Sep 30

2025

Protecting the Family Business: The Case for a Family Charter

At SCC, we have unfortunately seen too many family businesses run into trouble because of disagreements over spouses joining the business, who’s in charge when someone retires or conflicts about family remuneration. The professional and personal lines get blurred very easily and workplace tensions can lead to family feuds. 

Take the Roberts family who have successfully run “Roberts & Sons Builders” for three generations. The founder, James, built the business on trust. His son, David, continued this legacy, bringing his two children, Sarah and Mark, into the fold. Sarah, an architect, has a vision to expand into high-end residential projects, while Mark, a project manager, wants to stick to the company’s profitable commercial roots. 

As David approaches retirement, he assumes his children will take over as a team, but their differing visions, and the unspoken tension over who will get the founder’s shares, are beginning to tear the family apart. A simple disagreement has become a significant threat to both the business and the family’s relationships.

Business founders build businesses for the future benefit of their families wealth and relationships but quite often the opposite is the reality. 

This is where a Family Charter comes in.

What is a Family Charter?

A Family Charter is a document that outlines the rules and joint agreement governing the family’s relationship with the business. It’s a proactive measure, a conversation starter that helps families define their shared vision and create a framework for decision-making.

It acts as a ‘playbook’ for your family business. It is not, however, a legal contract. Instead it is a family agreement that factors in everyone’s requirements and helps to:

• Clarify roles and responsibilities.
  Who works in the business? What are the qualifications for a family member to join? How are promotions and remuneration decided?

• Establish a succession plan. How will leadership be passed down? What happens if a family member wants to sell their shares?

• Define family values and philosophy. What is the family’s legacy? What principles guide the business?

• Create a governance structure. How are major decisions made? Who is on the board of directors? How are disputes resolved?

Why is a Family Charter so Important now?

Securing your legacy amidst UK Inheritance Tax reforms

Inheritance tax changes in the 2024 Autumn budget were unheard of and family planning across the board has never been so important. Changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) means that succession planning is vital for the long-term viability and legacy of family businesses. Having a family charter in place will facilitate discussions about how the wealth will be passed down in an agreeable fashion whilst also being tax efficient.

Having a team of specialists that cover wealth planning and tax can help family businesses create strategic plans.

A Family Charter can help avoid misunderstandings

In the hypothetical case of the Roberts family, unspoken expectations can lead to the biggest disagreements. A Family Charter forces these critical conversations to happen in a structured, calm environment, addressing potential points of friction before they become a crisis and benefiting only solicitors and barristers.

It preserves family relationships

By separating family dynamics from business decisions, a charter helps to ensure that business disagreements don’t spill over into family gatherings. It provides a neutral, agreed-upon process for handling difficult issues, protecting the most valuable asset of all: the family itself.

It ensures continuity

A well-crafted charter provides a clear roadmap for the future. It ensures that the business can weather transitions, whether due to retirement, death, or a shift in market strategy. It formalises a succession plan, making sure the right person is in place to lead the company into the next generation.

It can help attract and retain talent

For non-family employees, a Family Charter provides clarity and shows a commitment to professional management. It demonstrates that the business is run on merit, not just on family ties, making it a more attractive place to work.

What should be in a family charter?

While every charter is unique, they often include sections on:

• Ownership and wealth management – policies on share transfers, dividends, and estate planning.
• Family employment policy – rules for hiring and remunerating family members.
• Governance – which family members will be involved in board decisions.
• Conflict resolution – the process for resolving disputes, often involving a third-party mediator and aligned with the shareholders agreement.
• Other unique matters such as paying for university fees, medical cover, family cars etc, all tying in with the bespoke tax efficient strategies for both the company and family members respectively.

How do you create a family charter?

At SCC, we have an in-house specialist team ready to create your family charter in conjunction with the business shareholders agreement, family wills and business and individual tax strategies. Protecting and planning is essential to a successful future for family businesses and ensuring family wealth and relationships are paramount. Contact us today to discuss how we can help your family business.