Separating family decisions from company decisions before a funding round
A family-run group was preparing for outside capital. We helped it separate what the family decides from what the company decides.
A second-generation family group was preparing for its first institutional investment. Decisions about hiring, pay, loans between group companies and capital spending were made at the family dining table and recorded, if at all, after the fact.
Investors would ask who decides what. The family had never had to answer that in writing.
What we did
- Step 1
List the decisions
We listed the decisions that recur in the group, and for each one wrote down who takes it today and who should take it.
- Step 2
Write a board charter and a delegation of authority
We set out what the board decides, what management decides within limits, and what needs shareholder approval.
- Step 3
Put related-party dealings on a rule
We wrote a policy for dealings between the family, the group companies and outside parties, with approval by directors who have no interest in the deal.
- Step 4
Create a family forum
We gave the family a place of its own, a family council, so family disagreements could be settled there and not in the boardroom.
A board that decides, and a family that has its own table.
The group went into investor meetings with written answers to the questions that stall most family-business rounds: who decides, who is conflicted and what happens when the family disagrees.
The charter and the delegation of authority were adopted by the board and minuted, so they existed as practice before the investors arrived.
A board charter
It was adopted at a board meeting and recorded in the minutes.
A delegation of authority
Limits were set for management, the board and the shareholders.
A related-party rule
Dealings were approved by directors with no interest in them.
Investors do not mind that a business is family-run. They mind that nobody can say who decides.
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