When Paper Decides Power: A 2025 Field Guide to Documentation for Family Enterprises

By: Mike Schmitt, Rubra Group

Two recent court battles remind us that the written word, not intention or tradition, settles who is in charge of a closely held business.

In April 2024 a United States District Court spent two full trial days comparing four versions of the same operating agreement after each half of a fifty-fifty limited liability company accused the other of forging removal clauses. The judge called the dispute “a battle for company control” and ruled only after weighing ink color, signature pages, and email threads. (New York Business Divorce)

Eight months later a Nevada probate commissioner blocked Rupert Murdoch’s attempt to tilt voting power inside the trust that holds roughly forty percent of Fox Corporation and News Corporation. The commissioner ruled that Murdoch and his son Lachlan had acted in bad faith and that the original trust wording must stand. (Axios)

Neither confrontation was triggered by market cycles, customer loss, or supply costs. Each began when missing or conflicting documents weakened the guardrails that protect ownership and management. If the protagonists had maintained one agreed master record both enterprises could have avoided millions in legal fees and untold distraction.

Why incomplete paperwork is a silent profit drain

1. Ambiguous authority Credit officers and suppliers demand higher prices or tighter terms when they cannot tell who has signing power. The premium attached to uncertainty quietly erodes margin.

2. Frozen decision making Directors hesitate to authorize capital expenditure while ownership percentages or voting thresholds remain unresolved. Delays compound as equipment ages and skilled candidates accept other offers.

3. Discounted valuation Buyers routinely reduce offers when standard operating procedures, succession notes, or estate documents are verbal or outdated. A twenty percent price haircut during exit will outweigh years of tax planning.

4. Personal breakdown When facts live only in memory, disagreements feel like personal betrayal rather than a search for truth. Relationships that once anchored the firm turn adversarial, often for generations.

Five documentation priorities for 2025

1. Master governing record Keep one signed digital original of every operating agreement, shareholder pact, and buy sell clause in a secure repository with read-only access for all voting parties. Review once a year and record any amendment on the spot.

2. Version-controlled process library Screen-capture key tasks, convert the steps to text, and store each revision with a time stamp and author tag. A new employee should be able to find the current procedure in under sixty seconds.

3. Delegation and spending matrix Document who can approve purchase orders, sign cheques, negotiate terms, or bind the company. Link the matrix to your accounting or enterprise system so approvals flow automatically.

4. Succession contact sheet List the individuals empowered to act if an owner or senior manager becomes incapacitated, together with direct contacts for banks, insurers, and suppliers. Update the sheet after every personnel change.

5. Crisis action script Capture the first ten steps the team must take if a critical event hits. Include data needed for a rate lock, vendor shift, cyber incident response, or shareholder death. Practice the script twice a year.

A market-driven example

The fictional Caldwell Tool Company closed a sale to a strategic buyer last quarter at nine times earnings because its digital vault contained current procedures for every station on the shop floor, a verified list of shareholder signatures, and a rate-sensitivity model signed off by its lender. The buyer’s lawyers cleared due diligence in three weeks and removed a seven-figure indemnity reserve. The owners attribute that windfall to documented proof of control rather than to capacity or patents.

First steps toward a documentation habit

• First hour Choose one cash-critical routine, for example order fulfilment. Record the task from start to finish, send the clip through an artificial-intelligence transcription tool, paste the steps into a draft, and store it in the common drive.

• First week Circulate the draft to the people who perform the work. Ask them to strike steps that never happen and add missing ones. Name one owner responsible for publishing every change.

• First month Repeat the cycle for each process that influences cash conversion. Standardize file names: function name, version number, and date.

Culture, not software, makes documentation stick. Leaders reinforce the habit by refusing to approve any request for funding or staff unless the related procedure is on file and current.

Closing reflection

The New York forgery dispute and the Murdoch trust ruling operate at different scales yet teach the same principle. Control follows the paperwork. Document while relationships are strong and memories are fresh. When conflict surfaces a complete archive lets you resolve the issue in minutes rather than years.

 Continue the journey

Read more in our book “Family Fortune”. Order the full edition here: https://a.co/d/85wRoB2

Schedule a complimentary thirty-minute strategy call to map your own documentation plan: Meet with Mike Schmitt

The cheapest hedge against uncertainty is a page that everyone can find and everyone can trust.