All issues related to the Family Protocol are always current since there are always companies that have partners from the same family. Before exploring into the various aspects of the Family Protocol, it is crucial to precisely define what it is. In simple terms, we can define the Family Protocol as a framework agreement signed by the shareholders of a company composed of members of the same family. Its purpose is to establish the rules of the game, facilitating decision-making, preserving family relationships, and ensuring the proper development of the company.
According to the study “Las empresas familiares ante el reto de la innovación” (Cruz & Santaló, 2022)[1], conducted by IE University, approximately 89% of private companies in Spain are family businesses. Despite their significant contribution to the economy, there is no specific law regulating the peculiarities of these businesses. Therefore, it is essential for the shareholders themselves to anticipate conflicts and ensure the smooth functioning of the company.
This objective can be achieved by drafting the Family Protocol, which can address a wide range of issues, including:
- Establishing a mission, principles, and values that unify objectives and foster collaboration among partners.
- Defining the process for choosing and composing the governing bodies of the company, establishing majorities for important decisions. Occasionally, additional control bodies not foreseen in the legislation can be created, such as the family council.
- Define standards for the inclusion of family members interested in working in the company.
- Implementing preventive measures to address deadlock situations and disagreements, promoting understanding among family members.
- Establishing rules for the transfer of shares, determining when and to whom they can be transferred, aiming to protect the company from the entry of new shareholders outside the family.
- Considering the right of withdrawal, specifying both the causes and the procedure for carrying out the division of the company when the time comes.
These are examples of elements that can be included in a Family Protocol, although the possibilities are almost limitless. Creating a Family Protocol requires a careful analysis of the company itself, the business, the environment, the owners, and the main relationships and/or aspects to regulate, as well as a review of applicable legislation and case-law.
The protocol only binds the signing parties of the document. Therefore, situations may arise where, despite having a signed Family Protocol, some aspects may not be fully applicable due to lack of effectiveness against non-signing third parties. Hence, it is important to establish sufficient legal mechanisms to ensure this effectiveness.
As can be seen, the protocol allows foreseeing and addressing future situations and problems, avoiding conflicts that could have a significant economic and emotional effect. The development of a Family Protocol is a complex matter that has a significant impact on the future of the company. Therefore, it is crucial to seek appropriate advice from experienced professionals in the field. At BUSQUETS, we are available to provide you with the necessary guidance. Feel free to contact us if you wish to explore deeper into this topic, we will be delighted to assist you with anything you need.
[1] Cruz, C., & Santaló, J. (2022). Las empresas familiares ante el reto de la innovación. Ernst & Young. Obtenido de https://static.ie.edu/fundacion/pdf/Informe_Empresa_Familiar_IE.pdf