Case Study: Care for the family under Family Business rules and management of charitable commitments

Advising and formalising family housing and employment in the family business and the planning for established charitable commitments.

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Our client is a family business based in the Gulf Cooperation Council with businesses in the Middle East and North Africa region, South-East Asia, Europe and North America. They sought assistance from Arch in finding a more equitable set of rules and procedures to provide housing and care for family members and to educate and train them for employment in the family business. They also sought advice on a plan for meeting charitable commitments.

The family business was many generations old and had extended at an uneven rate along lineal lines so that the access to housing and care no longer represented the shareholding. Our client had acquired or developed housing compounds located in their home city, as well as in the principal places of business throughout the MENA region. In other countries, individual housing had been acquired for family shareholder executives when necessary.

It was considered in the interest of the family to maintain housing for the employee shareholder families to care for more vulnerable members of those families. They also wanted to ensure those involved in the executive management of the family business could be supported close to their work.

Arch helped the client formalise a policy that excluded the vulnerable employee shareholder families from any equitable allocation of housing based on shareholding, whilst assuring that the managers were housed to provide them with the necessary support. Priority was also given to ensuring these families could benefit from a particular property that was allocated to them over generations to create a family home. Some of these goals conflicted but it was partly resolved by specialist executive housing being excluded from the employee shareholder family housing, and care allocation provided long term.

For family employee executives living in countries where executive housing was not provided, a financial housing allowance was to be allocated. It was not considered feasible to provide family employee housing other than in the compounds within the home countries. Family members of employee shareholders who wished to avail themselves of this benefit had to reside in these compounds. Rights to housing and care were made non-transferrable and inaccessible through family law or other litigation against individual family members.

Arch also assisted the client in formalising a set of training and employment procedures that encouraged and supported family members in pursuing relevant higher education qualifications and outside employment before joining the family business as an employee. Under the new plan, education qualifications are just one level of assessment for employment in the family business; a more practicable trainee program is also offered for family members who do not wish to pursue higher education. Promotion of family members within the family business on merit is supervised by the Board’s remuneration committee.

For better management of charitable contributions, we helped our client separate the assets allocated to charity through succession and philanthropy into an internal fund. Arch then assisted our clients in adopting a five-year rolling business plan, supported by financial modelling, that ensured the fund’s investment portfolio mix was balanced to achieve both growth and income whilst generating sufficient cash flow in time to meet annual charitable commitments.

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