The founding family of a company must establish norms and rules to internally manage and ensure its future. Failing to address this issue and not knowing how to organize and administer can lead to the organization's disappearance. Therefore, the Family Council in businesses is crucial for continuity.
The establishment of family agreements outside the company has gained importance in recent years. While the agreement is a necessary mechanism, it must be complemented with a management system and philosophy, especially for companies where the family wishes to continue participating in the administration.
Our managing partner, Héctor Torres, specializes in advising family businesses to ensure their continuity over time. First and foremost, Torres emphasizes the importance of distinguishing between the Family Council, the Board, and the Board of Directors, with the former being an additional body that delves into family matters and decisions affecting the company.
"A Family Council helps in transmitting values and culture within the company and the family. This body encourages the participation of the new generation in decision-making and the continuation of the family's traditions," he asserts.
The purpose of the Family Council is to create a family business project that serves as inspiration for the family and fosters values of unity and responsibility. This requires deep dialogue and making decisions on various important topics that can affect both the family and the company.
This component can be of great assistance to family businesses transitioning from informality to formality by establishing norms and governance structures for their preservation in the market.
Another benefit of the councils is the opening of communication channels and the separation of discussions on family and business matters from day-to-day operations. This allows family members to focus on the positive aspects of family relationships, achievements, and milestones.
In any relationship, problem areas tend to take precedence, overshadowing the good and functional aspects. Family councils enable families to correct this imbalance, allowing them to speak and discuss more comfortably while reaffirming their commitment to each other, family values, and the business.
Regarding the number of members and who should be included, our expert recommends that the council should consist of the founders, heads of different family branches if applicable, and external individuals who can provide professional and objective input in all processes.
-Written by the Torres Legal Team.