Family Business
Issue No. 49 - October/November 2009
Family Charter sets guidelines
by Mr Steven Toth
Problems in family business often arise because of bad communication: assumptions about roles, money or time on the job.
HLB Mann Judd Managing Partner (Adelaide), Steven Toth says family disputes which may wreck a strong business can be avoided if the stakeholders have a Family Charter in place.
A Charter operates like a corporate Partnership Agreement in that it lays down operating rules for the family business operators. It is less formal than a Partnership Agreement and, often, less legally orientated.
It is intended to help the business run smoothly by making the all family members’ roles and responsibilities abundantly clear, with no grey areas.
“Being family doesn’t mean you can ignore the legalities (of being in business),” Steven points out.
“It’s a mistake to think the fact that you are related means you don’t have to operate in a businesslike manner.”
“If there is a rulebook you can go back and say, ‘This is what we all agreed’,” Steven says. “Then you
can decide whether you need to change the rules, or apply sanctions.”
He emphasizes the rules are not intended to trigger legal battles but promote communication.
“You have got to be flexible. It can’t be interpreted as strictly as a company Partnership Agreement would be – and even those agreements tend to be enforced only if the legally binding parts are breached,” he says.
When setting up a Family Charter, all stakeholders – family members – should be involved. Their inputs to the family business have to be measured as well as how much they get paid for their participation.
The Charter should set down how often the family business board, or management team, should meet and go into details such as how much annual leave those involved in the business day-to-day should get; how much long service leave; how much sick leave; and retirement details, if they differ from award benchmarks.
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