To corporate success with a family constitution

Family businesses hold a high value in Switzerland. Many successful Swiss companies like the pharmaceutical company Roche, Swatch Group, or Hilti are family businesses. But how can family businesses manage to be so successful? A family constitution helps to agree on common values and goals and to avoid conflicts.

What is a family constitution?

A family constitution is a contract, indeed a constitution, among the leading family members in a family business. It involves a code of values and behavior intended to prevent conflicts and facilitate the achievement of common goals. The family constitution aims to harmonize different interests because only when all family members pull together can a company be successful. Often, the family constitution is developed by the family members of the company in the context of a workshop under the guidance of experts. It is crucial that the family members actually sit down together and do not leave the creation entirely to a third party. Because each family business is an individual institution with its own needs, which are best known by its leaders. If a family constitution is not tailored to these specific needs, there is a risk that it will not be lived but becomes a paper tiger.

What does a family constitution contain?

Like family businesses themselves, family constitutions vary. Therefore, there is no such thing as the perfect model family constitution. However, it is possible to describe content that has proven successful in practice. This includes especially the values that define the family and thus the company, i.e., the ethical and moral principles according to which business conduct should be aligned. Also, the organizational structure and the different rights and duties of family members should be regulated. Furthermore, it is necessary to clarify the significance of the company in family assets and ownership. Last but not least, succession should be regulated. Deciding early on the legal status of married-in spouses and the criteria by which successors are chosen is crucial to securing business success in the future.

What is the difference from a partnership agreement?

Why is a family constitution needed if there is already a partnership agreement between family members? And what exactly is the difference? It is important to realize that a family constitution and a partnership agreement are two different things. While the partnership agreement is usually written in legal jargon and legally binds the signatories, the family constitution is understandable to all and merely a non-binding declaration of intent. The latter contains no detailed rules but principles that are intended to shape the conduct of members among themselves and with the corporation. Because while the partnership agreement is often only consulted for a decision in case of dispute, the family constitution is intended to prevent such disputes. Its aim is to promote free discussion and thereby create higher decision-making quality.

Findea helps you keep your taxes simple and hassle-free.