The need to formalise family business rules and implement a governance structure typically reaches an elevated status when the founder of the business relinquishes day-to-day control and the organisation transitions across generations. Likewise, when a business reaches a size and complexity unsuited to more informal management styles, the time has come to consider a more effective governance structure.
- Establish dedicated communication channels (for example, family meetings or family councils) to develop and approve key strategic business decisions, determine management and ownership succession objectives, resolve family disputes and decide how to distribute the wealth generated by the business.
- Appoint an effective advisory board that includes independent non-family members.
- Develop a family constitution. While it is no guarantee that it will prevent conflict among family members over the family business, it can provide a mechanism by which conflict can be resolved. It also forces the family to consider important issues about the future of the family business that might otherwise be put aside.
- Establish guidelines and policies to help the family make decisions about their individual and collective futures in the management, leadership and ownership of the family business.
- Develop clarity of vision that leads to a proper strategic planning process.
- Understand and manage your business risks.
- Look for the “bad news”, ensuring that problems and irregularities are not overlooked or ignored.
- Monitor and evaluate business performance, highlighting key trends and issues.
- Establish important business fundamentals that build value and drive growth in your business.
- Create an effective assurance framework, embracing management controls and internal and external audits.
- Establish ownership criteria for family members.
- Develop a shareholders’ agreement that supports the overall management and ownership succession objectives (for example, keeping it in the family).
- Consider the benefits of family trusts to help safeguard family equity and maximise tax savings.
- Ensure that the owners’ will is in sync with the succession plan.
- Complete an estate plan.
- Start early so that you are well positioned to realise the full value of your hard work.
KPMG can help you challenge some of the key decisions you are making, to ensure they are as good for the business as they are for the family. Our approach is to establish regular dialogue with you to discuss your family and business issues and to help you formulate a strategy for the future, acknowledging at all times the interlocking nature of the family, the business, and its ownership.
All of our services are delivered by expert cross-disciplinary teams across the firm that have experience of the influence of the Family Component on business decisions and governance.