Page 25 - Internal Auditor Middle East - December 2017

TO COMMENT on the article,
EMAIL the author at hafmali@hotmail.com Challenges

consultation and study of matters related to • Discussing and selecting the alternative • The existence of a family constitution
the Family Business and may also be called to the current chairman when he helps avoiding disputes among
“Family Advisory Council” or the Family retires. members of the family and preventing
Executive Committee. The Family Council • Discussing the possibility of creating a
shall: the misunderstanding, as it explains
fund to support and adopt any ideas or the roles of people who are interfering
• be the primary link between the family suggestions made by family members in the management and others who
and the Board of Directors of the regarding their company or related to
company and the senior management new investment opportunities for the have no right to interfere in the
of the company; family. management.
• suggest and discuss names of • Discussing whether the company will • The existence of a family constitution
candidates for membership of the continue, be sold or a special or public with the elected Family Council
Board of Directors; offering process will be made. sets the expectations of the second
• determine and review the strategic In this regard, it should be clarified that generation and the third generation
vision of the company and its mission; the Family Council is an illegal entity of family members in its proper
and
and therefore it is not a substitute for the framework and governs their
• determine and review family policy company’s board of directors, but rather intervention in the management as per
regarding the family members’ it is complementary to it. As mentioned standards specified in advance.
employment, and their contribution to above, it is the link between the company
the company. • The contents of the family constitution
owners and the company’s board of
When the Family Council is elected by directors. are the strategic objectives of the family
the Family Assembly, criteria can be in relation to their companies, values,
set for the elections. For example, there The Family Council shall have a President beliefs, family mission, family members
shall be a representative in the Council and a Secretary of the Council and shall employment policy, method and rules
for each family branch represented by include up to nine members.
several generations of the family, i.e. the Other proposals to regulate the role of for nominating a member of the family
first generation, the second generation family members and their involvement for leadership positions.
and the third generation, and there shall
be criteria for electing/not electing those in management are the preparation of a • Method and way of trading shares of
who have a close relationship with family charter or constitution for the family. the company among members of the
members, and the rules of women and men Ivan Lansberg defined the family family and the basis of evaluation.
representation. constitution in Succeeding Generation as • Method of resolving any disputes that
The topics that can be discussed and “an official charter or book prepared with may arise among family members.
decided by the Family Council, include, the cooperation of all members of the
but not limited to, the following matters: family to include the values, beliefs and • Time of accepting an external investor
• The policy of distributing profits and objectives of the family in relation to their or making a private placement or
making balance between the material relations with each other and how they deal public offering.
needs of family members and the with the company or companies that they
financing needs of the company. own.” Finally, we discussed the characteristics of
the Family Businesses and the challenges
• The training needs of family members, There are several advantages benefiting
especially when they have the ability the family members and the companies they face. Then we addressed the challenges
to act as successor or substitute for the they own, when there is a family facing the auditors of these companies
founder. constitution, as: and then presented some suggestions to
• The policy related to the purchase and • During the period of preparation of overcome the challenges experienced by
sale of family shares and the valuation the provisions of the Constitution, all the Family Businesses to ensure long term
method of shares that may be traded members of the family even those who sustainability of these types of companies
among members of the family. do not interfere in the management of because they have a positive impact on the
the company shall be involved.
• Discussing and selecting a shortlist economic and social life of the country.
of those who have the qualification, • This increases communication among
experience and ability to lead the them and their sense of belonging to Hossam Amin Fahmy, the Founder & Man-
company in the future as a successor of the family and to the company, which aging Partner , HA Consulting
the current chairman. has a positive impact on the company.

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