An introduction to governance structures

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Summary: It’s not uncommon for heirs to fight over how wealth should be spent. Private companies or families that agree how to manage their money effectively, now and for future generations, are more likely to keep their money. Creators and owners of wealth, and their heirs, are better served by having rules in place about how wealth should be managed, invested and distributed. Here we summarise some key features and benefits of an effective governance structure.

The failure to plan for the transfer of family wealth to future generations is one of the main causes of the dissipation of wealth over two or three generations. In particular, the successful continuation of a family business over a number of generations depends on planning for succession to the management and control of the business.

Why is a governance structure needed?

As a family business devolves through generations the ownership and control of the business can be split between many individuals. This can:

  • make it difficult for key decisions to be made - for example, in relation to the potential sale or expansion of the business;
  • create tensions between family members - for example, between those family members who are actively involved in running the business and those who merely enjoy the economic benefits derived from the business; and
  • lead to instability in the running of the business.

Read more in our guide.

Download the guide >

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