# Family Charter > What is a family charter: a set of rules for ownership, management, and succession of family capital. Why it's needed, what it includes, and how it relates to legal documents. Author: Мария Плотникова — юрист, Family Office (https://wiki.private.law/authors/plotnikova) Last modified: 2026-07-21T09:28:00.000Z Canonical: https://wiki.private.law/en/family-charter Topics: structures Jurisdictions: global Semantic tags: corp-docs --- ## Concept Foundations, trusts, and holding companies decide how a family holds and passes on its capital. They say nothing about why it does so, or on what principles the family agrees among itself. A family charter answers that question: the set of values and understandings a family agrees on for owning capital, governing it, and handing it to the next generation. Among old dynasties such codes last for centuries — the Mogi family, owners of Japan's Kikkoman, trace their family precepts to the eighteenth century and drew them together into a formal constitution in 1925. > 🍓 At the core of a charter is the answer to one question: why the family preserves its capital, and which rules it places above short-term gain. From there, that answer unfolds into concrete structures and procedures. ## Where It Comes From The idea of writing down a family's rules is older than the management-company industry. Merchant and artisan houses kept "household statutes" for centuries, while the academic form arrived in 1978, when Renato Tagiuri and John Davis of Harvard Business School proposed the [three-circle model](https://johndavis.com/three-circle-model-family-business-system/) — family, ownership, and business. The circles overlap, and almost every family conflict lives at the seams: a shareholder brother who does not work in the company and a director brother who holds no shares view the same decisions differently. A charter spells out the rules for each zone of overlap in advance. The statistics explain why this matters. John Ward's classic study (1987) found that roughly 30% of family businesses reach the second generation, about 12% the third, and only around 3% the fourth (the figures are often generalized well beyond the original sample, so they are best read as a rough guide, keeping the researchers' own caution in mind). Folk wisdom puts it more briefly: the English "from shirtsleeves to shirtsleeves in three generations" and the Scottish "the father buys, the son builds, the grandson sells." A charter tries to break that cycle: along with the assets, heirs are handed the rules for handling them. > 🧭 A useful test is to check every rule in the charter against the Tagiuri–Davis three circles. A dividend rule belongs to ownership, the terms for hiring relatives to the business, and rituals and values to the family. A rule that mixes the circles almost always becomes the source of a future dispute. ## What It Includes A charter usually sets out the family's mission and values, the rules for entering and leaving the business, the order of decision-making and voting, the role of the family office, the policy on distributing and reinvesting income, the mechanisms for resolving disputes, and the rules for those who marry into the family. A separate and most delicate section covers the next generation: how heirs are prepared, what they are taught, and on what terms they are admitted to management and to capital. ## Legal Force On its own, a charter generally carries no direct legal force — it is the family's "social contract." Its principles are translated into binding documents: company charters, shareholders' agreements, the terms of trusts and personal foundations, and managers' mandates. Voting rights and dividends are fixed by a shareholders' agreement; control over assets without transferring them directly to heirs, by a trust or a [private trust company](https://wiki.private.law/en/ptc); protection against the fragmentation of stakes in divorces and through marriage, by prenuptial agreements and the holding company's charter. The charter remains the source; these instruments are its execution. > ⚙️ Half the value arises in the process itself: sitting down to write the charter, the family for the first time speaks its expectations, fears, and rules aloud — and a significant share of future conflicts is resolved before the text is even signed. ## When It Is Written > 🔗 **Related** > [Family office](https://wiki.private.law/en/family-office) · [Business succession](https://wiki.private.law/en/business-succession) · [Family holding for succession](https://wiki.private.law/en/family-holding-succession) · [Personal and inheritance fund](https://wiki.private.law/en/russian-personal-fund) · [Private trust company](https://wiki.private.law/en/ptc) · [Trust recognition (Hague)](https://wiki.private.law/en/trust-recognition-hague) A family charter is worth creating once the capital and the family have grown to the point where informal understandings no longer suffice: several branches, a next generation, a shared business. The occasion is often preparation for a handover of management or the assembly of a [family holding for succession](https://wiki.private.law/en/family-holding-succession) — the moment when the questions of "who decides" and "how we divide" arise in full. This is work for years ahead, and the text is updated whenever major changes occur in the family. ## How Families Actually Do It The best-known example is the French [Association Familiale Mulliez](https://www.afm.family/en) (AFM), which unites the owners of Auchan, Decathlon, and Leroy Merlin. The association has operated since 1955, the first family charter was written in 1968, and the principle "Tous dans Tout" ("everyone in everything") means mutual participation by all branches in all assets, with no outside investors. Today it counts more than 1,600 descendants and around a thousand active shareholders; membership comes by birth or by marriage, but not automatically — from the age of 21, candidates go through training and submit an application, and the managing council is re-elected every four years. Japan's Kikkoman rests on the constitution of the Mogi family, and its rules are strikingly specific: each of the eight branches may place only one representative in the business per generation, and a relative is valued by character and contribution to the enterprise. The rules look harsh, but they keep the company from turning into an almshouse for the whole clan and keep it governable over a horizon of centuries. ## Living Document A charter is not written once and for all — it is revisited as generations change and at major events: the sale of a business, a divorce, the appearance of new branches. To keep the document alive, the family sets up bodies: a family council for day-to-day decisions and a family assembly, where once a year everyone gathers, including the young and those who have married in. These institutions, together with the [family office](https://wiki.private.law/en/family-office), are what turn a fine text into working practice. > 🍓 A family charter works to the extent that the family is willing to follow it without compulsion. Written by everyone together and honestly, it saves heirs years of litigation and quarrels; handed down from above like a corporate regulation, it gathers dust in a safe. > 💡 The charter is carried into practice by the family office — see Family office. This material is for reference purposes and does not constitute individual legal advice. --- ## Sources - [Johndavis — three-circle model](https://johndavis.com/three-circle-model-family-business-system) - [Association Familiale Mulliez](https://www.afm.family/en)