Every bank and fund manager runs on a simple control: the person who proposes a transaction is not the person who approves it. Maker and checker. Many family offices, built around one founder, do not. The founder decides, signs and checks his own decisions. That works while he is well. When he becomes unwell, dies or loses capacity, the family office often discovers it has no governance at all.
Family governance is part of corporate governance
The disciplines that keep a listed company honest apply to a family office, scaled to its size:
- Segregation of duties. Different people propose, approve, execute and record investment decisions.
- Delegations of authority. Written limits on who can commit how much, to what, without referral.
- An investment committee with a written investment policy, which may include independent members.
- Trustees and mandates. Where wealth sits in trusts, the trustee holds the deed and appoints investment managers under clear mandates, with regular reporting.
- Conflicts and related parties. A register of family members’ interests, and rules for transactions between the family office and family members.
- Succession of key roles. Who replaces the founder as decision-maker, the CFO, the trustee directors and the appointors, and how.
Building in-house
Many families reach the point where it makes sense for the family office’s CFO to hire investment staff directly instead of paying a bank to do everything. In-house teams bring cost savings and control. They also bring employment, licensing, conflicts and governance questions that an external bank used to absorb. These need to be designed, not inherited.
What goes wrong without it
- Family members take money from the family office without approval, and nobody has authority to stop them.
- The founder’s capacity declines, but transactions he approves keep going through.
- On death, nobody can operate the accounts, and the family argues about who should.
- A child employed in the family office is accused of self-dealing, and there is no process to investigate.
Where we fit
We draft and review the legal side of family office governance: trust deeds, company constitutions, delegations, investment committee charters, family constitutions and succession of control. We work alongside your CFO, auditors and investment advisers. When disagreements arise, Justin Chua mediates between family members before they become disputes.
Chua Tan Associates advises families, executors, trustees and their professional advisers on estate planning, estate administration and estate disputes, in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal advice. Victorian law unless stated otherwise.
Tell us about the estate
A short message is enough. We reply in English, Mandarin or Cantonese, and quote fees in writing before any work starts.
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