Family Governance and Corporate Governance in Family Businesses: Global Practice and Serbian Perspective
When a family and a business share the same decision-making area, the boundaries between emotions and business processes often become unclear. In legal practice in Belgrade, I encounter family companies daily that struggle with issues of succession, control, and communication. That is precisely why I want to bring the significance of Family Governance – a management system that enables family businesses to prosper through generations.
Why is ‘Family Governance’ key?
Global studies show that more than 70% of family businesses do not survive the transition to the next generation, while as many as 95% disappear before the third generation. The reason is not a lack of business talent – but rather the absence of clear rules of the game. Family Governance represents a bridge between family values and business efficiency.
In practice, this means establishing structures such as the family constitution (Family Constitution), family council (Family Council), and family assembly (Family Assembly). These mechanisms do not serve to create bureaucracy – they protect the family from conflict and the business from inefficiency.
Global trends 2025.
Global practice shows several key trends, which we will consider in the following.
Family constitution as a foundation: This document defines values, vision, employment rules, dividend policy, and the process of resolving conflicts. It is not legally binding, but it creates a common frame of reference that prevents misunderstandings.
Early succession planning: Companies that succeed begin preparing successors decades in advance, through formal leadership development programs.
Professionalization of management: Leading family businesses introduce independent members to boards of directors, separate business decisions from family dynamics, and set clear criteria for hiring family members.
Transparency and communication: Regular family councils and assemblies ensure that all members – both those active in the business and those who are not – have access to information and can express their views.
How this works in the world you can see on our new blog: Do you know who the Henokels are? | Naumović & Partners.
Legal Framework in Serbia
In Serbia, family companies represent a significant part of the economy, but there is no specific law that regulates family businesses exclusively. Instead, general provisions of the Law on Business Organizations and the Corporate Governance Code apply, which establish principles of transparency and accountability.
The Law on Business Organizations regulates the establishment, management, bodies, and legal changes of all business entities, including limited liability companies (LLC) and joint-stock companies, which are the most common legal forms of family businesses. It is important to note that this law does not recognize the specificities of family companies – such as emotional ties, multi-generational cycles, or the need for formal family governance.
For lawyers and founders, this means that the responsibility lies with them to, with the help of experts, design internal acts – such as company statutes, operating procedures, and, particularly important, family statutes and shareholder agreements – that will regulate matters not defined by law.
Practical Recommendations
Based on international best practices and local experience, I recommend that family businesses in Serbia consider the following steps.
Adopt a family constitution: Defines who can work in the business, under what conditions, how profit is distributed, and how disputes are resolved.
Form family councils: Provide a space for open communication and making joint decisions, independent of daily operational matters.
Introduce independent advisory boards: A professional view from outside is often the most important factor in balancing family relationships and business priorities.
Plan succession early: Do not wait for retirement or a health crisis – identify potential successors, train them, and clearly define the criteria for the transfer of power.
Family businesses are the heart of our economy. But success is not measured only by profit – it is also measured by the ability to transfer the business to the next generation with preserved relationships and a clear vision. Family governance is not a luxury – it is a prerequisite for survival.
If you are interested in more information on this topic, you can view another of our blogs at: https://www.naumovic-partners.com/kako-napraviti-porodicnu-kompaniju/.
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