Governance in family businesses: navigating conflict, control and continuity

A session report from the IBA’s Annual Conference held in Copenhagen from 4 to 9 October 2026

Rapporteur

Mirko Sickinger

Heuking, Cologne

Co-chairs

Florian S Jörg

Bratschi, Zürich

Sandeep Mehta

JSA, Mumbai

Speakers

Rasem Kamal

Kamal & Associates, Ramallah

Jessie Smith

Howard Kennedy, London

Laura C Turano

Paul Weiss Rifkind Wharton & Garrison, New York

Jolande van Loon

Ploum, Rotterdam

Introduction and global importance

According to McKinsey (2024), 80–90 per cent of businesses worldwide are family owned and family enterprises reportedly account for more than 70 per cent of global gross domestic product.

The topic was framed historically and culturally, with the family presented as a social foundation across civilisations. Examples cited during the session included the Egyptian, Babylonian, Roman, Hebrew, Christian, Islamic and Hindu traditions.

The stated central objective of governance is to protect family unity and business continuity through clarity and acceptability.

Governance v legal structure

The core point is that governance questions, such as roles, control and benefits, must be decided before the form of the entity is finalised.

As a practical recommendation, families should start with a family charter or constitution that documents the rules on leadership transition, the dividend policy, dispute resolution and the structure of the family council.

Dutch practice provides an example: notaries identify succession issues early, for instance when drafting wills and marriage contracts, which enables governance work to begin before a crisis arises.

Entity design tools and frameworks

The stack or foundation model used in the Netherlands splits beneficial ownership from voting rights. The voting rights are held by a foundation, while the family retains the economic rights, which helps to separate ownership from control.

Shareholders' agreements are a common mechanism for transfer restrictions, pre-emptive rights and buy-outs triggered by divorce. They are typically preferred over embedding sensitive clauses into the articles of association.

A living will or power of attorney is used to ensure continuity if an elder becomes incapacitated and the use of such instruments have been recommended since the Covid-19 pandemic.

Succession, exit and M&A tensions

The primary legal challenge is that it is difficult to anticipate and accommodate exits and succession in evolving future scenarios. Lawyers should, therefore, facilitate family conversations rather than promise perfect, hardwired solutions.

Practical tools include staged transfers, mentoring, a staged handover of management and the appointment of external advisers or independent directors to separate management from ownership.

Elders, longevity and staged transitions

A key problem is that founders who remain active into their 80s and 90s resist letting go. According to Russell Reynolds (2025), reluctance to cede control is one of the top causes of succession failure.

Possible remedies include staged share transfers, living powers of attorney and the appointment of qualified non-family managers. In addition, explicit timetables and objective re-entry criteria should be set for temporary breaks, such as for maternity or caregiving.

Female leaders and temporary breaks

The issue is how to accommodate marriage, maternity and caregiving without sidelining the long-term prospects of female family members.

Female leadership is increasing, although this varies by region. Where a woman serves as chief operating officer, more formal governance structures such as a family board or council are used.

It was suggested that objective return criteria and rules for temporary replacement be provided in order to preserve continuity and re-entry rights.

Gen Z, ownership v participation

Survival metrics cited from Goldman Sachs show that 30 per cent of family businesses survive the transition from the first to the second generation, 15 per cent survive from the second to the third and only five per cent survive beyond the third generation.

Members of Gen Z often prefer startups, technology and a different work–life balance. Many of them want ownership but do not want to be involved in the day-to-day operations.

Possible responses include dual tracks that allow both an entrepreneurial path and involvement in the core business, a separation of ownership and control (owner versus operator) and structures that enable passive ownership without control.

Common causes of disputes and deadlocks

The main triggers of disputes are conflicts between family and business values, sibling rivalry, a lack of clear authority after the death of a key decision-maker, divorce and the involvement of in-laws, the entry of non-family shareholders and liquidity needs.

Preventing and resolving disputes

Mediation is preferred because it is culturally appropriate, confidential and less disruptive to the ongoing business. An Indian survey from 2025 found a preference for mediation of approximately 80 per cent.

The family charter or council should be a living document with embedded mechanisms for calling meetings, renegotiating allocations and managing grievances.

Shareholders’ agreements should contain clauses on pre-emptive rights, buy–sell triggers, drag-along and tag-along rights and change-of-control restrictions. Buy-outs triggered by divorce are common in practice if drafted carefully and an exit at fair market value is often proposed.

With regard to valuation and alternative dispute resolution design, fair market value clauses commonly lead to protracted disputes. Parties should, therefore, build in off‑ramps and embark on negotiated, M&A-style solutions when a buy–sell trigger occurs.

Legal and practical pitfalls (implementation challenges)

Documents often become stale, as charters that are created once frequently lack review mechanisms and become ineffective as circumstances change.

Enforcement is nuanced, because prenuptial agreements, shareholders’ agreements and court orders can interact unpredictably across jurisdictions. Local law and cultural nuances affect enforceability, as shown, for example, by regional peculiarities in divorce filings.

‘Stack’ structures give rise to compliance and beneficial ownership complications, in particular with regard to reporting and the identification of beneficial owners.

Notable quotes

‘Family sustains life.’ This quote was used as a historical framing that applies across multiple civilisations.

‘Family enterprises die when the leaders won't let go.’ This quote was referenced from Russell Reynolds (2025).

‘Talk, talk, talk.’ This was the final practical admonition of the session, emphasising that repeated and early conversations are the core remedy for many governance problems.

Speaker recommendations

The panel as a whole recommended drafting living family charters with review mechanisms and the use of mediation clauses that include confidentiality and good-faith obligations. It further recommended planning staged transfers and setting objective re-entry criteria for temporary breaks from a role.