In our country, the vast majority of businesses are family-owned, meaning that their owners belong to the same family. Like the family itself, a business is not static but evolves over time. Therefore, certain measures must be taken to ensure family harmony, and the continuity and success of the business.
A Family Protocol, when drafted in a timely manner -before family conflicts arise- serves as a powerful tool for planning the management, ownership, succession, and relationships among shareholders. It is a document formally executed before a notary that reflects the family/shareholders’ agreement, tailored to their specific circumstances, governing the present and future operations of the business.
Specifically, a Family Protocol establishes, for example, the rules governing the transfer of shares among family members or lineages, the roles and responsibilities of shareholding family members, and the requirements for family members wishing to join the company, whether as employees, executives, or board members. It also outlines succession plans for future generations and any other matters of interest. The principal aim is to safeguard the continuity and efficient operation of the business across multiple generations.
In our experience, by the time a conflict emerges in a family business, drafting and executing a protocol is often no longer an option. At that stage, the only recourse available to disputing family members may be to initiate legal proceedings, request audits, block Shareholders’ meetings and board decisions, and take other disruptive actions. Such disputes cause emotional strain within the family and inevitably disrupt the company’s daily operations.
Ultimately, proactively drafting a Family Protocol should not be an overly complex task, as it should be based on common sense and the knowledge that the founder or founders have of their family members who often differ in character and may evolve in diverse ways over time as new members and generations are integrated.
Finally, it is important to remember that the Family Protocol must always align with other agreements adopted within the business or the family, such as wills, prenups, Shareholders’ Agreements, and similar arrangements.
At Martí & Associats, we have extensive experience advising family businesses and implementing preventive measures, such as the Family Protocol, to ensure our clients manage their businesses effectively and facilitate a smooth transition across generations.
