On the Legal Qualification of the „Family Constitution”

Abstract

Family businesses are key players in economic development and innovation. The personal bonds between family members can be an asset to the success of a family business, but can also be a challenge for the company’s management. A family constitution can be an effective tool to manage these conflicts. The purpose of a family constitution is to ensure the long-term success of the business and to minimize the risk of family conflict. A family constitution also has the advantage of improving communication and trust between family members and ensuring smooth transitions in management and ownership. Although not always legally binding, a family constitution can in many cases, when supplemented by shareholders agreements, be an effective way of ensuring harmony between business and family. There are many examples in the literature of how a well-written family constitution can help avoid operational mistakes and provide a competitive advantage over other businesses.