Publication of Family Business Protocol

25 February 2008

Royal Decree 171/2007, which governs the publicity of family business protocol, was enacted February 9th. The aim of family business protocol is to both increase the transparency of these types of companies in terms of management and at the same time to boost overall confidence in these companies (for clients, suppliers, funding institutes etc.).

It is the administrative body who will determine the publicity of the family business protocol as well as the reach. There will only be one protocol published for each and every company. The protocol can be published alternatively or successively, and the family can determine the disclosure of its values, principles and agreements. The publicity can be limited to:

     1) Merely stating the existence of a family protocol in the form requested by the Register.
     2) Including the entire protocol or an abridged version of that which may affect company management with the balances and year-end accounts filed.
     3) And finally, recording, in the registery, the enforcement agreements for what is stated in the protocol itself.

For third parties, the first two possibilities are merely informative. The last option is the requirement for publicity (legality and legitimizing of the recorded documents and their being made public to third parties).

However, the companies must record the following:

     1) the penalty clauses to guaranty the obligations stated in the protocol.
     2) the criteria and system for the determination of the fair value of shares/stock in the event of inter vivos or mortis causa transfers.
     3) the arbitration clause agreement for disputes between shareholders and between shareholders and the company itself.

Finally the law states that the Family Council (Consejo de Familia) is the consulting body for family-owned enterprises, which will lead to greater stability and clarity for its scope of action, especially as regards retribution, function and relation to the Board of Directors.

For more information, please contact Nathalie Kühlmann: nkuehlmann@mmmm.es