1. Designing your family business ownership
Silvan Mifsud, Chairperson Family Business Committee
THE MALTA CHAMBER
OF COMMERCE, ENTERPRISE
AND INDUSTRY

2. Whatformat?
Under the broader heading of family business is a range of
businesses that operate in fundamentally different ways. Although
hybrids do exist, most family businesses can be described as one of
four basic types of ownership models:-
Putting yourhomeinorder- Helpingfamilybusinessesreachnewheights:
• Sole Owner: A single family member in each generation holds all the
ownership.
• Partnership: Only those actively participating in the business can be
owners.
• Distributed: Any descendant is eligible to be an owner.
• Concentrated: Any descendant can be an owner, but a subset has
ownership control.

3. Why is it important?
The type of ownership may seem like a formality that was
determined in some document a long time ago. However designing
the type of family ownership is not only one of your core rights, it
also has implications on the long-term health of both the business
and the family. So it is very important that as a family business
owner you understand:
• The main design choices for your family business
• The long-term implications of each type of family ownership
• Whether the type of ownership you have still works for your
family or if you need to consider a change
Putting your home in order - Helping family businesses reach new heights:

4. Whattype of ownership do you want?
When deciding what type of ownership you want for your family
business it is best to base it on the replies to the following 3 core
questions:-
1. Do you want all your business value, past earnings and assets
integrated together or separated?
2. Who can be an owner? All Family members or only family
members who operate and work in the business or who
contribute in the decision making in the business?
3. Which owners will have control? A shared ownership control or
consolidated in the hands of a subset of the owners
Putting your home in order - Helping family businesses reach new heights: The Need to Survive – Setting the scene

5. Integrateor Separate?
Putting your home in order - Helping family businesses reach new heights: The Need to Survive – Setting the scene

6. Inclusive or Exclusive Ownership?
Putting your home in order - Helping family businesses reach new heights: The Need to Survive – Setting the scene

7. Shared or Single/Restricted Control?
Putting your home in order - Helping family businesses reach new heights: The Need to Survive – Setting the scene

8. Putting things together…..
Putting your home in order - Helping family businesses reach new heights:
Putting the 3 core question together
in the two-by-two matrix derives
the four most common types of
family ownership.
The y-axis points to whether family
members have to meet some
participation criteria, like working in
the business, to be an owner
(exclusive) or whether any
descendant can be an owner
(inclusive). The x-axis differentiates
family businesses by whether
control is placed in the hands of
subset of the owners (unified) or is

9. Familybusinesses are likely to transition…..
Putting your home in order - Helping family businesses reach new heights:
• Most family businesses start out in the lower left-
hand box (Sole Owner). Ownership is exclusive to
the founder, who retains full voting control over the
business. Some family businesses stay in this mode,
limiting ownership to only one person in each
generation.
• Some family businesses move from having a Sole
Owner to a Partnership model. They retain the
connection between ownership and active
participation but allow for more than one person to
be an owner.
• Other family businesses move to a more shared
and inclusive model of ownership after the
founding generation. Since both ownership and
control are widely shared – there is the so-called
distributed form of ownership. Distributed
ownership has no participation requirements, and
shares are passed down through the family lines.
• Some family businesses exit the Sole Owner mode
and move to concentrated model, where they the
adopt an inclusive definition of ownership, usually
all descendants of the founder, but then the unified

10. Particular circumstances to consider changing…..
Putting your home in order - Helping family businesses reach new heights:
The needs and interests of both the family and the business change over time. For example,
owners can increase in number or diverge in their capabilities. Sometimes, owners need outside
capital as the business grows. You should consider reviewing and potentially changing your
ownership design under these circumstances:
• The next generation is coming into the business.
• The size and complexity of the business changes significantly.
• You are facing capital constraints from the need to buy out owners of the business.
• You are stuck in a conflict where the root cause relates to what you own, who can be an owner, or
who has control.
• You’re making the transition from family leadership to nonfamily leadership of the business.

11. Understandingthe implications of each
ownership type….Sole Owner
Putting your home in order - Helping family businesses reach new heights:

12. Understandingthe implications of each
ownership type….Partnership
Putting your home in order - Helping family businesses reach new heights:

13. Understandingthe implications of each
ownership type….Distributed
Putting your home in order - Helping family businesses reach new heights:

14. Understandingthe implications of each
ownership type….Concentrated
Putting your home in order - Helping family businesses reach new heights: