Family Protocol for the family business: What It Is, what to Include and mistakes to avoid

Family Protocol:

A family protocol only protects the business if its key agreements (transfer of shares, valuation, liquidity, governance and consequences for breach) are carried into the articles of association, the shareholders' agreement, the marital agreements and the wills. If it remains a statement of intent, the family has a document, but not a solution.

In brief:

• Legally, the family protocol is a shareholders' side agreement: it binds those who sign it, but it is not enforceable against the company unless it is incorporated into the articles of association or reinforced by other means.
• What separates a good protocol from a decorative one is five chapters: transfer rules, an agreed valuation formula, a liquidity mechanism, governance with independent directors and a clear cost for whoever breaches it.
• For a buyer, a bank or an investor, a well-executed protocol reduces perceived risk; its absence, or a protocol that contradicts the articles, shows up as a red flag in due diligence.

Introduction: a continuity problem, not a paperwork problem

The family business is the backbone of the Spanish economy: according to the Instituto de la Empresa Familiar (IEF), it accounts for 92.4% of companies, 70.6% of private employment and 57.8% of private gross value added. The problem lies in the handover. The report La Empresa Familiar en España 2025, by the IEF, estimates that only one in three family businesses has survived at least one generational transition, and one in ten has reached the third generation. The international reference points the same way: according to the Family Business Institute, cited in Harvard Business Review (April 2015), 30% reach the second generation, 12% the third and 3% the fourth.

And yet, the tool that best organises that handover remains a minority practice. In the Sigma Dos survey for the IEF (2023, 2,390 companies), only 16.6% reported having a family protocol; among IEF members and their regional associations, 54.9%. The study La profesionalización de la empresa familiar (UPF-BSM, March 2026) puts the figure at 36% in its sample, and only 35% have a Family Council in place.

At Maraz we see it from the transaction side. When a family wants to sell, bring in a financial partner or buy out a branch that wants to leave, the protocol —or its absence— weighs on price, on timing and on whether the deal closes at all. That is why this article is the central piece of our series on business strategy for the family business: the protocol is the document where succession, governance and ownership meet.

What a family protocol is

The only statutory definition is in Royal Decree 171/2007 of 9 February, which regulates the publicity of family protocols: "a set of agreements entered into by the shareholders among themselves or with third parties with whom they have family ties, affecting a non-listed company in which they share a common interest, in order to achieve a model of communication and consensus in decision-making to regulate the relationships between family, ownership and business".

The Royal Decree itself clarifies that its content "shall be shaped by contractual autonomy, as a shareholders' side agreement". In other words: the protocol is a contract between its signatories, grounded in Article 1255 of the Spanish Civil Code. And here Article 29 of the Spanish Companies Act (Ley de Sociedades de Capital, LSC) comes in: "Agreements kept private among the shareholders shall not be enforceable against the company".

In practice, a complete protocol is not one document but a system of four layers that must say the same thing:

• The protocol (shareholders' side agreement): the master document, signed by shareholders and non-shareholder family members. Enforceable between signatories.
• The articles of association: whatever must bind the company and third parties.
• Marital agreements and wills: so that divorces and inheritances do not undo what was agreed.
• Succession agreements (pactos sucesorios), only where regional civil law allows them: Catalonia, Aragon, Navarre, Galicia, the Basque Country and the Balearic Islands. In Civil Code territory —Alicante included— Article 1271 of the Civil Code prohibits contracts over a future inheritance, so the protocol cannot settle succession: the will does, with the help of Article 1056, which allows the testator to keep control of the business in one or more heirs "by providing that the forced heirship share of the other interested parties be paid in cash".

Protocol and articles of association are not the same thing: what goes where

The most expensive misconception in the family business is believing that signing the protocol is enough.

• The articles of association are the company's rulebook: they are registered at the Commercial Registry, they bind all present and future shareholders, and the registrar and the courts apply them without asking.
• The protocol is a contract between those who sign it: it binds those people, not the company, and whoever did not sign it (an heir, a former spouse, a buyer of shares) is not bound by it.
• The shareholders' agreement sits in between: the corporate matters that cannot be registered or that the family prefers not to make public.

Hence the design rule: everything that must withstand a shareholder who refuses to comply goes into the articles; everything that is culture, criteria and family commitments stays in the protocol.

The practical consequence is a transposition list: each clause of the protocol carries next to it its legal destination, who must approve it (family, general meeting, each grantor) and a date for execution. Without that list, the protocol ends up being what the Court of First Instance called it in the case the Supreme Court decided in 2020: "a commitment of a moral, not legal, nature".

Publicity and effectiveness: the routes under Royal Decree 171/2007

Publicity is always voluntary, it is decided by the board and each company may publish only one protocol. The Royal Decree provides four routes, from least to most effective:

1. Publication on the corporate website recorded on the company's registry sheet (Art. 4). This is not registry publicity.
2. Record of its existence on the company's registry sheet (Art. 5), with notary, date and protocol number. The registrar does not review the content.
3. Deposit of the protocol, in whole or in part, as a public document together with the annual accounts (Art. 6).
4. Registration of corporate resolutions adopted in execution of the protocol (Art. 7), with express mention. It is, according to the preamble, "the only one that produces an effect of substantive publicity and not mere notice".

The first three are notice publicity: anyone can know the protocol exists, but its content remains unenforceable. Only the fourth changes the nature of what was agreed. And publishing is not always advisable: a deposited protocol exposes valuation formulas, family rules and personal data. The decision is taken clause by clause.

Which part is moral and which part is enforceable

Statements of mission, values or standards of conduct are, in essence, moral. Rules on share transfers, valuation, dividends or voting are enforceable between signatories if they are drafted precisely and carry a consequence. There is an additional reinforcement: when the agreement is signed by all shareholders (an omnilateral agreement), Supreme Court doctrine on good faith and estoppel makes it harder for a signatory to challenge corporate resolutions that implement what he himself agreed. One more reason for everyone to sign, including the next generation as soon as they receive shares.

What functions it serves

The protocol exists to separate three systems that overlap in the family business. The three-circle model, formulated by Renato Tagiuri and John Davis in 1982, describes them as follows: the family is governed by affection and equality among children; ownership, by return on capital and legal certainty; the business, by merit and results.

The overlap produces seven distinct positions, and looking at just two explains where conflicts come from: the family owner who does not work in the business (wants dividends and transparency) and the family owner-executive (wants to reinvest and not be supervised). When the circles mix, the worst decisions appear: the son who runs the business because he is the son, the dividend shared equally even though contributions are not, or the brother-in-law who blocks a general meeting. Aligning management and ownership is, at bottom, the protocol's job.

Specifically, a protocol serves to:

• Regulate relationships and information channels between family members, shareholders and managers.
• Prevent conflicts by setting rules before interests collide.
• Set rules for entering and leaving ownership.
• Organise succession in management and in ownership, which are two different successions.
• Protect the estate and continuity against divorces, deaths, attachments or branches seeking liquidity.

Advantages

• For the family: rules known before the conflict, equitable treatment of branches and a forum (the Family Council) to discuss what should not be discussed at the board.
• For the business: professionalisation, investment decisions that do not depend on the mood of the general meeting and the ability to attract non-family executives, who will not accept environments where careers depend on surname; combined with instruments such as phantom shares, it retains talent without giving up ownership.
• For third parties: Royal Decree 171/2007 acknowledges that the protocol "is regarded as an additional safeguard for third parties, investors and creditors". In an M&A process this translates into concrete things: the buyer knows who decides and whether a sale can be forced or joined (drag-along and tag-along); the valuation is not tainted by a governance-risk discount or deadlock scenarios; and legal due diligence is shorter. Conversely, a non-existent protocol, or one that contradicts the articles, appears among the red flags of due diligence, and the buyer covers it with price, warranties or an escrow.

The ideal structure of a family protocol

A well-built protocol has thirteen chapters. It is not a template: it is the logical order that runs from what unites the family (values) to what protects it when it stops being united (exits, breaches). Each chapter indicates where it must be executed to be effective.

A design recommendation: modular architecture. A stable core (values, definitions, governance, transfers) reviewed every three to five years, and annexes that change with the business (dividend policy, succession plan, valuation formula, Family Council regulations) reviewed annually. That way the whole protocol does not have to be reopened to adjust a percentage. And, besides the thirteen chapters, an annex with the transposition list: clause, destination instrument, who approves, owner and date.

Essential points a family protocol must cover

Transfer rules

• Tiered pre-emption rights: first the shareholder's own branch, then the other family shareholders and, last, the company.
• Prohibition on transfers to non-family members: beware of Article 108 LSC. In a Spanish private limited company (S.L.), clauses that make transfers practically free are void, and clauses that prohibit them are only valid if the articles grant the shareholder a right to withdraw at any time, and they require unanimity. The usual alternative is an authorisation regime with pre-emption at an agreed value.
• Drag-along and tag-along: if a qualified majority (say 75%) accepts an offer for 100%, it drags the rest; if control is sold, the minority may exit on the same terms.
• Transfers mortis causa: Article 110 LSC allows the articles to grant the surviving shareholders, and subsidiarily the company, a right to acquire the deceased's shares at fair value. It should be activated when the heir is not a direct-line family member and coordinated with the wills.
• Matrimonial property regime: recommend separation of property and, at a minimum, that the shares be private (non-community) property. Shares received by inheritance or gift are, but their fruits and shares subscribed in capital increases with community funds are not always.
• Divorces: acquisition right if shares are awarded to a former spouse.
• Attachments: if a shareholder's personal creditor enforces against his shares, Article 109 LSC allows the other shareholders and the company to step into the award. The articles must develop this (deadlines, value) so that a creditor or an auction buyer does not enter the capital.

Agreed valuation method

The formula must be objective, verifiable and applicable without litigation. The usual approach: normalised EBITDA multiple (average of the last three audited years) less net financial debt, with an illiquidity discount and deferred payment. The multiple is agreed within a range, taken from sector references or set by an independent expert appointed through a closed procedure. Our guide on how to interpret EV/EBITDA explains what the multiple actually measures.

Example:

Payment: 20% at closing (€459,000) and the balance in four annual instalments of €459,000, at a market interest rate and with security (pledge of the shares themselves or a guarantee). That way the company does not drain cash in one go and the exiting shareholder receives a certain price.

Beyond the formula, the clause must set the valuation date, who values, how extraordinary items are normalised, how net debt and non-operating assets and liabilities are treated, the tie-break mechanism and who pays the expert. Alternative valuation methods (DCF, net asset value) can serve as a cross-check, but the main formula has to fit on one page.

On discounts, rigour is required. Santiago Fuertes (Garrigues, 2018) puts the usual liquidity discount in a full divestment at between 15% and 25% of value, with payments over three to five years. But if nothing is agreed, a statutory withdrawal is governed by the "fair value" of Article 353 LSC, set by an expert appointed by the commercial registrar, and the courts are restrictive with discounts that were not agreed.

In the Electra Caldense case, the Barcelona Provincial Court rejected an 18.4% minority discount applied to a 5.66% shareholder who withdrew for lack of dividends, and the Supreme Court (Judgment 402/2026 of 12 March) declined to admit the appeal. Conclusion: discounts not unanimously agreed, and preferably in the articles, cannot be taken for granted.

Dividend and reinvestment policy

Article 348 bis LSC allows a shareholder to withdraw if, after the fifth financial year from the company's registration, the general meeting does not distribute at least 25% of the distributable profits of the previous year and he has recorded his protest in the minutes. It is the main exit route for non-active branches. The protocol must set an explicit, conditional policy, not a fixed figure: for example, a distribution of 30-40% of net profit while net financial debt is below 2.5 times EBITDA and no approved investment plan prevents it.

Our article on the optimal dividend policy develops how to calibrate it, and the one on capital allocation explains when reinvesting creates more value than distributing. Removing or modulating Article 348 bis in the articles requires the consent of all shareholders or granting a withdrawal right to anyone who does not vote in favour.

Family members joining the business

Criteria that work: qualifications suited to the position, three to five years' experience outside the family business, entry into a position with a real vacancy, appraisal by someone other than their father and market remuneration. And the golden rule: salary pays for work and dividends pay for ownership.

Succession plan

Separate succession in management (who runs the business, with what profile, with what overlap period) and in ownership (how shares are distributed, whether there is a voting syndicate). Set an age or date for the retirement of the chief executive and his subsequent role. A useful technique: the founder transfers bare ownership to the children and retains the usufruct with voting rights; the articles must expressly attribute the vote to the usufructuary, because the default legal rule gives it to the bare owner (Art. 127 LSC). The succession plan and the generational handover decision tree have their own articles in this series.

Governance and independent directors

A board of directors with one or two independent directors in the mid-sized company, separation of chair and chief executive where size allows, and a Family Council that does not encroach on the board's functions. There is a long way to go: in the 2026 UPF-BSM survey, 52% of companies have a board of directors or advisory board, but only 39% of those have a significant presence of independents. The rules of corporate governance in the family business are detailed in a separate article.

Liquidity mechanisms

• Buy-back fund endowed annually with a percentage of profits.
• Treasury shares: in a Spanish S.L., Article 140 LSC allows the company to acquire the shares of a withdrawn or expelled shareholder, shares acquired under restrictive clauses or shares transferred mortis causa, charged against profits or free reserves; they must be cancelled or sold within three years.
• Family holding company: concentrates ownership, facilitates buy-backs and voting syndication.
• Periodic liquidity windows, with an annual buy-back cap so as not to strain cash. A mandatory purchase with no funding plan is a time bomb.

Dispute resolution and deadlock

A three-step escalation: negotiation at the Family Council, professional mediation and arbitration at law. Since 3 April 2025, under Organic Law 1/2025, attempting an appropriate dispute resolution method (ADR, known in Spain as MASC) is a precondition for most civil and commercial claims, so the escalation ladder is no longer just good practice.

Corporate arbitration is incorporated into the articles under Article 11 bis of the Spanish Arbitration Act, with a two-thirds majority. And, for 50/50 companies or two branches that block each other, a last-resort clause: the Texas shoot-out (one party offers to buy the other's stake at a price; the recipient must either sell at that price or buy at the same value). It is harsh, but it avoids the worst: dissolution for deadlock of the corporate bodies (Art. 363 LSC) or shareholder litigation, where the forensic expert opinion ends up replacing the agreement that was never signed.

What happens if someone breaches: penalty clauses and the ancillary obligation

A protocol without consequences is a recommendation. If a shareholder votes at the general meeting against the agreed dividend policy, or sells to a cousin without first offering to his branch, the corporate resolution will be valid and the others can only claim damages in the civil courts (Arts. 1101 and 1124 Civil Code), slow to prove and hard to quantify. That is why the protocol needs two mechanisms, one contractual and one corporate.

Penalty clause (Arts. 1152 to 1154 Civil Code). It sets the cost of breach in advance and avoids having to prove the loss. To be useful it must be specific: a fixed amount per breach, a percentage of the value of the defaulting shareholder's shares (typically between 10% and 30%) or an obligation to sell his shares to the others at an additional discount on the agreed formula.

It should be graduated (missing a Family Council meeting is not the same as selling to a third party) and bear in mind that the courts may moderate it if the obligation was partly performed (Art. 1154 Civil Code): a disproportionate penalty gives less protection, not more.

Penalty clauses can be registered in the articles (Arts. 114.2 and 175.2 of the Commercial Registry Regulations), but only if they secure obligations of a protocol published through deposit or registration (Arts. 6 and 7 of the Royal Decree); a mere record under Art. 5 is not enough. A penalty in the articles is applied by the company; one that is only in the protocol has to be claimed by one shareholder against another.

Ancillary obligation to comply with the protocol (Art. 86 LSC). The articles impose on all shareholders the obligation to sign and comply with the family protocol executed as a notarial deed, identified by notary, date and protocol number. Wilful breach of an ancillary obligation is a statutory ground for expulsion of the shareholder in an S.L. (Art. 350 LSC); the articles may extend expulsion to non-wilful breach (Art. 89.2 LSC); and transfers of shares carrying an ancillary obligation require the company's authorisation (Art. 88 LSC).

This technique is now settled registry doctrine: the Directorate General admitted it in 2018, confirmed it for a family protocol in its Resolution of 11 October 2024 and reiterated it in the Resolution of 10 June 2026 (Official Gazette of 13 October), upholding the appeal of a Seville company against a registrar who demanded that the full agreement be transcribed into the articles. Identifying the deed is enough; it need not be copied or deposited. On one condition: the protocol must be drafted precisely enough that it can be said what has been breached.

The Directorate General itself recalls that the Supreme Court, in Judgment 120/2020, faulted the 1983 protocol for not having been incorporated "through the instrument of requiring compliance as an ancillary obligation".

The following matrix summarises, for each subject, where it must be executed and what happens if it is breached:

Common mistakes when drawing up a family protocol

• Copying a template: every family's conflicts are different, and the value of the protocol lies in the process of negotiating it.
• Having the founder do it alone: if the next generation does not take part, they will not feel it is theirs.
• Stopping at a statement of intent: without transposition into the articles and the shareholders' agreement it is not enforceable.
• Not agreeing valuation or liquidity: the most expensive conflict is an exit with no price.
• Not defining what happens on breach: without a penalty clause or ancillary obligation, breaching is free.
• Splitting the capital into identical blocks with no tie-break mechanism: two siblings at 50%, or three branches with a third each and opposing views, is a structure designed to deadlock. If equal ownership is wanted, it should come with a voting syndicate, a casting vote or a deadlock clause.
• Co-CEOs of convenience: appointing two or three children as co-CEOs so as not to offend anyone dilutes accountability and creates factions. The alternative is to move from the founder to a management committee with a clear chief executive.
• Writing the successor's name instead of the process: "the eldest will be CEO" ages badly. The protocol regulates profile, candidates (family and external), appraisal and timetable; the competent body decides when the time comes.
• Negotiating without a shared vision: if one branch wants to reinvest to grow and another wants dividends to live on, the protocol will not fix it. First the strategic plan; if there is no agreement, organise the exit of whoever does not share it.
• Over-regulating: deciding today how grandchildren who are not yet involved should behave produces rigidity. Lasting principles in the core; reviewable policies in annexes.
• Not providing for divorces, deaths or attachments, nor involving spouses.
• Not updating it: a 2010 protocol is no use to a third generation with nine cousins.
• Doing it in the middle of a crisis, when every clause is negotiated as a battle.
• Doing it only with the usual lawyer, without a financial perspective: valuation formulas, dividend policy and liquidity windows require cash-flow modelling.

Risks

Of not having one

Corporate deadlock, conflicts between branches, forced sale, loss of non-family executives, withdrawal under Article 348 bis with no cash to pay for it, a former spouse or a creditor entering the capital, and a valuation discount in front of buyers and banks. The Hermès case illustrates it at large scale: minority branches sold on the market and LVMH accumulated more than 20% of the capital without the family knowing; the response was to hurriedly pool more than 50% of the shares in a family holding. What was not in the articles gave no protection.

Of having a badly made one

Void clauses, contradiction with the articles and a false sense of protection. The Supreme Court has been saying so for years: Judgments 128/2009 and 138/2009 of 6 March and 103/2016 of 25 February upheld the validity of shareholders' side agreements, but their mere breach is not enough to annul a corporate resolution. Judgment 120/2020 of 20 February added that the protocol must be accompanied by amendments to the articles, marital agreements or wills, that its covenants cannot bind in perpetuity and that its defence is pursued "through a claim between the contracting parties", not by challenging corporate resolutions.

Two illustrative cases

The divorce that put a third party in the general meeting. An industrial company in Alicante, second generation, three siblings with a third each. One divorces under the community property regime and part of his shares, subscribed in a capital increase with joint funds, is awarded to his former spouse, who starts voting at the general meeting and demands dividends. With a well-executed protocol: separation-of-property marital agreements, a statutory acquisition right of the siblings over shares awarded to non-family members and a formula price. The former spouse would have received her value without entering the company.

The branch that wanted liquidity. A distribution company with two branches: one manages (60%), the other does not work in the business (40%). For years 100% of profits are reinvested and the managing branch draws high salaries. The passive branch records its protest at the general meeting, exercises Article 348 bis and asks the registrar for an expert. Result: two years of litigation and a payment that forces a refinancing. With a protocol: a dividend policy of 35% of profits, market remuneration for the family members who work, a liquidity window every three years with an agreed formula and deferred payment.

How a family protocol is drawn up

1. Diagnosis: corporate structure, articles, wills, matrimonial regimes, financial position and each branch's dependence on dividends.
2. Individual interviews with all relevant members, including the next generation and spouses.
3. Thematic family sessions, starting with the shared vision.
4. Draft and review rounds.
5. Legal and financial review: validity of each clause, consistency with the current articles, modelling of dividends, buy-backs and penalty clauses.
6. Signature as a notarial deed by all shareholders and the affected family members.
7. Transposition into the articles, shareholders' agreement, marital agreements and wills, using the transposition list as a control; consider registry publicity.
8. Review calendar: annual for the annexes, every three to five years for the core, and extraordinary on death, divorce, entry of a new generation, a corporate transaction or a change in the law.

In a mid-sized company the process takes between six and twelve months. And it needs an owner: not the founder, but the Family Council with a secretariat, to call reviews, keep versions, record the accession of new shareholders and check that the articles and wills remain coordinated. Signing is not the end of the project; it is the halfway point. The ideal adviser combines three profiles: corporate law, tax and finance, with experience in family mediation and in corporate transactions, because that is where what was signed is put to the test.

Conclusion: an instrument of continuity and value

At Maraz we do not see the family protocol as a defensive legal document, but as a tool for the business to survive the handover and be worth more when the time comes to decide: grow, bring in a partner or sell. A good protocol is not the longest one, but the one that translates into the articles, into a price formula everyone understands, into cash available for whoever wants to leave and into a clear cost for whoever does not comply. Doing it calmly, with the next generation at the table, is probably the most profitable governance decision a business family can make.

Does your family business need a protocol, or need to review the one it has?

At Maraz Corporate Finance we provide the part of the protocol that law firms do not usually cover: we design the valuation formula and value the business on market criteria, we model the dividend policy and the liquidity plan so that exits can actually be paid for, and we coordinate the transposition into the articles with your lawyers. And if the protocol is the prelude to a transaction —bringing in a partner, buying out a branch or preparing the sale of the company—, we support you through the whole process. Tell us about your case or call us on (+34) 965 133 120.

Javier de Rojas Roca de Togores

Partner - Maraz Corporate Finance

FAQs about the family protocol

Is a family protocol legally binding?

Yes, between those who sign it: it is a contract (a shareholders' side agreement) and its breach gives rise to contractual liability. But it does not bind the company or anyone who did not sign it, unless its rules are incorporated into the articles of association, directly or through an ancillary obligation to comply with it. That is why a protocol not carried into the articles is, in practice, a moral commitment with some financial consequences.

What is the difference between a family protocol, a shareholders' agreement and the articles of association?

The articles are the company's rulebook, registered at the Commercial Registry and enforceable against everyone. The shareholders' agreement is a private contract between shareholders on corporate matters (transfers, voting, exits). The family protocol is broader: it includes the corporate matters, but also values, family bodies, family members joining the business and succession, and it is also signed by family members who are not shareholders. Usually the three coexist and say the same thing.

Does the family protocol have to be registered at the Commercial Registry?

No. Publicity is voluntary (Royal Decree 171/2007) and comes in four degrees: corporate website, record of its existence, deposit with the annual accounts and registration of the resolutions that implement it. Only the last one gives effect against third parties. Many families choose not to publish the protocol and to carry into the articles only the clauses that need to be enforceable.

Who should sign the family protocol?

All family shareholders and, in the matters that affect them, spouses and the adult next generation even if they do not yet hold shares. Having all shareholders sign (an omnilateral agreement) strengthens its effectiveness, and the protocol should provide for mandatory accession by anyone who receives shares in the future, by purchase, gift or inheritance.

What happens if a shareholder breaches the family protocol?

It depends on how it was built. If only the protocol exists, the other signatories can claim damages or the agreed penalty, but the corporate resolution or the sale will remain valid. If compliance with the protocol is an ancillary obligation in the articles, wilful breach is a ground for expulsion of the shareholder (Art. 350 LSC) and the company can cancel or acquire his shares at the agreed value. The Directorate General for Legal Certainty and Public Faith confirmed this technique in 2024 and 2026.

How does the family protocol affect the sale or valuation of the company?

Directly. A buyer or an investor checks in due diligence who decides, how shares are transferred and whether there is a risk of deadlock or litigation among shareholders. A protocol consistent with the articles reduces that risk and avoids price discounts, additional warranties or escrow retentions. Its absence, or a protocol that contradicts the articles, shows up as a red flag and is paid for in price or in timing.