If you are thinking of selling a family-owned business, separating family issues from business issues can often be a challenge. One solution? Create a family council.

Creating and running a family council helps improve communication, accountability, and family harmony. By participating in a family council, family members feel more involved as part of the family-management-ownership system. But most importantly,  a forum exists in which family issues can be addressed separately from business issues rather than being exposed in front of employees, managers or potential buyers. Lines of communication remain open, interpersonal relationships are improved, and the quality of life for everyone is enhanced.

What is a Family Council?

A family council serves as a sort of board of directors for the family. A family council provides family members with a regular, structured forum to communicate and voice concerns, have input, and participate in determining how to deal with both family and business issues. The purpose and procedures of a family council are determined by the family charter, its by-laws, and its vision/mission statement.

The family council also provides a regular time and place for dialogue concerning the interests of the family in the business. By following the family council protocol, issues are presented, information is shared, misunderstandings are cleared up, and matters can be resolved without escalating them to involve the whole business.

A family council should not be confused with a board of advisors. A family council deals with the "business of the family," while a board of advisors deals with the "business of the business." If you have both an advisory board and a family council, there should be at least one liaison between the outside board and the family council. This person is responsible for representing the family on the advisory board and coordinating and managing the family goals and expectations with respect to the company's strategic plan.

When Family and Business Issues Overlap

When family and business issues overlap, they can be managed or communicated to the board of advisors. With this structure, the family does not feel obliged to pack the corporate board with family members, preventing the involvement of objective, experienced outside directors who bring new perspectives to the business.

But, perhaps the most important benefit provided by the family council is improved family relations. The council provides family members with a support system for each other during difficult times. The council meetings may serve to help maintain communication between family members, foster family involvement in giving back to the community, help educate family members on financial and other issues, teach the younger generation about family history and values, and provide an excellent backdrop for people to get together and enjoy each other's company. One of the more unexpected outcomes of this family-business governance structure is a new sense of family identity and togetherness.

The family council can also be continued after the sale of your business too. A family council provides the same benefits after a sale, including providing a forum in which family members can remain engaged to share and transfer values and build concensus about the family's future charitable or business endeavors.

Creating a Family Council

If creating a family council sounds interesting, but you are not sure where to start, talk with someone in the MidCap Advisors office near you. He or she can help you explore the pros and cons of a family council, and if it makes sense for you, help you set up and facilitate family council meetings for you.