The Family Council: The Body Most Often Missing From Family Successions
Most family successions that go wrong do not fail inside the company. They fail at the kitchen table, and the board of directors does not sit there.
Yet the board is where people turn. When a family file gets tense, the reflex is to improve the company's governance: an independent director, organisational rules, better-run meetings. All of that is useful, and I have argued for it here. But it answers a different question. The board decides for the company; it has neither the mandate nor the legitimacy to decide what the family expects from its wealth, who is entitled to work in the business, on what terms a member may sell, or how one talks to the sister who owns a third of the shares and has never set foot in the workshop. These questions have no body. They are dealt with at Christmas, by allusion, until the day they are dealt with at the lawyer's.
The family council is the body missing at exactly that spot. The Swiss Code of Obligations does not know it, which is what makes it adaptable. It is a regular meeting of the family members concerned by the company, shareholders or not, with a single mission: to state what the family wants, so that the company's organs can then carry it out. It does not manage. It appoints nobody. It tells the company which family stands behind it, and it says so with one voice.
The objections I hear, and why they do not hold
The first objection is size. A family council, one hears, is for industrial dynasties with four branches and a foundation. In the mandates I lead, the opposite worries me: a forty-person company with three children, only one of whom works in the business, has precisely the problem a family council solves, and none of the structures that naturally contain it in a large group. The council does not add weight; it gives an hour, a date and an agenda to a conversation that otherwise takes ten years and ends badly.
The second objection is more serious: "we get along well, we do not need to formalise anything". My answer is that the family council is not made for families that quarrel. For them it comes too late. It is made for families that get along well and that will, within five years, change their generation of shareholders. As long as the founder holds everything, harmony costs nothing: there is only one will. The day the shares are spread between siblings with different lives, one employed by the company, one a teacher in Basel, one in Australia, the same harmony has to withstand interests that have stopped being identical. The first dividend withheld to finance a machine will make the point.
The third objection sometimes comes from the owner: "one more body I will have to answer to". That gets the order of things wrong. The family council is not a counterweight to the owner; it is the place where he stops being, all at once, the father, the boss, the majority shareholder and the referee between his children. Nobody can hold those roles simultaneously and lead their own succession. Separating the roles is what frees him, not what constrains him.
What the council actually produces
Imagine a carpentry and timber-framing company in the canton of Lucerne, sixty employees, a 64-year-old founder, three children; a scenario, not a client. The eldest son has run production for eight years and will take over the management. The other two do not work there and do not wish to. Without a family council, the succession shrinks to two documents the trustee prepares: a share purchase agreement and an advance on inheritance. Neither says what happens when the daughter wants to sell her stake in twelve years, or when the son wants to invest rather than distribute.
A family council that meets twice a year produces, over two or three years, what I call a family charter: why the family remains an owner, the dividend policy it accepts, the conditions under which a family member may work in the company, how one leaves the capital and at what price, and who speaks for the family to the board. This charter has no legal force of its own. It acquires it when its decisions pass into the texts that do: the shareholders' agreement for pre-emption rights and the price formula, the articles of association for transfer restrictions, the inheritance contract for the balance between the children. The order matters: the family decides, then the lawyer writes.
The council does not disappear with the succession. It is afterwards that it becomes indispensable: the founder is no longer there to settle disagreements with a look, and the shareholders who do not work in the company are left with two ways of existing, the annual general meeting once a year, or a phone call to the brother who runs the place. The family council gives them a third place: informed, heard, without laying a hand on operations.
That leaves the question I am asked most: who chairs it? Not the owner, for the reason given above. Rarely the family's trustee, who has a mandate to protect. Most often an outsider with no stake in the outcome, who keeps the agenda, makes sure the one who speaks least has spoken, and recalls what was agreed the last time. A modest role, and in my view the one that decides whether the third generation will still own something other than a dispute.