Planning for the Future

25,March,2020

A family office can help avert problems with succession, and it’s good to establish one early, says Vincent LO, Chairman of Shui On Group

If Vincent Lo Hong-sui could only give you one piece of advice about setting up a family office, he would tell you to establish a family governance system, right at the start.
This advice results from his personal experiences. Lo, the Founder and Chairman of Shui On Group, was involved in a high-profile court case over his parents’ estate.

“The earlier you start the process of establishing a family governance system that includes a constitution, the better,” he says. “That’s because it becomes almost impossible to agree on anything as the family gets bigger. If that situation occurs, someone will have to dictate what happens, and that’s never a good thing. If you start the process when the family is still small, everybody will hopefully be more committed to making it a success.”

The Hong Kong-based businessman has first-hand experience of what happens when a family governance system is not properly established. In 2016, his mother filed a case in the High Court to dismiss HSBC as a trustee for its shares in Great Eagle Holdings, a company she had jointly built with Lo’s father, Lo Ying-shek, in 1963. Vincent Lo says that the lack of family governance is the reason that the family became embroiled in a courtroom drama.

That’s why Lo is so enthusiastic about family governance. He has established a family constitution for his own family branch who leads Shui On Group with businesses in property development, construction and contracting.

A family constitution, according to Lo, defines the values of the family. It also clearly lays down ground rules for how the family business should be run, how family members should treat each other, and what should be done when a member breaks the rules.  It must serve to mitigate any future disputes or disagreements regarding the family business, thereby preserving the wealth and integrity of the business throughout the generations, he says.

“With regard to the family feud that we are experiencing, my parents wrote letters which contained wishes and instructions a long time ago. But they did not establish a vehicle to put such instructions into place. The assets were placed in a discretionary trust with a bank, but the trustees are not part of the family, so they are not well-placed to deal with family issues,” Lo says.

https://www.scmp.com/presented/business/topics/defining-family-office-landscape/article/3076171/planning-future