FAMILY PROTOCOL: IN SEARCH OF CONSENSUS FOR A BETTER FUTURE

Our Law Firm is strongly focused towards the private sector and we have proven experience in advising family businesses. Within this context, our customers are usually concerned about the future of their companies, even (and specially) in difficult times like these. Considering the large participation of corporate families in the Argentine market, there are several factors (such as emotional, commercial and strategic) that need to be evaluated and negotiated in terms of generational transition.

In this opportunity, we invited Dr. Leonardo Glikin to write on this interesting topic. Dr. Glikin is an expert lawyer in this area and a well-known writer, consultant and lecturer on this matter and he is a university professor as well. At the same time, Dr. Glikin is a strategic partner of Estudio Nunes & Asoc. in the area of family protocols and succession planning in family-owned firms.

That said, we present you the article of the specialist:

If Family Protocols were a mere template, we could download it from the Internet and complete the corresponding data of the company, parents and heirs. But the protocol is more than this. It is the honourable diploma of the corporate-family consensus.

The Family Protocol is an agreement with legal value. Today, section 1010 of the Civil and Commercial Code stipulates agreements or arrangements on future inheritance for the avoidance or settlement of conflicts and to ensure the lack of division in the business management.

But, prior to considering its legal value, it should be considered from the moral point of view: Protocols are rather the fruit of a process based on the consensus of corporate families, enabling them to continue functioning smoothly and strengthened all over the years.

The Protocol is an agreement which should be based on a broad consensus among all family members in order to be vested with legitimacy, a key factor for success and for showing respect by the family group without the need to resort to any Judge or arbitrator.

If all family members feel that the protocol is the result of the efforts of a family group to reach to an agreement based on mutual concessions, it is likely to succeed throughout the future generations. Time is another key factor since protocols are aimed to overcome possible contingencies such as the death or the retirement of some member of the family.

Therefore, one of the main tasks of the expert in charge of developing the Family Protocol is to focus on the dialogue regarding the main concerns of particular family and of a particular company. This process can be achieved through a deep insight of the actors, the roots of the corporate family and the conflicts they face. This information will allow the consultant to define the most sensible topics for the corporate-family consensus based on his long-term experience.

Sooner or later, some of the following issues are likely to arise:
• A possible sale of the capital share by any family member
• A possible conflict regarding an important decision
• Any dispute due to marriage of any family member (requiring marriage settlements or self-protection documents)
• Any contingency such as disability or death of any family member
• Different levels of commitment and expectations towards the company
• The need to encourage the next generation to engage with the core values, visions and mission of the family company

Some of these aspects shall naturally arise for discussion by any of the family members but others should be proposed for debate thanks to the Consultant’s reliable experience in approaching and resolving interfamily conflicts.

It is usual that the leadership within the firm often relies on one member and the rest of the family automatically approves his/her decisions. However, all family members should strive in proposing ample debates with a high participation level, since all opinions are relevant to conclude a Protocol suitable for all the parties involved, strengthening the connection among the parties and fitting the particularities and needs of the whole group.

An effective Protocol shall mirror the desired alignment and shall be likely to be respected in the long-term ahead, making the business feasible for generations, even in the absence of any of the current members. This aspect is a fundamental tool to encourage all family members to commit themselves with the Protocol development.
In many cases, the process of developing a Protocol is a good opportunity for promoting a harmonious coexistence between the branches of the corporate family, setting the strategies and dynamics for a better organization.
Finally, the consensus represented in the Protocol can be interpreted as a good signal of the future challenges and of the upcoming times.