On Friday, March 6, session 6 and 7 of the Family Business Course took place. Session 6 was conducted by Pascual Fernández (UV) and discussed “Civil Fundamentals of Family Business” while session 7 was conducted by Enrique Hervás (Broseta Abogados) dealing with the “Labor Fundamentals of Family Business”.

Pascual Fernández put a special emphasis on properly planning succession from the legal prism. The Family Business is usually involved in crisis when replacement processes have to be carried out, since Law limits right of inheritance. Due to this, proper planning of the succession process will be the key to guarantee the Preservation and Continuity of the Family Firms.

Problems related a proper valuation of the company, payment of Inheritance Tax and the Legal limitations (which can add up to 2/3 of the inheritance when it is not planned), leads us to the need to adopt Prevention Mechanisms:

1. Civil
   1. Will and Testament: Guarantees succession takes places according to employer's last will, always adjusted to the legal limits. It is decided who will continue the activity of the Family Business and its ownership.
   2. Marriage Contract: Establishes the economic regime of married couple. Can be used to limit the responsibilities related with the company.
2. Mercantile
   1. Corporate Structure: It is recomended to use a Private Limited Company (LLC, Ltd, PVT...) to limit responsabilities to the company.
   2. Corporate bylaw: Keeps the property within the family and establishes limits to ownership transfer.
3. Familiares
   1. Family Protocol: Preserves Business Culture, establishes long term family plan and regulates Family Council.

The combination of all these measures, composes what we call the Succession Protocol, which will be the key to an adequate succession in the Family Business.

The day continued with a session focused on the Labor Aspects of the Family Firm. The session focused on how to correctly lay down the figures and labor relations within the Family Business.

Enrique Hervás recalled the figure of Family Work as a key part of labor relations that are common in the Family Businesses, recalling that this figure is excluded from the Workers' Statute. There are 2 requirements that presuppose this relationship, kinship (up to second grade) and coexistence or belonging to the same family unit.

Enrique continued by showing the different positions business family members can develop within the Family Business, and the compatibility between them. These are:

1. Partner
2. Chief or Administrator.
3. Worker: Common or Senior Management Personnel.

Puede existir relación laboral en caso de ser Socio y Trabajador siempre que no se posea un Control Ejecutivo de la Sociedad, en cuyo caso la relación se convertiría en mercantil. Algo parecido sucede con la Alta Dirección y la Administración, que solo puede compaginarse bajo una relación mercantil.

Enrique concluded by emphasizing the importance of establishing the appropriate labor relations, the clauses in commercial relations and the frameworks within the Social Security. 

Next Friday, March 13, we will have Alejandro Ríos (Partner at Broseta Abogados) dealing with the “Mercantile Organization and Family Protocols in the Family Business”.

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