Jersey: Ruling The Family Roost

Last Updated: 20 April 2012

The issue of "who is in charge" affects families and businesses alike, but it is within the unique operating environment of a family business that potentially destructive tensions are most likely to emerge, if ground rules are not established that effectively separate family from business.

In the family, there is a natural hierarchy whereby the parent has authority over the child and an older sibling has hierarchy over a younger sibling. In the world of business, it is more complex. The CEO or MD presides over the board of directors, and the board of directors in turn preside over the senior management who preside over the staff.

In a family business these roles can become more complex as younger generations come into the business and, for example, demonstrate technical expertise and management capability that may be superior to that of their older, more senior family. Consequently it is very easy for the family hierarchy and the business hierarchy to come in to conflict.

Trust and corporate structures can however provide a perfect starting point for introducing a system of structured governance to families, whilst allowing the family to develop their business. Such structures would typically include Private Trust Companies, Foundations and Special Purpose Trusts, with offshore jurisdictions competing on the range and sophistication of structures available.

  • The Private Trust Company (PTC). Many consider the PTC as the most appropriate and flexible structure for family businesses. The board of the trust company can comprise family members, advisors, and fiduciaries, so a blend of family and external, specialist expertise can be assembled at Board level.
  • Special Purpose Trusts. The British Virgin Islands have developed VISTA trusts which can be created for the sole purpose of holding shares in a BVI company, which is then run by its directors. The settlor's family can comprise the directors of the board, so allowing ownership and control over the company. By way of comparison, Cayman's STAR trust regime allows trusts to be created for a pure purpose or beneficiaries or both. The STAR trust can be used for holding operating companies which are principally comprised of the director's family as the board.
  • Foundations. Families may find foundations an effective way of exercising influence over a structure. Although Jersey foundations must have at least one Jersey regulated person on the council, the other council members can include the founder or family members.

One of the key features of a Jersey foundation is that the council is answerable to a guardian (who can be the founder or his representative) rather than the beneficiaries. The council does not have a fiduciary duty to the beneficiaries and accordingly, a foundation may be able to undertake entrepreneurial activity.

On a day to day basis, conflicts may arise between family members, so there needs to be an effective and formalised channel for resolving such disputes, if these are to be prevented from impacting upon the business. One way forward is to lay down a clear code of practice for the family to abide by which would clearly identify a dispute resolution process in a given set of situations. Those scenarios include:

Business goals and family goal conflicts

It is really very easy for the goals of a family business to become incompatible with those of a family. In business, the core goal is usually to make a profit and provide a return on capital to the owners and investors.

In a family, goals are infinitely more complex. Emotional ties can come into play and there is often a need for support, both for the old and the young. The governing principles of a family are usually founded upon love respect and kindness, not making profit.

Often, parents who have founded a business may often want to see that all of the children are supported by the business, even though only one or two siblings may be working in the business. This can create intense friction, if the business and family goals are not clarified and reconciled.

Compensation issues

Compensation disagreements may arise in family businesses when there is a lack of clarity around business and family goals. In a family feud over money, the members working in the business may believe they are entitled to market rate compensation. Other members may not agree and may insist that everyone receive equal distributions from the business, irrespective of whether they are directly involved in wealth generation or not.

The essential problem is one of justice based on equity, equality, and need. These three interests must be in balance for there to be a sense of fairness in compensation.

Ownership issues

Ownership issues can often be generational. A key question that needs to be resolved is 'how long should parents hold onto the business before turning it over the children?' For parents, the business may represent their life's work, and the majority of their wealth. For the offspring, the business may mean their future and the future of their own families. The tension in ownership and succession can result in emotional disputes.


Sometimes the family is more important than the business. When members simply cannot get along in the business, one side may have to buy out the other. This is an emotional situation because the selling side will always see more immediate value from the business than those who remain. The problem is complicated by mistrust and a sense of betrayal which almost always underlies these types of conflicts.

Fiduciary claims

Managing owners sometimes fall into the trap of believing the business is solely theirs. Consequently, outside family members can easily believe that, rightly or wrongly, the managing owners are cheating and defrauding them.

For the family business therefore, a clear set of operating rules and a disputes resolution process are vital. In defining such rules, a good starting point is the rules that commercial companies must adhere to.

Rules for family governance – establishing a benchmark

The Financial Reporting Council (FRC) outlines a series of codes by which corporate entities should be governed, which it recently published in 'The UK Corporate Governance Code, June 2010'.

In the report, the FRC stipulates that 'The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver long-term success of the company'. The main principals of the code encompass:


  • That every company be headed by an effective board which is responsible for running the company. No one person should have unfettered powers of decision making.
  • The role of chairman is separate from that of the board and the chairman's role is to ensure the leadership and effectiveness of the board is maintained.
  • Non-executive directors should constructively challenge and help develop proposals on strategy.


  • The board should have a balance of skills, experience and independence to allow them to discharge their responsibilities effectively.
  • There should be a transparent process for appointing new directors.
  • All directors should have enough time to effectively discharge their duties.
  • All directors should receive an induction to the board and regularly refresh their skills and knowledge.
  • The board should be supplied in a timely manner with information in a form that allows it to discharge its duties.
  • The board should undertake a formal and rigorous annual evaluation of its own performance and that of the directors.
  • All directors should be submitted for re-election at regular intervals.


  • The board should present a balanced and understandable assessment of the company's position.
  • The board should maintain sound risk management and control, and apply formal reporting methods for risk.


  • Levels of remuneration should attract the directors but a significant proportion of their rewards should be linked to the company's success.
  • There should be a formal policy for deciding remuneration. No director should decide their own remuneration. Relations with shareholders
  • There should be a dialogue with shareholders on a mutual understanding of objectives.
  • The board should use the AGM to communicate with investors and to encourage participation.

Whilst the above codes are expansive, they do also have the benefit of being very clear and outlining a methodology by which good corporate governance can be employed. As a starting point, is it possible for the codes that have been developed for corporate governance to be used as a basis for family governance? The requirements that family governance present are not really that dissimilar from those needed to achieve good corporate governance.

Family decision making

At the heart of family governance is the way that families make decisions. If a 'normal' family is anything to go by, this can be a complex process, with many dynamics coming into play which are simply not there in a corporate environment.

A protocol and methodology for making decisions needs to be put into place, and appointing a board (which can be comprised of both family members and expert advisors) can often be a good starting point.

In the context of family decision making this would outline the process for bringing new opportunities to the table, the process for agreeing the decisions and in the event of a split decision it would resolve how a casting vote might be made.

Having a good decision making process allows families to move forward with their business. This means that wealth is not dissipated through inertia or an inability to reach a consensus.

Where trust structure are used to hold family businesses and these do not include clear governance rules, this lack of governance can cause issues for trustees where a fiduciary obligation needs to be considered. Central to this would be how a trustee is able to represent all the beneficiaries and their best interests. If a trustee is unable to make an effective decision, the trustee runs the possibility that the trust is ultra vires.

Implementing formal planning and procedures

Whilst the codes suggested by the Financial Reporting Council might not exactly be to every family's taste, they do provide a principal upon which a dynastic concept can be built. This allows a family structure to be created, the purpose of the family to be agreed, and procedures to be created that make the governance implementable.

The family purpose can be documented and could be an equivalent of a company's Memorandum of Association. Issues that might be covered within it include:

  • How the family wishes to address wealth preservation
  • The business focus of the family
  • Family values, reputation and ethics
  • The family's approach to philanthropy
  • The family's distribution and investment policy
  • Procedure and succession planning.

If the family purpose is viewed as an equivalent of a company's Memorandum of Association, the family procedure can be viewed as an equivalent to a company's Articles of Association. Accordingly, the family purpose must include detailed operational provisions. These will be typically contained in:

  • Articles of association for the family's private trust company
  • Articles of the enforcer entity
  • Family constitution

This will allow for a range of areas to be covered, including communications procedures, meetings and decision protocols, minority protection, dispute resolution, an agreement as to how professional advice is co-ordinated and a central strategy and administration.

Using trusts to aid family governance

Trustees can play an essential role in the running of family structures. Trustees can ensure that the governance principals are applied as adopted and agreed by the family. Trustees have the necessary independence and fiduciary obligation to ensure that all beneficiaries are looked after and as a result will naturally apply checks and balances and ensure that the power base within the family is spread.

The primary advantage of a trust is its ability to keep the family on track. For a trustee, the trust deed is binding and the trustee must enforce the trust deed, as to not adhere to the trust deed is to be in breach of trust. Adherence to family governance codes can be written into the trust deed and therefore act as a strategic tool for resolving family disputes.

Ruling the family roost

Long term planning is essential for any family, and keeping all elements of a structure well maintained is critical. Proactive and regular input is needed which in turn will help prevent disputes arising in the first place. Above all, seeking continued professional advice is advisable for any family.

Trusts and Foundations can provide an ideal framework for both ensuring the future health of the family business and the family itself. Running a family is a complex matter and all families have their specific requirements, so one size certainly does not fit all. Whilst the Financial Reporting Council guidelines are clear and useful, it should be realised that they just provide a starting point, as they will need to be adapted to suit each family.

The modern high net worth family may have multi-jurisdictional requirements and multigenerational needs, which result in complex tax treatments and business needs. At Vistra (Jersey) Limited we work with families and their advisors on a day to day basis developing appropriate family and business structures to protect and enhance the long term prosperity of both.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions