Writing an investment committee charter for a billionaire family
Built on Chapter 8 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
The charter should tell a family-office employee whether a committee decision is enough to proceed. If that answer requires a private call to the founder after every meeting, the written instructions are incomplete.
Chapter 8 recommends a charter that records the committee's mission and structure. For a billionaire family, I would write it around the decisions that create obligations. The document should distinguish discussion from authority to commit a particular entity's assets.
State the outcome you want protected
When testing a proposed deal, I ask people thinking through a deal structure to identify what could break the transaction and what they most want to protect. Those answers need to come before choosing terms.
I would apply that approach when writing the committee charter. State which decisions the family is delegating and which consequences it wants escalated. If protecting available cash is a priority, the charter should say when a proposed commitment needs another approval. The charter can then govern an actual decision.
Identify the assets within the mandate
Name the portfolios or entities the committee covers. A family office can coordinate several owners while each retains different rights. Avoid describing all family wealth as a single pool if that description is not accurate.
Have the appropriate professionals confirm the relationship between the charter and the governing documents. A committee cannot give itself powers that belong elsewhere. The office should know when another consent is necessary and who obtains it.
Include a route for assets added later. A new trust or acquired company should enter the mandate through an authorized change. Assuming that yesterday's delegation covers every future entity creates uncertainty at the point of execution.
State what a decision means
Write down whether the committee approves an investment or recommends it to another decision maker. If it has a mixed role, explain the boundary. Different types of decisions may follow different approval routes.
Separate permission to investigate from permission to commit. An employee may need to spend money on diligence before anyone is ready to approve the investment. Give that preliminary expenditure its own authority so the team can do useful work without implying a commitment.
Address conditional decisions. If approval depends on a final document or additional evidence, name who determines that the condition has been satisfied. Material changes should return through an identified process.
Explain participation and voting
List the voting roles and distinguish them from invited attendees. The family may want an heir to observe and a specialist to advise. Neither role should create an accidental vote.
Set the rules for attendance and decisions between meetings. Have counsel help establish how the committee can act when a member is unavailable or conflicted. The process needs to fit the actual documents and responsibilities.
The founder's retained authority deserves direct wording. If the founder can reject a recommendation, record that arrangement. If the committee has authority independent of a later family preference, staff need to understand that as well.
Connect the charter to the investment policy
Use the charter to identify the body responsible for applying the policy. Keep allocation limits and detailed investment constraints in the approved policy where possible. Duplicating them in several documents makes future amendments harder to control.
Explain who can propose policy changes and who can approve them. A committee facing a proposal outside the mandate should have a clear choice between declining it and requesting an authorized exception. It should not reinterpret a limit simply to fit the opportunity.
Include reporting duties for delegated decisions. A tactical group may act within agreed boundaries, but the broader committee should receive enough information to assess whether those boundaries remain appropriate.
Make records part of the assignment
Name the person who maintains minutes and the location of supporting materials. Record decisions with conditions and responsible employees. Someone who missed the meeting should be able to distinguish an accepted recommendation from an unresolved discussion.
Decide who may receive the minutes and who needs a shorter decision notice. Payment staff may need evidence of authorization without receiving every confidential detail considered by the committee.
Set a review route for the charter itself. Changes in ownership, staffing, or investment scope can make old language inaccurate. Record the approved version so employees can identify the instructions in force.
Test the wording against a live decision
Take a proposal currently under consideration and walk it through the charter without making assumptions. Identify the presenter and approving body. Follow the instruction through any additional entity consent and the release of funds.
Mark each point at which staff have to guess. Fix those gaps before adoption. A short document with a clear route is more useful than a long document that leaves the central authority unresolved.
What to take from this
- Define the covered entities and the effect of approval.
- Assign responsibility for conditions before execution.
- Keep an identifiable current version.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Should the charter contain every portfolio limit? Keep detailed investment limits in the approved policy and identify how the committee applies it.
Who confirms entity authority? The relevant governing documents and qualified professionals should establish it.