Corporate lawyer for family businesses: structure, governance, and succession

Corporate legal advisory for family-owned businesses in Spain: family protocol, shareholder agreement, corporate governance, business succession, and dispute resolution between family members.

The problem

The Spanish family business faces a paradox: it is the engine of the economy — family companies generate 70% of GDP and 67% of private employment — yet has a very low generational survival rate: only 30% reach the second generation and fewer than 12% the third. The reasons are primarily conflicts between family shareholders, the absence of clear corporate governance, the lack of a protocol regulating the next generation's entry into the business, and the blurring of family and business spheres. These conflicts, when they erupt, are the most destructive because they simultaneously affect the family's assets and personal relationships.

Our solution

At BMC we advise family businesses on designing the legal structure that enables the company to grow in an orderly manner, manage the integration of the next generation, resolve conflicts before they escalate, and plan succession in good time. Our work combines corporate law, inheritance law, and tax planning to provide comprehensive solutions that take both the business and the family into account.

Process

How we do it

1

Current structure diagnosis

We analyse the existing corporate structure, articles of association and shareholder agreements, the distribution of shareholdings among family members, the current governance bodies, and the mechanisms (or absence of them) for decision-making in conflict situations.

2

Family protocol design

We draft the Family Protocol, the document that sets the rules governing the relationship between the family and the business: who may enter the business, under what conditions, and at what remuneration; how strategic decisions are made; how dividends are managed; and what happens when a family member wants to sell their shareholding.

3

Shareholder agreement and corporate governance

We complement the Protocol with legal implementation instruments: shareholder agreement between family shareholders, adapted articles of association, Family Council and Board of Directors with their respective standing orders, and conflict resolution mechanisms (mediation, arbitration).

4

Business succession planning

We design the succession plan in good time: selection of the successor or post-succession governance model, tax optimisation of the share transfer (95% ISD relief if family business requirements are met), and structuring the transfer (lifetime gift, testamentary transfer, or a combination).

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The family business: the most valuable and the most fragile asset

The family business is the engine of the Spanish economy. 70% of GDP, 67% of private employment, and more than 80% of exporting businesses are family-owned. Yet only 30% of family businesses survive the generational handover and reach the second generation. This is not a question of talent or adverse markets: it is a question of structure, governance, and succession planning.

At BMC we accompany family businesses in designing the legal architecture that enables them to grow in an orderly manner and transfer between generations without the conflicts that destroy so many successful business stories. We combine knowledge of corporate law with inheritance law and tax planning to provide comprehensive solutions that take both the business and the family into account.

Family protocol: the rules of the game before the conflict

The family protocol is the most effective instrument for preventing the conflicts that destroy family businesses. It establishes in advance the rules on the issues that generate most tension: may all children work in the business or only the most qualified? Under what conditions? At what remuneration? How is it decided who is the next CEO? What happens when a child wants to sell their shares and the others do not want a third party as a shareholder? How is the dividend policy set when some shareholders need liquidity and others want to reinvest?

A well-designed protocol turns these uncomfortable conversations into documented decisions, agreed before the conflict exists. It is far easier to agree on the rules when everyone is in agreement than to try to resolve them once a conflict is already under way.

Corporate governance: separating family and business

One of the hallmarks of second- or third-generation family businesses that function well is the separation between the governance bodies of the family and those of the business. The Family Council — where family issues with a business impact are discussed — and the Board of Directors — where strategic business decisions are made — must have clearly differentiated composition, functions, and operating procedures. Incorporating independent directors onto the Board of Directors is common practice in mature family businesses.

Succession: planning before it becomes urgent

Business succession is the moment of greatest risk in the life of a family business. Transfer of leadership and ownership must be planned years in advance to be orderly, tax-efficient, and emotionally manageable. The 95% Inheritance and Gift Tax relief for family businesses is a significant tax opportunity that can only be captured if the corporate structure satisfies the requirements laid down in law.

We design a personalised succession plan for each family business, combining the choice of post-succession governance model, tax optimisation of the transfer, and management of the family process of preparing for the handover.

Contact our team of family business specialists for an initial no-commitment consultation.

FAQ

Frequently asked questions

The family protocol is the document that governs relations between the family shareholders and the business. It sets rules for family access to managerial positions, the dividend policy, liquidity mechanisms for shareholders wishing to exit, and the company's governance bodies. Legally, the protocol is a contract between the family shareholders and may have varying levels of enforceability depending on how it is structured: as a shareholder agreement (binding between the parties), as a statement of principles (morally persuasive but not directly enforceable), or with statutory provisions (effective against the company itself).
A dispute between sibling shareholders typically begins with disagreements over management or dividend policy and can escalate to deadlock of the corporate governance bodies. The legal options available are: corporate mediation (a voluntary process with a third party facilitating agreement), arbitration if the shareholder agreement provides for it, challenge of corporate resolutions taken irregularly, or application for judicial dissolution on the grounds of permanent deadlock. A good family protocol greatly reduces the probability of reaching these situations and provides exit mechanisms before litigation.
It depends on whether a family protocol exists and what it provides. In the absence of a protocol, a shareholder (even a family member) has only the rights conferred by the articles of association and the law: voting at the General Meeting, receiving dividends, subscribing for new shares on capital increases, and obtaining information. There is no automatic right to be appointed as a director or to hold a managerial position. The family protocol may establish conditions for family members entering management: minimum qualifications, external experience, an assessment process.
The transfer of shareholdings in a family business to descendants benefits from a 95% reduction in Inheritance and Gift Tax provided the requirements of Article 20.2(c) LISD are met: the company must carry on a genuine economic activity (not be a mere asset-holding company), a shareholder must perform genuine managerial functions with remuneration exceeding 50% of their total employment and capital income, and the transferring shareholder's stake must exceed 5% individually or 20% on a family basis. This relief can represent a tax saving of millions in material family business assets.
The answer is always: sooner than one thinks. Business succession requires years of preparation: identifying and developing the successor (or designing the governance model if there are several children), optimising the corporate structure so that the transfer is tax-efficient, making partial lifetime gifts when tax rates are lower, and managing the expectations of all family members. Waiting until the founder is seriously ill or has died to consider succession is the primary cause of family business crises.
A 50/50 deadlock — two shareholders each holding 50% unable to agree on a strategic decision — is one of the most paralysing situations a family business can face. Legal options depend on what the shareholder agreement and articles of association provide: a casting vote mechanism for the Chairman, a deadlock resolution process involving a trusted independent third party, a buy-sell (shotgun) provision that allows either party to trigger a forced purchase at a stated price, or — in the absence of contractual mechanisms — an application to the court for judicial dissolution on the grounds of the impossibility of achieving the corporate purpose. A well-drafted family protocol and shareholder agreement should anticipate and resolve deadlock scenarios before they arise.
The Family Council is the governance body for family matters — it manages family relationships, discusses strategic decisions relevant to the family, oversees the family protocol, and provides a forum for family shareholders who are not directors to participate in the company's direction. It has no legal standing under company law; its authority derives from the protocol. The Board of Directors is the company's legal management body, responsible for managing and representing the company, with directors appointed by the General Meeting. The two coexist: the Family Council operates in the family sphere, the Board in the corporate sphere. Confusing the two leads to governance problems — decisions taken by the wrong body generate invalid resolutions.

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