Mumbai: A growing number of wealthy Indian families, often nudged by younger members, are adopting a “family constitution”, a document that lays out the principles governing wealth creation, philanthropy, succession planning, and the family’s larger sense of purpose. Part legal blueprint, part moral compass, these charters attempt to codify not just money matters, but also the family’s value system. Reflecting a changing social landscape, many charters now grapple with questions older business dynasties would once have avoided: What happens if a gay family member marries abroad? Should a daughter who chooses ceramics or music over the family enterprise lose financial rights? How does one accommodate family members who reject traditional expectations?

Youngsters driving charter adoption

“A family constitution is a guiding charter that seeks to establish a framework for the family, rooted in its ethos and values, rather than functioning as a conventional legal binding document,” says Jahnavi Kohli, partner at ANB Legal, heading the private client practice, who has recently observed an enormous rise in families approaching her to draft such documents. “What is most evident today is that everyone wants an equal seat at the table,” she notes. The real significance of these charters lies in how they signal a move away from the era of the powerful patriarch, whose toxic grip over family wealth often bred resentment and eventual fracture. Lack of clarity combined with simmering egos have sparked countless Mahabharatas within Indian business families. Yet, there could be covert forms of control. For instance, many constitutions, especially among ultra-wealthy multi-generational families, call for an annual ‘retreat’ at which all family members must be present – much like the ones that unfold in the twisted comedy shows like ‘Succession’ or ‘The Perfect Couple’. Defined as a ‘family retreat’, that Maldives vacation with Dadaji and Dadiji then gets written off as a business expense. Each branch of the family can also go on separate holidays, but the constitution allocates the maximum amount that can be spent by each person, or requires fuel reimbursement if the helicopter or jet has been used beyond a defined number of trips. “Philanthropy forms a very important part of this charter,” says Nitaa Shivdasani, managing director and head of HERitage Waterfield Advisors. “One client said he wanted to work on protecting marine life, so our philanthropy team strategically found projects which work in that area. Many families want to contribute to medical research, especially towards cancer,” she adds. Clauses in different documents lay out the minutiae of what can or cannot be done. For example, one says: Charity shall not be done for publicity. Or, there might be specifics about what kinds of charities are permissible. Another charter warns against mixing business with friendship, stating: The family recognizes that entering into business dealings with friends and relatives can cause strain on relationships and will refrain from such transactions, or do so only with the prior approval of the Family Business Board. “Today, people are OK with openly talking about money and how to navigate distribution within one’s lifetime rather than waiting for the elders to pass on,” says Zeherra Mecklai, a wealth managerin this area. “The ideas are coming from the bottom up, not top down. Youth want to take charge. We have US-return youngsters coming to us saying, please help us set up a family charter for our family office.” The fast-growing family office is essentially an entity that manages wealth of affluent families – looking at investments and intergenerational transfer and distribution within the lifetime, including ring-fencing assets within private trusts, a common practice to protect assets in the event of, say, a divorce. Family offices in India have grown significantly in 5-6 years, reflecting both new wealth creation and the aspiration for family branding. Covid forced many to confront mortality and plan succession. The family office, an old practice among old-wealth in Europe and US, has since become a status symbol. “When someone says, ‘I manage our family office’ it is a euphemism for ‘I have serious money’,” says a wealth manager. The family office often comes into effect when there has been a “liquidity event”, the term used to describe the sale of a business or property that generates a lot of cash. Investment experts suggest a minimum combined asset base of Rs 100 crore makes it worthwhile to create a family office. And with the family office comes the constitution. “I actually find addressing the non-financial aspects more difficult,” says Delhi businessman Sanjay Goyal, who is in the process of working on his family charter.