Family protocol in Spain
At UR Global, as experts in tax legal advice, we understand “family protocol” as the commitment or agreement drafted by the partners of the current property, linked by family ties or not, in order to ensure the proper functioning of the company both now and in future generations, thus ensuring business continuity.
The family protocol regulates the unity and dedication of the members of the current property, also establishing consensual rules of the game in which the owners even commit, in some cases, to increase the business assets in order to bequeath them in optimal conditions to the next generations.
Why is it important to establish a family protocol?
At the beginning of a company’s life, decisions tend to be simpler because there is a small group of partners aligned on objectives. However, as the years go by, with shares being held in a more dispersed way among the new generations, governance becomes more complicated.
If you find yourself in this situation, do not hesitate to contact our experts to carry out a company consultation where we will establish a family protocol.
With the creation of the family protocol, a number of rules will be established that will guarantee the continuity of the business and will also define the commitment, relationship and coexistence between the shareholders themselves and the environment.
With tax legal advice, the aim is to professionalize the business and its management, as well as to plan for the future.
Why UR Global for the drafting of a family protocol?
At UR Global, we manage more than 400 Spanish companies in Spain and Latin America, so we have extensive experience in family business management and tax legal advice.
To offer this service with which we are so familiar, we have a team of specialists who perform many different types of family protocols. In a business consultation, they mitigate the frictions, tensions and problems that appear in any company with the passing of time, always following the signatories’ own will with the objective that all of them may agree with the signed result.
We understand that each company has its own values, so we establish a family protocol that fits the principles of all the partners perfectly, in order to ensure harmony between all parties, laying all the foundations for a business to be prosperous and successful over time.
Frequently asked questions about family protocol
Constituted with the agreement of all members and family members, the family protocol may, among others, have the following functions:
- Ensure that the family business has the necessary robustness to be passed on with sufficient solidity to future generations.
- Define the actions of the company’s managing partners, making clear each partner’s rights and duties as of the moment of acceptance of the agreement.
- Define the position of family members in relation to asset life.
At UR Global we offer tax legal advice on the company’s family protocol, offering alternatives and helping to reach an agreement on all those points of friction that arise in any family, until there is compliance with the will of the majority of members of the organization.
There are three fundamental pillars on which the family protocol is based: family, property and governance.
- Establishing family or non-family succession of partners
- Define the work requirements for a family member to work in the company.
- Establish the salaries for family members
- Non-competition covenants in case of exit
- In order to ensure generational replacement, establish an obligation to retire at a certain age.
- Note down procedures in the event of death of any of the partners
- Establish the transfer of shares, for example, only to children
- Assess the value of each partner’s shares in view of a possible exit, with prior criteria
- Right of shares, to prevent the entry of a third party or a possible embargo
- Composition of the Board of Directors
- Implement the allocation criteria of this Board.
- Limit, if necessary, the term of office of Board members.
- Establish delegates who will have certain responsibilities and make decisions
There is a tendency to mix up partnership agreements and family protocols, although there are some points on which they differ.
One of the main differences is the ultimate purpose for which both are signed:
While the purpose of the partnership agreement is to constitute a group of assets and persons with the will to distribute the profits generated, the family protocol has the basic purpose of regulating the relations between the family and the company, in order to give the company long-term stability.
Another important point is the contribution made by each of the partners signing the partnership agreement and the family protocol. In the partnership agreement, the partners will provide assets or industry on the basis of a common objective. At the time the family protocol is drawn up, however, these contributions have already been made and there is no obligation to contribute again.
As tax legal advisors, we will help you establish your company’s family protocol in a professional way in our company consultations.