Family constitution: what it is, the ten clauses that matter, and a template

A written agreement among family members about purpose, values, membership, decisions and conflict. Not a will, not a trust deed, not a shareholders' agreement; those are binding and this is not. It sits above them: when the deed leaves a choice to discretion, the constitution says how the family makes choices, and the binding documents are drafted, or redrafted, to match it. Families with a business, a trust or an office use it most; families without any of those usually need only the meeting and the letter. The Cadbury, Mars and Mulliez families are the textbook cases; the family with a A$20 million business and three children in it is the common one.

1. Purpose. What the family's wealth is for, in a paragraph the founders wrote and the next generation edited.

2. Values. Five at most, each with one sentence on what it looks like in a decision.

3. Membership. Who is family for these purposes: by blood, marriage, adoption; at what age; whether spouses vote.

4. Decision rights. Which body decides what: the council, the board, the trustees, the office. What needs a vote and what majority.

5. Employment. Whether family members may work in the business, on what conditions (outside experience first, a real vacancy, market pay), reporting to whom (never a parent).

6. Distributions. The principles for what is paid out and what is kept, and who decides exceptions.

7. Conflict. The steps: talk, mediate, then and only then the lawyers. Who mediates.

8. Communication. The meeting rhythm, the minutes, what is shared with whom.

9. Education. How the next generation learns: budgets, seats, apprenticeships.

10. Amendment. How the constitution itself changes, and how often it is reviewed.

Slowly, by the family, not by an adviser. The process is the product: three or four meetings over a year, each clause argued over, the founders' draft rewritten by the children. A constitution handed down finished is a memo; one the family wrote is a constitution. A facilitator helps, a lawyer drafts the binding documents afterwards to match, and the adviser who offers to write the constitution for the family should be thanked and declined.

The shareholders' agreement adopts the employment and distribution clauses as conditions. The trust deed's letter of wishes points the trustees at the values clause. The family office's investment policy statement takes its constraints from the purpose clause. The wills leave shares to the structure the constitution describes rather than to individuals. Without those steps the constitution is a statement of hope; with them it is the family's operating system, and the courts, which will not enforce it, will read it to understand what the binding documents meant.

The [family name] family constitution, adopted [date].

1. Purpose. Our family's wealth exists to [ ].
2. Values. We decide by [ ], [ ], [ ], [ ], [ ]. In practice this means [ ].
3. Membership. A member of the family for the purposes of this constitution is [ ]. Spouses [may / may not] vote on [ ].
4. Decisions. The family council decides [ ]. The board decides [ ]. The trustees decide [ ]. A decision to [ ] needs [ ] of members.
5. Employment. A family member may work in the business if [ ], paid at [ ], reporting to [ ].
6. Distributions. We distribute [ ] and keep [ ]. Exceptions are decided by [ ].
7. Conflict. We first [ ], then [ ], then [ ]. Our mediator is [ ].
8. Communication. We meet [ ] times a year. Minutes are kept by [ ] and shared with [ ].
9. Education. Each member under [ ] receives [ ] and a seat on [ ].
10. Amendment. This constitution is reviewed every [ ] years and changed by [ ] of members.
Signed by every member.