Publication Date · 01.05.2026

The Binding Nature of the Family Constitution: An Assessment Within the Framework of Turkish Law

Although family businesses constitute a significant part of the Turkish economy, they face serious sustainability challenges during intergenerational transitions, mainly due to intra- family disputes and a lack of institutionalization. The family constitution has emerged as an increasingly common instrument for preventing such problems. It is a written document that sets out the company’s governance principles, regulates relations among family members, and aims to ensure long-term sustainability. As it is not expressly regulated under Turkish law, the family constitution is regarded as an atypical contract, and its binding force is limited to the parties and to mandatory rules of law. To enhance its effectiveness, it should be supported by legal tools such as the articles of association, shareholders’ agreements, privileged shares, penalty clauses, and alternative dispute resolution methods.
Att. Deniz Daşdan
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THE BINDING EFFECT OF A FAMILY CONSTITUTION: AN ASSESSMENT UNDER TURKISH LAW

A. INTRODUCTION

Family businesses constitute one of the fundamental building blocks of the economic system, both globally and in Türkiye. It is widely recognized that approximately 90-95% of enterprises in Türkiye are family businesses and that these businesses have a significant impact on employment and national income. However, the sustainability of family businesses remains a major challenge. Research shows that only approximately 30% of these businesses reach the second generation, while only 10-12% reach the third generation.

The main reasons for these low sustainability rates include intra-family disputes, lack of institutionalization, uncertainties in management mechanisms, and inheritance-related conflicts. Relying solely on the legacy of the past and family values is no longer sufficient to carry family businesses into the future; a new strategic approach is needed1. One of the tools developed as a solution in this respect is the “family constitution,” which has become increasingly common in practice in recent years.

Particularly in family businesses that are growing and entering a process of intergenerational transition, the absence of written rules may lead to serious management crises. In this context, the family constitution gains importance not only as a means of resolving existing problems but also as a mechanism for preventing potential disputes.

B. WHAT IS A FAMILY CONSTITUTION?

A family constitution may be defined as a written document that sets out the management principles of a family business, regulates the relationships among family members, and aims to ensure the long-term sustainability of the business2. This document has the character of a comprehensive framework that includes not only rules concerning the management of the business, but also the family’s shared values, vision, and objectives.

In practice, the family constitution performs a function similar to the structure referred to as a “family protocol” in Anglo-Saxon legal systems. While it may acquire a contractual character if signed by the parties, in many cases it may also be prepared as a guiding document containing ethical and directive rules. In this respect, the family constitution is regarded not only as a legal instrument but also as a sociological and managerial tool. It also plays an important role in strengthening communication among family members and creating a shared corporate culture.

C. THE PURPOSE AND CONTENT OF A FAMILY CONSTITUTION

The fundamental purpose of a family constitution is to place the relationships between family members and the business within a clear, predictable, and sustainable framework. Within this scope, the family constitution aims to:

  • Regulate the relationships among family members,
  • Transfer the mission, vision, and values of the business to future generations,
  • Institutionalize management processes,
  • Determine the roles and responsibilities of family members in the management of the business,
  • Clarify the principles relating to inheritance, ownership, and share transfers.

Although the content of a family constitution varies according to the needs of each business, the following headings are frequently included in practice:

  • Mission, vision, and core values,
  • Rights and obligations of family members,
  • Management structure and decision-making processes,
  • The functioning of the family council and similar bodies,
  • Share transfer and inheritance arrangements,
  • Dispute resolution methods,
  • Succession and leadership planning.

In addition to these, some family constitutions also include more technical arrangements, such as the education and experience requirements necessary for family members to work in the business, remuneration policies, and performance evaluation criteria. Such detailed arrangements contribute to the integration of a professional management approach into family businesses.

In this respect, the family constitution is regarded as a mixed framework that encompasses both intra-family relationships and the management of the business.

D. THE PLACE OF THE FAMILY CONSTITUTION IN TURKISH LAW

There is no express statutory regulation concerning the family constitution under Turkish law. For this reason, the family constitution is not among the typical, or nominate, contracts regulated by statute; in legal doctrine, it is generally characterized as an “atypical contract”3.

Pursuant to the principle of freedom of contract adopted in the Turkish Code of Obligations, parties may conclude contracts that are not specifically regulated by statute. Indeed, under Article 26 of the Turkish Code of Obligations No. 6098, parties may freely determine the content of a contract within the limits prescribed by law4. Within this scope, the family constitution may also be accepted as a contract created by the free will of the parties and binding only upon its parties.

Nevertheless, the family constitution is not subject to any formal requirement. However, for ease of proof and applicability, it is of great importance that it be prepared in writing and signed by all parties. Furthermore, the use of additional safeguard mechanisms in practice, such as notarization, increases the seriousness of the document and strengthens its evidentiary value in potential disputes.

E. THE BINDING EFFECT OF THE FAMILY CONSTITUTION

The legal binding effect of the family constitution is a contested matter under Turkish law. There are two main approaches on this issue in legal doctrine.

According to the first approach, the family constitution is a non-binding guide that mostly contains ethical rules. Under this view, in the event of a breach of the arrangements set out in the family constitution, the application of legal sanctions is not possible; sanctions remain mostly limited to intra-family social mechanisms.

The second approach, on the other hand, accepts that if the family constitution is signed by the parties and contains specific obligations, it may be regarded as a binding contract within the scope of the Turkish Code of Obligations. In such a case, a breach of the contract may give rise to liability under the general provisions.

Nevertheless, the binding effect of the family constitution is subject to various limitations. First of all, a contract binds only its parties. Therefore, there is no direct binding effect with respect to shareholders who are not parties to the family constitution or persons who later join the family. Furthermore, the provisions set out in the family constitution may not be contrary to mandatory rules of law. Otherwise, such provisions will be deemed invalid.

On the other hand, if the provisions of the family constitution conflict with the company’s articles of association, the articles of association will prevail pursuant to the provisions of the Turkish Commercial Code. Indeed, in joint-stock companies, the content of the articles of association is limited by law5.

At this point, arrangements relating to inheritance law must be addressed with particular care. Mandatory provisions such as the reserved portion cannot be set aside by a family constitution.

In sum, the binding effect of the family constitution varies according to doctrinal views; some consider it to be an ethical guide, while others regard it as a contractual document. In any event, however, this binding effect is limited by the parties and by mandatory rules of law, and it does not provide absolute superiority over the articles of association or the provisions of inheritance law.

F. LEGAL INSTRUMENTS AIMED AT STRENGTHENING THE BINDING EFFECT

In order to increase the effectiveness of the family constitution, various legal mechanisms are used in practice. Within this scope, the following methods particularly come to the fore:

  • Transferring the provisions set out in the family constitution into the articles of association to the extent permitted by the Turkish Commercial Code,
  • Supporting the family constitution with shareholders’ agreements,
  • Regulating restrictions on the transfer of shares and rights of first refusal,
  • Creating privileged share structures,
  • Preparing internal directives of the board of directors (TCC Art. 367),
  • Subjecting breaches of contract to sanctions through penalty clause provisions.

In addition to these, the inclusion of alternative dispute resolution methods, such as mediation and arbitration, in the family constitution may contribute to the faster and more confidential resolution of potential disputes. This offers an important advantage, particularly in terms of preserving family relationships.

Through these instruments, it becomes possible for the arrangements set out in the family constitution to acquire indirect legal binding effect.

G. CONCLUSION AND ASSESSMENT

The family constitution emerges as an important tool for the institutionalization and sustainability of family businesses. However, the fact that it is not subject to an express statutory regulation under Turkish law gives rise to uncertainties regarding the legal binding effect of this document.

Although it may acquire contractual binding force under certain conditions, it cannot be said that the family constitution, on its own, constitutes a strong sanction mechanism. For this reason, in order to increase the effectiveness of the family constitution, it should be supported by the company’s articles of association, shareholders’ agreements, and other legal instruments.

In conclusion, in the process of preparing a family constitution, not only legal but also financial, managerial, and psychological dimensions must be taken into account. Ultimately, a family constitution prepared with a professional approach and with due regard to legal limits will make significant contributions to regulating intra-family relationships and transferring the business to future generations in a sound manner.

Atty. Deniz Daşdan

H. FOOTNOTES

  1. PwC, Global Family Business Survey 2021 Türkiye Report
  2. Kırıkkale Chamber of Commerce and Industry, Family Constitution Preparation Guide, 2020, p. 3. (https://www.kirikkaletso.org.tr/ktso/dosyalar/K%C4%B1r%C4%B1kkale%20TSO-%20Aile%20Anayasas%C4%B1%20Haz%C4%B1rlama%201.pdf)
  3. Aral, Fahrettin / Ayrancı, Hasan, Law of Obligations Special Provisions, 14th Edition, Ankara 2021, p. 59.
  4. Turkish Code of Obligations No. 6098, Art. 26.
  5. Turkish Commercial Code No. 6102, Art. 340 and Art. 579.