Institutionalising the family

When the dynasty outgrows the dinner table

My professional insights · Lyudmil Karaulanov · 4 min read

Published: 16 October 2026 · Version 1.1

While the circle around the family business is small, much can be understood without detailed rules. You know who has done what, who needs what and when it is time for a conversation. This closeness is valuable.

With more generations and different paths through life, some of that shared understanding can no longer be taken for granted. The cousin who lives elsewhere does not hear the conversations after work. The heir outside the company does not know why the profit is being reinvested again. For me, family rules begin with the wish to give these people an understandable and respected place too.

When the old arrangements begin to creak

At this stage, the old informal arrangements begin to produce uncertainty. Who is entitled to work in the company? Who assesses relatives? How is it decided how much profit to distribute and how much to retain in the business? If the answers depend on closeness to the leading family branch, every decision can easily be perceived as a personal privilege, and every privilege as an affront to everyone else.

The problem is not family closeness. That is something worth preserving. The problem is the absence of a common framework understood in the same way by everyone.

What institutionalisation means

The word sounds weightier than the first steps required. It may begin with a procedure for discussion, clarity about who participates and a record of joint decisions. Gradually, unwritten expectations take a form that no longer depends solely on the eldest person's memory or authority.

A family constitution should not be treated as an automatic substitute for the company's constitution, articles of association or an agreement between owners. Its legal force depends on its specific content and the applicable law. An intended arrangement becomes effective only when translated into the appropriate documents and decisions. A family council does not in itself acquire authority to appoint a managing director or distribute a dividend.

Where to begin

The practical starting point is modest and specific: rules for relatives working in the company, remuneration based on role rather than family name, regular information for owners and a clear procedure for disagreement. Representation, terms of office and periodic review of the rules are then defined. One simple rule avoids many hurt feelings: when a particular person's appointment or remuneration is being discussed, that person does not assess their own candidacy.

A place for the next generation

A young person needs to understand the shared property before being given formal responsibility for it. Participation can begin with information, discussion and a suitable task. It is important to allow questions about matters the family has long considered settled.

Proportion is decisive

For a small family, a regular meeting and a clear record may be a good enough beginning. Councils and procedures that no one will use simply add a burden. The form follows the actual relationships and expands when needed.

Where is the point of instability?

What this concept means →

It arises when closeness is treated as a substitute for clarity: a relative expects a position, a manager confuses their work with their ownership rights, and the shared discussion remains in one person's hands.

Family rules can protect both relationships and property when they are understandable, workable and open to review. They then give people room to participate without requiring everyone to live in the same way.

This material is of a general analytical nature and does not constitute individual legal, tax, financial or investment advice.