THE ADVOCATE 829
VOL. 77 PART 6 NOVEMBER 2019
munication) and “hard” issues (such as tax planning) to better help business
family clients. The technical skills of wealth transfer are certainly important,
but proficient legal and tax planning does not ensure a successful transition
of wealth. How well the family is prepared to deal with the transition
of wealth is much more important.
The Continuity Planning Process
A continuity plan is far more likely to be successful if it is borne out of early
preparation and the coordination of the three circles: family, ownership and
Continuity planning requires the setting of clear objectives, agreement
within and between the three circles, good communication, appropriate
governance structures, recognition of risks and timely action.18 The lack of
effective governance is a major cause of continuity problems and governance
is thus a critical first step in starting the continuity planning process.
At its most basic level, governance is an organizational structure that helps
groups make decisions. The governance of a family business is more complicated
than for ordinary companies because of the central role of the family
that owns and typically leads the business. In a family business, the
business, the family and the ownership subsystems all need governance.
The role of governance in the family business system
As a family moves from unilateral decision making in the owner-founder
stage towards more complex decision making in later stages, increased and
more formalized governance is important to ensure that the right people
are given the right information to make the right decisions at the right time.
The type of governance structure that a family firm needs at any one point
will depend on the developmental life stage of the business and the stage of
family ownership.19 There is no single type of governance structure that fits
all family enterprise systems, but most family enterprise systems can be
governed by structures set out below.
The governance needs of family businesses will depend on various factors,
some quantitative (such as family size, business complexity and balance
between insiders and outsiders), and others qualitative (including the
degree of cohesion and quality of communication between family members).
Smaller and/or more cohesive families may start with frequent family
meetings. Families facing greater tensions or complexity may need a
more formalized approach, including family charters and shareholders’