Institutionalization and sustainability in family businesses as joint-stock companies: The legal framework of the family constitution and a comparative analysis

Family businesses hold a significant place in the Turkish and global economy. However, these companies can face structural and managerial challenges due to factors such as the intergenerational transition process, the need for institutionalization, and the impact of family relationships on business processes. The primary objective of this study is to evaluate the family business constitution, a tool that can provide solutions to legal issues encountered in family businesses, within the framework of institutionalization, corporate governance principles, non-competition prohibitions, share transfers, and context. By examining its legal framework in foreign legal systems, we demonstrate how this constitution functions as a governance tool for family businesses. The first part of the study examines the concepts of family business and family constitution within a theoretical framework, addressing the development processes and intergenerational transformations of family businesses. Furthermore, the concept of a conglomerate is explained, and the legal status of family joint-stock companies, which hold the dominant position within this structure, is examined. In this context, we detail how family businesses are positioned within the conglomerate, how dominant relationships are established within the framework of Article 195 et seq. of the Turkish Commercial Code (TCC) No. 6102, and the legal characteristics of the family holding structure. This section also evaluates the strengths and weaknesses of family businesses in terms of management, finance, and organizational culture, and addresses the legal aspects of the dissolution and liquidation processes of joint-stock companies. The second section examines the family constitution in detail as a mechanism that contributes to the institutionalization and sustainability of family businesses. The family constitution drafting process, its content standards, legal nature and binding nature, and the amendment and termination of family constitutions are discussed in comparison with practices in countries with different legal systems, such as France, the United States (US), and Germany, as well as its status in Turkish law. The study demonstrates that family constitutions can contribute to institutionalization as a structural framework that ensures internal balance. The third section evaluates various legal issues encountered in family businesses, examining institutionalization, corporate governance principles, non-competition prohibitions, share transfers, and context. The role of alternative resolution methods, such as arbitration and family mediation, that can be envisioned within family businesses in resolving various legal issues is discussed in detail. This section also discusses the role of family constitutions in regulating compliance processes in family businesses. The primary objective of this study is to theoretically examine the concept of the family constitution, which currently lacks an effective legal framework during the institutionalization process of family businesses. This study argues that the family constitution, beyond being an ethical text, can contribute to the sustainability and institutionalization of family businesses as a legally valid guide.. Keywords: Family Business, Family Constitution, Institutionalization, Sustainability.