Safeguarding family assets with strong family governance

Safeguarding family assets with strong family governance

Decisions around succession solutions can be very sensitive in family businesses. This makes it all the more important to approach the process in a structured manner and at an early stage. With family governance, entrepreneurial families create the basis for finding solutions that are supported by all parties involved.

Succession planning can harbor a potential for conflict in family businesses. What if, for example, the next generation does not want to take over the company at all? This is not a rare scenario. According to the Global University Entrepreneurial Spirit Students' Survey, only 20% of the children of entrepreneurs can imagine following in their parents' footsteps.

On the other hand, the question of to which descendants the management and shares in the company should be transferred can also lead to disagreements or even disputes. Especially if the division is not perceived as fair. This makes it all the more important to have a clear framework for resolving conflicts within the family – i.e. effective family governance.

Developing a strong family governance framework

"Family governance is a process through which business families learn to communicate better with each other," says Dr. Sonja Kissling, a lawyer and independent consultant to family businesses. "It is also a framework to guide the family in accomplishing its vision," adds Grégoire Imfeld, founder of ONE Family Governance. The process helps families have a structured discussion about topics that are difficult to address. In the process, each family should discuss three key questions:

  • How do we see the future of the business and what goals do we want to achieve with the business?
  • What should the ownership structure of the family business look like in the future?
  • How do we organize ourselves and the decision-making process within the family?

"Agreeing on these questions can have a positive effect for all families," says Dr. Sonja Kissling. However, she goes on to add that it is particularly important in later-generation family firms with many family members to reconcile the different interests of the family members. Owner families would have a special responsibility in this regard, since they not only have to manage the business, but also organize the family. The answers that emerge from the process then are often written down in a family constitution.

Involving independent experts in the process

When establishing family governance, it can be helpful if the family is supported by independent experts who moderate the process. "They structure the communication and ensure that a solution-oriented discussion takes place," explains Dr. Sonja Kissling.

This would ensure that all parties are involved in the process and that all important issues are discussed. In addition, family members have a neutral contact person to voice their concerns to. And finally, the independent experts support the family find a solution that fits their situation and is supported by all members.

Manage the family assets properly

An effective tool to manage family assets based on the agreed structures in family governance is a single family office (SFO). "The purpose of any single family office is to cover the needs of a family. The scope of the needs must be clearly established by the family to ensure the single family office's effectiveness and may include an array of services; from accounting, concierge services, to investments" says Grégoire Imfeld.

For the successful establishment of a single family office, he says it is important that the needs and goals have been precisely identified in advance. Grégoire Imfeld comments, "In my experience, a solid and pragmatic approach developed by the family for the family, with guidance and experienced facilitation, is the most efficient way to achieve the family's objectives." That's because the ownership and family responsibilities are decided by the family, shareholders, or a dedicated committee and the single family office executes these decisions.

Our solutions for many aspects of family governance

Credit Suisse provides you with professional support for managing the primary aspects of your family finances and in the event of key family-related challenges.

Our advice for you

Today, sound advice is also a key element of successful wealth management. At Credit Suisse, your relationship manager is your direct contact person, providing access to our vast wealth management capabilities as well as our corporate finance and investment banking expertise. Find out precisely how you can benefit from our experience in a personal consultation. Call us at 0848 880 844.