A corporation is not a family business (Part 2) 10 steps to managing a corporation to be sustainable.

Do not give “Kongsi” which is a gift from your parents and ancestors. become a cause of hatred and suffering that will be with us forever

“The truly rich people are those whose children He hugged me even when he came home empty-handed.”

Last issue, we talked about the definition of a "kongsi", which is that a cartel is a family pot of money. and the evolution of the three eras of corporations, from the unification of corporations and family businesses to "corporations" and "family businesses" that are separated from each other (a corporation is a Family Fund and a family business is a Family Business) to questioning. It's important that Whose cartel is it?

In this issue, we will continue to talk about what the "Kongsi" can do? And I will invite us to learn 10 steps of managing a company sustainably from generation to generation.

What can a cartel do?

A family cartel is often used for many different matters, depending on the wishes of its members and varying from family to family. But for the most part Cartel money is spent in four important ways:

1. Family Welfare – Many families create The “welfare system” was created to guarantee the well-being of members from birth until death. Welfare provided ranges from Money from the bottom of the bag for marriage, pregnancy, childbirth, children going to school, first car, first house, lump sum to invest in a business, health insurance, life insurance, salary after retirement. to funeral expenses, etc. The most important thing to consider when arranging family welfare is “Where will the welfare money come from?” This question can be answered. We can continue!

2. Family Business Reserves – Many business families place importance on setting aside money in the company to protect them. “Emergency funds” when needed for the family business “If you pay it as dividends, it will all be used. It is good to set aside some money from the dividends to keep in the general fund. Especially if one day Betagro has a problem. Still able to inject money from the general fund to help,” Mr. Wanus Taepaisitphong of the Betagro business family Further telling the reason behind bringing back the family cartel system again.

3. Joint investments – “Assets when pooled together It is worth more than the sum of its parts. It is an important principle in taking care of family assets to create the highest Synergy” is the view that Mr. Chan Srivikorn, heir of the Srivikorn family, once gave. And it is this idea combined with the fact that Sometimes it is difficult to separate assets within a company. Therefore, it became necessary for the family to find a way to invest the cartel's money to produce results. In order not to waste the opportunity

4. Public Charity - Many families share some of their money from the syndicate to donate as public charity. It is considered a joint merit-making activity among the family, such as the Por Teck Tung Foundation, which Chao Sua Uthen Techapaiboon, the ancestor of the Techapaibun family. Together with a Chinese businessman friend, it was established more than a hundred years ago. or foundations in the names of various families, hospitals, schools, meditation centers, etc. that were established to benefit society in various ways, etc.

How to manage a company: 10 steps to managing a company sustainably

Cartel management was something the family needed to discuss. Prepare well And keep things organized, especially as the head of the family. or the holder of the cartel's property is still fully conscious Siblings still love each other well and can talk to each other because we never know. If something happens to one of the members or if there is a conflict between them What will be the situation? But for sure, managing the cartel will become increasingly difficult.

In this matter I divided the arrangement into 10 steps so that interested families can apply it. or use it as a topic for discussion between each other as follows

Organize clearly

The first three steps will be to clearly organize the assets in the cartel. It starts with accounting for family assets. (which is considered central) making a letter confirming property ownership on behalf of the family Including the establishment of a holding company to represent the holding of various assets of the company.

1. Prepare an inventory of the company's assets such as land and buildings. What real estate, etc., is owned by the syndicate? Where? In whose name is it held? Who is taking advantage? etc. Preparing an asset inventory allows the family to know what is What is "private property" and "common property"? It creates clarity, reduces doubts (that sometimes members don't dare ask or talk about), and is considered a foundation of mutual trust between family members.

2. Make a letter confirming property ownership on behalf of the family. If any member is allowed to hold property on behalf of the cartel The family may consider having “Letter confirming property ownership for the benefit of family members” for clarity Reduce the chance of arguments and misunderstandings later. What must be stated in this matter is Making a book of holding property instead It's not distrust. But people are good at forgetting. Therefore, it is recommended to put it in writing to prevent forgetting and to make everyone comfortable.

3. Establish a holding company This must be considered a family choice. You can do it or not. Many families choose to use a holding company as a tool to consolidate their cartel's assets into one place, whereby the holding company owns the land. and various assets of the association, and then have the members be shareholders of that holding company again This method will make the cartels come together into one unit. Buying or selling assets of the company can be done through a holding company. There is no need for a person to carry out the hassle later.

Make rules that can actually be used

The next three steps are Setting rules for using the cartel's money Because the cartel is owned by the central government. The use of cartel money is therefore a matter that must be discussed well. Otherwise, there may be conflicts. It will start by setting policies and rules for using the cartel's money together. Then calculate the income-expenses of the company to see if it is enough or not. Can it really be done? And the last point is to designate a "consortium manager" to take care of the income-expenses of the consortium to be as agreed upon.

4. Establish policies and rules for using shared funds. For example, how will the family use the communal funds? If there will be welfare benefits, what are the criteria? Who is eligible? How much will they receive? If the communal funds will be used for joint investments, what are the investment criteria? What is the budget limit? What are the shareholding percentages in each investment? What are the loan limits? What about guarantees? Or, if there will be joint activities such as trips abroad or parties, what is the budget? Who can participate? These rules are usually established during the drafting of the family constitution. Once these policies and rules are established, the family can roughly estimate their annual expenses.

5. Calculate the family business's income and expenses. Income includes revenue from land and real estate rentals, property sales, dividends from businesses in which the family has investments, interest on deposits, etc. Expenses include family welfare expenses, joint investment expenses, or any other expenses agreed upon by the family. Calculating the family business's income and expenses will determine whether the family has sufficient income to meet the members' desired policies (in point 4).

6. Appoint a "Family Fund Manager" responsible for disbursing funds from the family fund, ensuring compliance with the rules and regulations agreed upon by the members. Some families may establish a Family Office to assist the Fund Manager, significantly reducing their workload. A Family Office is suitable for large families with frequent disbursements. The "Family Fund Manager" may be selected from among family members or from an outsider trusted by the family to manage the common fund; there are no fixed requirements.

Manage it sustainably

The last part is to ensure the sustainability of the company. The family needs to deal with four things, starting with controlling the use of more company money than the company can earn. Establishing emergency credit limits to inject into the family business in case of crisis. Including the preparation of contracts between shareholders. and wills related to shares of holding companies. and shares of the family business

7. Maintain a balance between the income and expenses of the company. Otherwise, the company's money may deplete and eventually disappear.

8. Set emergency credit limits for your business. Families should prepare cash. or assets that can be quickly converted into cash (such as bonds or highly liquid financial assets) to be able to be injected into the family business in the event of an emergency line of credit. It should be discussed first at a time when there are no problems yet. Because when a crisis occurs So that the emergency money can be used immediately.

9. Prepare a contract between shareholders of the holding company. Then add it as part of the holding company's regulations. This will make the agreement between shareholders generally known. The contract between shareholders will contain important agreements related to the purchase, sale, and transfer of shares, such as prohibiting the sale of shares to people outside the family. or if the shares are sold to other families Must be offered for sale to people of the same lineage first (Right of first refusal)

Or in the case where shareholders are unable to pass a resolution at the meeting (Dead Lock), there may be regulations or measures for shareholders to follow in order to be able to continue managing the holding company, etc. In addition, in the case where the company Holding has preferred shares. The shareholder agreement and the holding company's regulations must also specify information on the proportion of voting rights or rights to receive dividends of preferred shareholders.

10. Manage wills related to stocks, such as shares of a holding company. or shares of a family business, etc. In this section, each family member who is a shareholder must proceed as agreed upon. (A will may be tied to a contract between shareholders) with the goal of ensuring that the shares remain in the hands of family members, such as having family members who own shares write a will giving the shares to their bloodline heirs. or relatives in the family, etc., except that the family has discussed that they are not serious about allowing outsiders to hold shares in the family business.

Do not give “Kongsi” which is a gift from your parents and ancestors. become a cause of hatred and suffering that will be with us forever. Finally, I would like to leave some thoughts from Mr. Boonkiat Chokwatana, the youngest child of Dr. Thiam Chokwatana, founder of Sahapat Group, said, “With family, it is important not to be afraid of disadvantages. Because in reality A disadvantage is better than an advantage.”

(Thank you Mr. Prachat Kuppittayanan Legal advisor, Baker & McKenzie Company Limited, for advice on related legal matters to make this article more accurate)

refer

“A truly rich man is one whose children run into his arms when his hands are empty.” – Unknown via THEDAILYQUOUTES.COM