There has been a sharp rise in the numbers of wealthy families drawing up 'written constitutions' to govern decision making, rather than relying on ad hoc responses, according to research by the Stonehage Group which works with ultra high net worth (UHNW) clients across Europe.

Stonehage says these codified sets of rules are now used by 20% of UHNW families and entrepreneurs, compared to just a handful in the years before the financial crisis. Their aim is to provide a framework outlining agreements on asset allocations or the direction of the family business, in order to head off disputes over risk management strategy.

Stonehage says that one of the most common dilemmas for UHNW families is when the family business looks to fund itself from other family investments, which were expressly set aside to diversify the risks and to provide for family members not involved in the business.

Andrew Nolan, managing director and head of Stonehage's family office division, said: 'The recession has put pressure on some family businesses, with many experiencing cashflow difficulties. A well drafted constitution is of immense value in such circumstances, because it defines the purpose of each of the main family assets and the decision making processes involved, before one asset can be used to help support another. It is particularly important to protect the interests of family members who are not directly involved in the business, whose voices may not otherwise be heard in the middle of the storm.'

Stonehage says the constitution is also important to the management of the succession when a written framework can be vital to resolving leadership and strategic disagreements quickly and amicably.