• Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 11/13/2012

Formal bodies to govern the business: the Family Assembly and Family Council 

Formal bodies to govern the business
In the past, we’ve talked about the three components of a family business, which are the family constitution, the family assembly, and the family council. We’ve discussed what a family constitution is, and why all family enterprises should have one. Now, we turn our attention to the other two components, the family assembly and the family council.

Family assemblies and family councils are usually established when both the business and the family itself has grown. The larger and more extended nature of the family then necessitates a more formal approach to that used in the past, when casual family meetings preceded the existence of a family assembly or family council.

A Family Assembly is a formal forum where all family members can discuss business and family issues, and how the latter are impacting on the former. The assembly meets periodically, typically once, though maybe twice, a year. It’s generally open to all members of the family, although some families may impose certain membership restrictions, for example age limits or limiting the participation of non-bloodline family members, like spouses or in-laws.

Encourage younger family members to engage in the business

The family patriarch – or matriarch, as the case may be – usually calls for and chairs the assembly. While the business-end of the family assembly may be adults-only, John A. Davis, Senior Lecturer in Entrepreneurial Management at Harvard Business School, encourages families to include younger members of the family.

Davis suggests that the family assembly is the perfect forum for children to engage with each other and form bonds (they may one day be working together, after all), and for teenagers and young adults to begin learning about aspects of business, in a broader sense, and the family business in particular.

The family assembly gives family members an opportunity to:

  • Interact and bond with one another, particularly if the family is large and dispersed
  • Keep abreast of business issues
  • Discuss and voice opinions on business developments
  • Access information about the business’ performance
  • Review the family constitution
  • Educate family members about their rights and responsibilities towards the family business
  • Elect family council members.

Directing business interests

Also referred to as the family executive committee or family supervisory board, the Family Council is a working governing body elected by the family assembly to deliberate on business issues. Family councils usually come into being once a family reaches a critical size, and the casual approach of the past becomes unwieldy and ineffective.

an elected body which represents the interests of the family assembly. The family council is the link between the family, the CEO, the Board of Directors, and senior management.

Amongst other things, it deliberates on:

  • Candidates for membership on the Board of Directors
  • The direction, strategies and policies of the business
  • Any issues or challenges which the family business currently faces
  • Conflict resolution
  • How new laws or regulations might affect the business or family members.

Eligibility for family council service

The family council is small – between five and nine members (an odd number to rule out a ‘hung jury’ on important decisions). When considering who is eligible for election to the family council, take the following into consideration:

  • Age
  • Formal qualifications
  • Skills and expertise
  • Work experience
  • Ability to fulfill their assigned duties.

To ensure there are no conflict of interests, it’s wise to rule out family members of the senior management team or Board of Directors. To encourage effectiveness and a sense of inclusiveness, limit terms of service on the family council to a specific time frame – a year or two.

The family assembly should also elect a Chairperson, to lead the family council, and a Secretary, who takes and distributes minutes of all family council meetings to the family assembly. Family councils can meet twice annually, once a quarter, or every second month, depending on the nature of your family business.

Christophe Bernard

Christophe Bernard
I am a KPMG partner based in the French firm’s Paris office, responsible for encouraging the growth of our firms’ middle markets practice across Europe, Middle East and Africa, a majority of that market comprises of family businesses.

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