The Chinese saying 富不过三代, “wealth does not survive three generations”, is quoted so often because families see it happen. The first generation builds. The second keeps. The third, with no shared rules and many more members, divides and argues. The families who break the pattern usually have one thing in common: they agreed how decisions would be made while the founder was still there to lead the conversation.
What a family constitution covers
- Values and purpose. Why the family holds its wealth together, and what it is for.
- Governance. A family council, how members are chosen, how decisions are made, and how the founder’s role passes on.
- The business. Who may work in it and on what terms, how family employees are paid, and the role of independent directors.
- Ownership. Who may hold shares or trust interests, whether in-laws can, and how members can exit and at what price.
- Distributions and support. Dividend policy, help with education or housing, and loans to family members.
- Disputes. An agreed process of family meeting, then mediation, then arbitration, before anyone goes to court.
Is it legally binding?
A family constitution is usually a statement of shared intentions, not an enforceable contract. Its force comes from being agreed. The key parts are made binding through the documents that do have legal effect: the company constitution and shareholders’ agreement, the trust deeds and the wills. A good constitution is drafted together with those documents so they all point the same way.
How it is made
The process matters as much as the document. Meetings, often facilitated by a neutral, give each generation a voice. That includes in-laws and the overseas members of the family, in their own language. Families that have been through this process find it much easier to deal with death, divorce and disagreement when they come.
Where we fit
Justin Chua is an Accredited Family Business Advisor, a nationally accredited mediator and a second-generation lawyer in his own family’s firm. We facilitate family meetings, draft constitutions, and align the wills, trusts and company documents behind them, for families in Australia and across Asia.
Frequently asked questions
What is a family constitution?
A family constitution is a written agreement among family members about how the family will make decisions about its business and wealth. It usually covers the family’s values and purpose, governance such as a family council, who may work in the business, who may own shares or trust interests, distributions and support, and an agreed process for resolving disputes.
Is a family constitution legally binding in Australia?
Usually not on its own. A family constitution is generally a statement of shared intentions rather than an enforceable contract, and its force comes from being agreed. Its key parts are made binding through documents that do have legal effect, such as the company constitution, shareholders’ agreement, trust deeds and wills, which should be drafted so they all point the same way.
What does “wealth does not survive three generations” mean?
The Chinese saying 富不过三代 describes a common pattern: the first generation builds the wealth, the second keeps it, and the third, with no shared rules and many more members, divides and argues. Families that break the pattern usually agree how decisions will be made while the founder is still there to lead the conversation.
How are disputes resolved under a family constitution?
Many family constitutions set out an agreed process: first a family meeting, then mediation, then arbitration, before anyone goes to court. Agreeing that process in advance, while relationships are good, and giving every generation a voice in making it, makes it much easier for the family to deal with death, divorce and disagreement when they come.
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.
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