find the latest legal job
Corporate and Commercial Partner
Category: Corporate and Commercial Law | Location: Adelaide SA 5000
· Adelaide CBD · Join a leading Adelaide commercial law firm
View details
Freelance Project Finance Lawyers
Category: Other | Location: All Australia
· Vario are looking for freelance lawyers with experience in project finance ideally within the renewable energy sector
View details
Vario Freelance Lawyers
Category: Construction Law | Location: All Australia
· We are looking for lawyers who appreciate the endless possibilities that a freelance career can offer.
View details
Freelance Construction Lawyers
Category: Construction Law | Location: All Melbourne VIC
· We are looking for construction lawyers who appreciate the endless possibilities that a freelance career can offer.
View details
Banking Associate - 1-6PQE - Allen & Overy
Category: Banking and Finance Law | Location: United Kingdom
· Banking Associate - 1-6 PQE - Allen & Overy
View details
Benefits of having Family Constitution in place for a multi-generational business

Benefits of having Family Constitution in place for a multi-generational business

Promoted by


By now it’s a widely circulated fact that nearly 90% of Australian family businesses don’t survive into the third generation. It’s a really big problem, and no problem that large has a simple solution. But that doesn’t mean a family business can’t take a few simple steps to protect itself from falling apart when it’s time for the grandkids to lead.

Let’s classify family business failures into two groups. The first is business failure, which every business must deal with in their own way. The second group is family failure, which is a unique problem for family businesses. If the intention is to put the company on equal footing over the long term, one needs to be able to handle family problems before they hit crisis mode. To accomplish this, I’ve long argued for a written family constitution.

Family constitutions intimidate some people, but they shouldn’t. All a family constitution really does is clarify family values and create better rules for working together. I think it’s well worth every family business member’s time to learn about family constitutions.

If, after learning more about family constitutions, your clients are still afraid to start, consider this: the very process of building their own unique constitution will likely bring people together, strengthen family bonds, and create more emotional investment in the business.

The Benefits of a Formal, Written Family Constitution

I’ve recently outlined six good reasons to write a family constitution, but I’ll focus on a few more here. Begin with one of the most obvious and easiest to overlook: the constitution is written and formal.

There’s an old Chinese proverb, “the palest ink is better than the best memory.” This is one of the unofficial themes of the Family Legacy Asia, a pro-family constitution advocacy group based just North of Hong Kong. The benefits of written rules are obvious for governments, schools, and even recreational sports leagues. Those same benefits can apply to families.

A family constitution creates rules and boundaries for family members. This isn’t a gimmick; the rules are intentionally created during a sober moment, before emotions run high, so everyone can agree on fairness and process.

The idea is to create a strong, unifying bond based on love and emotional acceptance and then codify it in a document for making decisions and resolving conflicts. A lot of family issues fester because members don’t have a safe, understandable way to discuss them.

A family constitution helps identify difficulties so they can be conquered. Every year, the KPMG and Family Business Australia survey family businesses. Every year, those surveys reveal that “balancing family and business issues” are a top concern, yet only a small minority of family businesses use a constitution.

Most importantly, a family constitution lets a family express and share its own values. Sharing values and teaching them to children is a highly underappreciated aspect of building a lasting family business model. Those values will inform the leadership structure, succession, community involvement, and long-term goals.

Get It Right the First Time: Use an Outside Facilitator

Each family constitution should contain certain rules, or themes, for successful implementation. This creates a problem or two. First, whoever negotiates and writes the family constitution should know what they’re doing. That person probably needs strong interpersonal skills and some kind of arbitration experience. Second, even if a family member possesses such skills, there might be budding conflicts of interest. It’s difficult to trust the impartiality of interested parties.

Of course, a family could write a constitution and amend it over time using trial-and-error. This approach isn’t very efficient, though, and leaves plenty of room for conflict or emotional hang ups. The better solution is to use a trusted outsider. Ideally, this should be an expert whose credentials aren’t questioned by the whole group and who can ensure the process is open-minded and accessible for everyone involved.

Is your estate plan as comprehensive as you think?

Cleardocs users receive legal document creation time-saving benefits like:

  • 24/7 access to over 175 ready-to-sign documents;
  • access to a document creation interface that’s both quick and easy to use;
  • pay per use document creation;
  • sample documents; 
  • free online resources and FALQs; and
  • the ability to create, manage and store in the cloud.

The Cleardocs interface is easy to navigate, incorporating help text and useful resources. Please call their free helpline on 1300 307 343 to get started.

Like this story? Read more:

Book commemorates diamond milestone for WA law society

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

Benefits of having Family Constitution in place for a multi-generational business
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Debate rises over Victorian judiciary attack
Debate rises over Victorian judiciary attack
The Victorian Bar has become the latest to go on record condemning recent political attacks on the V...
Michelle Quigley QC
Vic Barrister who helped stop major heritage redevelopment joins Supreme Court
Michelle Quigley QC, who assisted a coalition to oppose the redevelopment of St Heliers villa estate...
Building, construction
Building for NSW coroner’s complex slated for early 2019
Efforts to relocate the state coroner’s facilities from Glebe to Lidcombe are on track, according ...
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...