Who can stop the heir who forgets himself?

Why family wealth needs independent guardians, distributed powers and emergency brakes in every important company

My professional insights · Lyudmil Karaulanov · 12 min read

Published: 29 October 2026 · Version 1.0

Trust is not a system of control

A family owns substantial property through a holding: manufacturing businesses, trading companies, real estate and financial investments. One of the heirs runs the group. He is capable and successful, and the others, with good reason, prefer not to interfere. For years everything works well.

One day the manager decides to undertake a particularly risky investment and to secure it with the assets of several family companies. The others learn about the transaction when it is almost agreed. They then discover that, although they own a significant part of the wealth, they have no practical way to stop the decision. They have no access to the documents, they do not control the bank transactions, and they cannot replace the executives, because their appointment depends on the same person.

The uncomfortable question is who can stop him. Not after years of litigation, but before the transaction has become irreversible.

The first mistake: all the keys are with one person

In many family structures control exists only formally. At the top sits a holding, below it several subsidiaries with their own managers. If, however, the person running the holding can single-handedly appoint and dismiss all the executives, decide who disposes of the bank accounts and change the internal rules, there is no independent control. The corporate structure only creates an illusion of security.

Nobody needs to misappropriate the holding's shares in order to damage the family wealth. It is enough for the subsidiaries' assets to be used for other interests or burdened with other people's debts. Formal ownership remains unchanged, while the wealth gradually leaves the structure.

There is one more feature. A shareholder's right to information usually concerns the company in which he participates directly, and not necessarily the companies below it. Control therefore cannot sit only at the top. It has to reach the places where the assets are.

Owners outside management need real rights

Some family members may consciously stay outside operational management. This does not mean giving up strategic control. They can take part in approving the investment strategy, significant changes in ownership and extraordinary financing, propose independent members of the management bodies and demand an extraordinary audit on defined grounds.

These rights have value only if they cannot be revoked by a simple majority. When the managing heir controls the majority in the holding, protecting the others requires a qualified majority or unanimity, laid down in the articles of association and in an agreement between the owners. A rule that can be changed by the person it restricts is no protection.

Decisions no one can take alone

Not every transaction requires the family's consent. There are, however, decisions that can change the fate of the family wealth: the sale of a core business, the disposal of a key property, securing someone else's obligation, significant borrowing, transactions with companies in which the manager has a personal interest, and intra-group loans.

These transactions can be placed under a special regime: above a set threshold, approval by an independent member of the body or a resolution of the general meeting is required. The thresholds take account of value relative to the assets and of the risk assumed, not only of the absolute amount.

The independent person in the subsidiary

The head of a subsidiary is obliged to act in the interest of his own company. If, however, his career depends entirely on the person pressing for a particular transaction, an independent decision is difficult. What is needed here is an independent controlling person: a second manager, a member of the board of directors or of a supervisory body.

This person is not necessarily a family member. It matters more that he is professionally competent, has the necessary information and cannot be dismissed at will by the person he oversees. His task is not to approve every invoice, but to stop transactions that go beyond ordinary business or create a significant conflict of interest.

There is a legal feature here. Under Bulgarian commercial law not every internal restriction on the power of representation has effect against third parties. A clause that prohibits a transaction without consent does not necessarily make the transaction itself invalid, but it gives rise to the liability of the manager who breaches it. Effective protection therefore combines corporate resolutions, rules of representation, financial controls and personal liability. The real emergency brake is not a declaration in the family charter. It is a working power that can be exercised in time.

Who appoints the guardians?

It is not enough for every significant company to have an independent member of management. What matters is who appoints him, who sets his remuneration, to whom he reports and who can dismiss him. If all of this is in the hands of the person running the holding, independence remains formal.

The controlling persons are therefore chosen with the consent of different groups of owners or under a procedure that does not allow their removal by one person. They themselves are also subject to control. Otherwise a new problem arises: people without operational responsibility who block the business with impunity. Clear grounds for intervention, time limits, reasons and a way to overcome an unjustified deadlock are needed.

Information is the first line of defence

No system of control will work if the owners rely only on the information the manager decides to give them. The annual report is necessary, but by the time it reveals the problem, the important decisions may have been taken months earlier.

A family holding needs continuous monitoring: periodic data on liabilities, liquidity, guarantees given, related-party transactions and significant changes in the assets. Especially valuable is a direct channel from the independent executives and from the auditor, so that the information does not pass only through the person whose actions may need to be examined. The aim is not for every heir to follow every operational step, but for the owners to learn in time when their common property is exposed to unusual risk.

How is the emergency brake applied?

Take the case in which an independent member of management discovers an intention to use a significant asset as security for a personal investment of the manager. The first step is a signal to a predetermined recipient. The second is a check of whether the transaction falls among the decisions that require special approval. The third is a temporary suspension of its execution, to the extent the powers allow. The fourth is an independent assessment of the transaction and of the conflict of interest. Only then is it decided whether the transaction is permitted, changed or rejected.

In the case of serious breaches there must also be a possibility to change the management, with a temporary takeover of its functions arranged in advance, so that the business is not left without leadership at the hardest moment. The mechanism is created in advance. Once the conflict has broken out, agreed rights and independent bodies are usually out of reach.

And if the owners abuse their rights?

The opposite risk also exists. The manager proposes a reasonable investment, but several heirs systematically block it because they prefer the profit to be distributed as dividends. Or they use their right of consent to impose the appointment of people close to them.

Good architecture does not replace the power of one person with the ability of all the others to exercise power against him. Day-to-day management stays with the people who carry professional responsibility. The owners exercise strategic control within predetermined limits. The dividend policy is agreed early, and for disputes there are independent assessment, mediation and permitted ways of leaving the ownership. The aim is not for everyone to manage. The aim is for no one to be able to manage without control.

Family wealth needs institutions, not heroes

If the whole structure depends on the personal qualities of the founder or the successor, it has not yet acquired institutional resilience. In a personal business, the business works because a particular person makes the right decisions. In the architecture of family wealth, it keeps working even when that person makes a mistake.

The role of independent executives and supervisory bodies is not to show distrust of the manager. Their task is to turn trust from a personal hope into responsibility supported by institutions.

The point of instability

What this concept means →

The point of instability arises when the protection of the family wealth exists only at the top of the structure, while the assets are in subsidiaries to which the owners have no direct access. The vulnerability deepens when the independent controlling persons are appointed and dismissed by the person they control, and when he alone can change the rules.

The opposite point of instability is protection without limits. When every owner can block every decision without grounds, time limits or reasons, the mechanism created to protect the wealth paralyses the business that creates it.

A good family holding is not one in which everyone trusts the manager. A good family holding is one that can protect the wealth even on the day the manager stops deserving that trust.

Practical check: does your holding have an emergency brake?

Can one person alone sell a core asset of the group? Can he provide security for a personal or related project? Who approves significant intra-group loans? Who appoints the heads of the individual companies? Who receives information if the manager begins to take decisions in his own interest? Can he alone change the rules that restrict him? And most importantly: who can intervene before the damage is done?

If the answers depend solely on the goodwill of the manager, the structure does not yet have real protection. Family wealth is not protected merely because it is spread across several companies or placed under one holding. It is protected when power over it is accompanied by responsibility, independent control and a possibility of intervention built in advance.

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