Family council

The idea of a family council is not new.

The Philippine Civil Code in June 1949 called for the establishment of a family council when needed.

Title VII, Chapter 3, Articles 242 to 244 of the Code read:  “the Court of First Instance may, upon application of any member of the family, a relative, or a friend, appoint a family council, whose duty it shall be to advise the court, the spouses, the parents, guardians and the family on important family questions.

“The family council shall be composed of five members, who shall be relatives of the parties concerned, but the court may appoint one or two friends of the family. The family council shall elect its chairman, and shall meet at the call of the latter or upon order of the court.”

The language might be vague (what constitutes important family questions?), archaic (“chairman” has loaded gender connotations), and arbitrary (why five members?).

But the good intentions of the lawmakers are obvious. Family is a long-cherished concept. Community elders realized that when deciding on family matters, they often needed the counsel of respected family members, who would likely know more about the issues at hand.

“The importance of the family council reached its apex in the case of Mirasol v Lim,” says lawyer Jim V. Lopez in his book “Family Business Law Declassified”: “When the Philippine Supreme Court ruled that when the consent of the family council is not given or when the family council does not participate in the making of the marriage settlement (or a prenup), the same is void.”

However, family councils had mixed success.  Members could not agree with one another or play favorites, at times worsening the situation.

In 1988, the Family Code abolished the family council.

The late Justice Jose Benedicto Luna Reyes, Family Code Commission head, said: “In the case of the family council supposed to be composed of relatives of husband and wife, it was found out that the family council, instead of solving problems, created new ones, because in view of family, affection and loyalty that prevail in our country, the family council usually split into factions so that no solutions could be obtained. So the Committee opted for solutions through the courts.”

Most families, then as now, tend to view family matters as private ones, resorting to the courts only in extreme cases, such as that of a recently deceased tycoon whose estate settlement is currently being avidly followed by the public.

Though no longer a legal entity, the family council provides innumerable benefits to family businesses. Councils delineate the family mission-vision, create a training-mentorship scheme for the next generation, monitor business dealings that impact the family and mediate in family  conflicts.

Family councils execute programs to increase family bonding both in and out of the business; decide on potential conflicts of interest regarding in-laws, adopted children, illegitimate children; oversee a family fund separate from that of the business which can be used for emergencies, charitable causes, or even as seed money for family members’ entrepreneurial undertakings.

Most importantly, family councils provide a safe environment for all family members to air their concerns and ideas. If warranted, family councils also take the lead in crafting a family constitution, and see to it that its provisions are followed afterward.

A family council is distinct from a board of directors of the family business. Bound by law to serve and advise management on business matters to the best of its ability, the board of directors is usually composed not just of family members but independent advisers chosen for their expertise.

Big-scale family businesses usually have several board of directors (one for each company), but only one family council for the conglomerate, to discuss family matters and business issues that concern the family.