The family protocol is the key tool for organising the relationship between family and business. We explain what it should include, when the right moment is to create one, and how to avoid the most common mistakes.
The family protocol is the most important governance document a family business can have — and the one that is most frequently absent. It is the document that establishes the rules for the interaction between family and business: who can work in the company, how decisions are made, how ownership is managed, how conflicts are resolved, and how the succession is planned.
Without a family protocol, these questions are answered by default — through precedent, personality, and power dynamics. With a protocol, they are answered by design — through agreed principles that all family members have committed to respect.
A family protocol is a private agreement between the members of a family that owns a business. It is not a legal statute or a corporate document — it is a family agreement that governs the relationship between the family and the business. While it can be reinforced through shareholders’ agreements and corporate bylaws (which are legally binding), the protocol itself derives its authority from the commitment of the family members who sign it.
The protocol should begin by articulating the family’s shared values and their vision for the business. This may seem abstract, but it provides the foundation for every subsequent rule and decision.
Who can work in the company? Under what conditions? At what level? This is one of the most sensitive areas. Clear rules — requiring external experience before joining, meeting specific qualifications, and entering at a level consistent with competence rather than surname — prevent resentment and protect the company’s culture.
How are family members who work in the company compensated? At market rates? With premiums? With equity components? The protocol should establish that compensation is based on role and performance, not on family membership.
How are shares managed? Can family members sell to outsiders? Is there a right of first refusal? How are shares valued for internal transfers? These rules prevent the dispersion of ownership and protect against situations where non-family shareholders gain influence.
How much of the company’s profits are distributed to shareholders, and how much is reinvested? A clear dividend policy manages family expectations and prevents conflicts between members who want income and those who want growth.
The protocol should define the governance bodies: a family assembly (for family matters), a board of directors (for business matters), and the rules for how each operates.
Every family will face conflicts. The protocol should establish mechanisms for resolving them — mediation, arbitration, or other structured processes — before they escalate to litigation.
The protocol should address how leadership transitions will be managed, including the criteria for selecting successors, the timeline for transitions, and the support structures for incoming leaders.
The ideal moment is before you need one — which means before the first generational transition, before a significant family conflict, and before external events (health issues, divorce, economic crisis) force decisions that should have been made deliberately.
In practice, the most common triggers are:
Creating it too late. A protocol created in the middle of a crisis is a reactive document, not a strategic one. The best protocols are created when relationships are good and the family can discuss principles calmly.
Making it too rigid. A protocol that is excessively detailed leaves no room for judgment, context, or evolution. The best protocols establish principles and processes, not micro-rules.
Not involving all stakeholders. A protocol that is imposed by the patriarch without genuine input from other family members will not command respect or compliance.
Failing to update it. Family circumstances change. The protocol should be reviewed every five to seven years and updated as needed.
A family protocol is not a luxury or a bureaucratic exercise. It is the tool that allows a family business to navigate the inherent tensions between family dynamics and business needs with clarity, fairness, and mutual respect. The families that create one — and commit to living by it — give their companies the best possible foundation for long-term success.
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
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