In Mumbai, a growing number of affluent Indian families are increasingly adopting “family constitutions.” This document serves to outline principles governing wealth creation, philanthropy, succession planning, and a broader familial purpose. Part legal framework and part moral guide, these charters aim to codify not only financial matters but also the family’s value system.
Jahnavi Kohli, a partner at ANB Legal who leads the private client practice, notes that there has been a significant rise in families seeking assistance in drafting such documents. “A family constitution is a guiding charter rooted in the family’s ethos and values, rather than merely a conventional legal document. Today, everyone desires an equal seat at the table,” she states.
These charters symbolize a substantial shift away from the era of patriarchal dominance, which often led to resentment and division within families due to ambiguities related to wealth. Ongoing disputes, fueled by ego clashes, have historically led to unresolved conflicts, likened to the Mahabharata within Indian business families.
However, some constitutions may harbor concealed forms of control. For example, many multi-generational wealthy families stipulate annual ‘retreats’ requiring all family members’ attendance, akin to scenarios depicted in shows like “Succession.” Such family retreats frequently serve functionally as business expenses, allowing for separate family vacations with specified budget limitations and reimbursement protocols if private air travel exceeds defined allowances.
Philanthropy is a significant component of these charters. Nitaa Shivdasani, managing director at HERitage Waterfield Advisors, emphasizes, “One client expressed a desire to support marine life protection. Our philanthropy team identified relevant projects in that field. Many families wish to focus on medical research, notably cancer.” Various charters explicitly detail acceptable charity practices, including clauses stating that charitable action should not be undertaken for publicity purposes.
Furthermore, one charter explicitly states that blending business with personal relationships could strain familial bonds and recommends seeking prior approval from a Family Business Board for such transactions. Wealth manager Zeherra Mecklai observes, “Today, people are open to discussing money and navigating wealth distribution during their lifetime rather than waiting for elders to pass on. The drive for change is coming from the youth; US-returned young adults often approach us to help establish a family charter for their family offices.”
Family offices, entities managing the wealth of affluent families, have gained significant traction in India over the past five to six years, reflecting both the emergence of new wealth and aspirations for family branding. The Covid-19 pandemic prompted many families to confront issues of mortality and succession planning. What was once an established practice among wealthy families in Europe and the US has become a symbol of status in India. “When someone claims they manage our family office, it suggests they possess considerable wealth,” a wealth manager remarked.
A family office typically comes into play following a “liquidity event,” which refers to selling a business or property that generates substantial cash flow. Investment experts suggest that a minimum combined asset base of Rs 100 crore justifies the creation of a family office. Accompanying this trend is the corresponding adoption of family constitutions.
Sanjay Goyal, a businessman from Delhi currently developing his family charter, expresses, “I find addressing the non-financial aspects to be more challenging.”
