Glossary
Family Constitution for Family Businesses: What and How
In family companies, the problems that wear people down most are often relational, not technical: Who can work in the company? How is profit shared? Who receives the shares?
Contents
| Topic | Example provision |
|---|---|
| Values and vision | Shared goals of the company and the family |
| Role of family members | Criteria for working, joining the board and hiring |
| Profit distribution | Dividend policy, reinvestment rate |
| Share transfer and exit | Limits on sale outside the family, pre-emption rights, valuation method |
| Decision making | Family council, meeting order |
| Dispute resolution | Negotiation first, then mediation |
| Succession | Transfer of management and education criteria |
Legal nature and complementary instruments
A family constitution is a statement of principles. Provisions that must be binding can be moved into these instruments:
- Articles of association: Provisions on share transfers and decisions.
- Shareholders’ agreement: Obligations binding on the parties.
- Will and inheritance contract: Share transfer and succession planning. The reserved shares of heirs must be taken into account.
- Marital property agreement: On the matrimonial property regime.
Steps to prepare it
- Goals: A shared vision is discussed with family members.
- Assessment: The share structure, roles and current problems are mapped.
- Draft: Principles and processes are written down.
- Agreement: It is shared with family members and signed.
- Legal counterpart: Necessary provisions are moved into the articles of association and contracts.
- Review: It is updated at regular intervals.
How Denova can help
In our Corporate Solutions Advisory we support preparing the family constitution, and together with Legal Advisory turning it into provisions of the articles of association and contracts.
Frequently asked questions
Is a family constitution legally binding?
On its own it is not a document regulated by law. It is more a statement of principles and agreement between family members. Provisions that need to be binding should be moved into the articles of association, a shareholders' agreement or notarised contracts.
When should it be prepared?
Before problems arise, preferably before a change of generation or before new family members join the company. Reaching agreement after a dispute has started is much harder.
This article is for general information only and is not legal advice. Every case must be assessed on its own facts. It reflects Turkish law as of the publication date.