Family protocol in Spain
At UR Global, as experts in tax legal advicewe understand “family protocols” as the commitment or agreement drafted by the current ownership partners, linked by family or non-family ties, in order to ensure the correct functioning of the of the company both now and in future generations, thus guaranteeing business continuity.
The family protocol regulates the unity and dedication of the members of the current ownership, also establishing consensual rules of the game in which the owners even commit themselves, 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 a more dispersed shareholding among 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 consultancy where we will establish a family protocol.
With the creation of family protocols, 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.
When should recruitment be outsourced to in-country experts?
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.
Frequently asked questions about family protocol
Constituted as the acceptance of all members and family partners, the family protocols would have, among others, the following functions:
- Ensure that the family business is robust enough to be passed on to future generations.
- Define the actions of the managing partners of the company, making clear the rights and duties of each one of them upon acceptance of the agreement.
- Define the position of family members in relation to patrimonial life.
UR Global offers legal and tax advice on the family protocol of the company, offering alternatives and helping to reach an agreement on all those points of friction that arise in any family, until the will of the majority of members of the organization is reached.
There are three fundamental pillars on which the family protocol is based: family, ownership and governance.
- How to establish family or non-family succession of partners.
- Narrow down the work requirements for a family member to work in the company.
- What the salaries of family members will be.
- Non-competition covenants in case of exit.
- In order to ensure generational replacement, establish an obligation to retire at a certain age.
- To note procedures in case of death of any of the partners.
- Establishing the transfer of shares, for example, only to children
- To value the shares of each partner before a possible exit with previous criteria.
- Right of the participations, to prevent the entry of a third party or a possible seizure.
- Composition of the Board of Directors.
- To implement the allocation criteria of this Council.
- To limit, if necessary, the term of office of Council members.
- Establish the delegated persons, who will have certain responsibilities and make decisions.
There is a tendency to confuse the corporate contract and the family protocol, 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 company contract 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 it long-term firmness.
Another important point is the contribution made by each of the partners signing the partnership agreement and the family protocol. In the partnership contract the partners will provide goods or industry based on a common objective. At the time the family protocol was drawn up, however, these contributions had already been made and there is no obligation to contribute again.
As legal and tax advisors, we will help you to establish the family protocol of your business in a professional manner in our business consulting services.
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