurs still in the wealth-creation phase may struggle to relinquish control, while patriarchs or matriarchs may wish to maintain influence posthumously. Furthermore, not all beneficiaries may be directly involved in the family business, and differing attitudes toward philanthropy or social responsibility can add further layers of complication.
Legal status and ongoing review
Although a Family Charter is not a legally binding document, it often serves as a precursor to more formal instruments such as shareholders’, and pre- or post-nuptial agreements.
To ensure its continued relevance, it should be treated as a living document, reviewed periodically to reflect changes in family composition, values, or commercial circumstances. Annual family meetings provide an appropriate forum for such reviews. It is also prudent to establish clear procedures for amendment, including who holds the authority to propose and approve changes.
Conclusion
A Family Charter is a powerful tool for promoting unity across generations. When thoughtfully developed and consistently maintained, it provides a framework through which families can manage wealth, governance, and relationships in a manner that supports both family harmony and long-term sustainability.
No action should be taken on the basis of this note, nor should it be construed as amounting to tax, legal or VAT advice. Suitable, specific and professional advice should always be obtained in respect on any particular issue.
