It is a commitment established by the members of the Proprietary Family Company in order to reach and ensure (for current and future generations) the company’s standard for success that generates business wealth, and leave it to the generations to come.
A set of agreed participation rules is established so the family owners undertake the commitment to increase the family wealth in order to leave it to their descendants. Their implementation is generally articulated during a corporate restructuring procedure.
What is a family protocol for?
The family protocol makes it possible to professionalize the family company Group by a clear separation of the management, ruling and propriety levels. The relations between the family owners and the family company are regulated, so each part cannot interfere with the other.
It makes it possible to regulate the criteria for the future incorporation of partners’ relatives to the company, both as workers and as shareholders, as well as the criteria to establish their remuneration (a salary or shares). A set of guidelines are established in the management body of every distinct operative company of the family group, with a group of proper transparency standards towards the Rulers and the Propriety.
What pillars is family protocol based on?
- SUCCESSION POLICY: thanks to the family protocol, the criteria to operatively plan the family Internal Succession versus non-family Internal Succession are articulated. The criteria for the labor access of relatives in each company are also established: academic qualifications, minimum professional experience, etc. The duties for the transferring manager’s future obligations and the appointment of the successor are marked. The minimum requirements for the future recruitment of the non-familiar manager are equally established. Prohibitions of non-competition are established for the transferring manager, and training and integration duties will be imposed to the successor.
- SHAREHOLDING AND LABOR POLICY. REMUNERATION. The key issues are the following:
- Delimitation of the company allocation of the partners personal expenditure, safe unanimous assent of the partners.
- Criteria are established for the access to the status of shareholder in the family company, the labor access of biological family and the labor access of spouses and unmarried partners.
- The salary-remuneration versus the shareholding-remuneration policy is also articulated, the latter by means of a minimum compulsory minimum dividend under a series of allocations.
- Restrictive regime of new shareholders and corresponding limitations.
- The control of the propriety under situations of (a) transmission of shares while alive, to the next in line or a third one, (b) transmission of ‘Mortis causa’ and ‘disability’ company shares.
- The Regime of administration for underage shareholders is articulated.
- Prohibition of taxing the social shares and the compulsory transfer of social shares to the rest of the shareholders or to the own company, in treasury regime and under certain concrete circumstances.
- Eventually, in the family protocol exit rights are established for any case in which the shareholder wants to sell his or her share. The standard for the market-assessment is also established in these cases.
- DISTINCTION BETWEEN MANAGEMENT, RULING AND PROPRIETY: The functions of each company in the group, how the Administrative Body should be, the composition of this Body and the convocation of the General Meeting are defined. Similarly, the criteria for the designation of representative members of the Administrative Body are established comprising minimum participation, seniority in office, etc. The established majorities for decision-making in the operative society are determined, and so are prohibitions affecting the members of the Administration Body. The need of providing information to the owner family by the worker partners is articulated too. Determination of the assessment method for each company in a defined moment in order to take in account a right to leave or to purchase. Rules for the revision and interpretation of the protocol.
Does it have legal value?
The family protocol is a contract, so it has the force of law between the parts required by Article 1.091 of the Civil Code.
Must the family protocol be reviewed?
The signatories are obliged to review the contents of the family protocol at least once a year or every two years, without prejudice to the circumstances advising its modification in a previous moment to that determined for the review, and then an extraordinary general meeting must be accorded for this. For example, this could be the case of the death of a shareholder or of a member of the Administration Body, a change in the company’s executive management, transmission for any reason of the social shares or the existence of a legal change affecting the dispositions of the current family protocol.