Raffles Consulting Services
Family office co-investment conflicts need early disclosure, a clear recusal rule and minutes that show who made the independent decision.
Family office co-investment conflicts should be declared before the office shares deal information, negotiates allocation or votes on an investment. The conflicted person should state the interest, the governing body should decide the recusal and the minutes should show who made the independent decision. A disclosure made after capital is committed is too late to protect the process.
Co-investment can give a family access to larger transactions and useful partners, but it can also mix personal interests, family relationships, manager incentives and unequal information. The office needs a record that keeps the family’s mandate and decision authority clear.
Define what counts as an interest
Use a broad, practical definition. An interest may arise when a family member, officer, employee, adviser or related entity owns part of the target, earns a fee, has a board seat, expects another business benefit or has a close relationship with the sponsor.
Also consider indirect benefits. A person may have no direct shareholding but may manage another fund participating in the round, represent the seller, provide financing or receive carried interest. Record the connection in plain language.
Do not decide materiality only by percentage ownership. A small interest can matter when the person controls information, leads the recommendation or can influence allocation between investors.
Collect declarations before circulation
The EDB single family office setup guide encourages families to define their mandate, board and executive arrangements, and investment strategy. Put the conflict process inside that governance structure.
When a co-investment arrives, circulate a short conflict request before the full data room opens. Name the sponsor, target, sellers, lead investor, advisers and known related parties. Ask recipients to confirm an interest or state that none is known.
Repeat the request when the parties or economics change. A clean declaration at the first meeting may become incomplete after a family member joins the board or an adviser takes a transaction fee.
Separate information from decision rights
A recusal can cover more than the final vote. Decide whether the person may receive confidential papers, join discussions, negotiate terms, recommend valuation or communicate with the sponsor.
The response should fit the conflict. A person with technical knowledge may answer factual questions but leave the room for the recommendation and vote. A person representing the seller may need to be excluded from the family office’s entire review.
Record who will replace the conflicted person. A recusal that leaves no one accountable for analysis creates another risk.
Check allocations and economics
Compare the terms offered to the family with those offered to the sponsor, lead investor and related participants. Review price, security, information rights, fees, expenses, governance rights, liquidity and exit arrangements.
If an allocation is scarce, document why the family received its amount and whether a decision-maker influenced allocation between personal, family or managed accounts. Do not rely on a verbal assurance that everyone received the same terms.
Identify fees paid by the target or investors to the sponsor, introducer, manager or adviser. State who bears broken-deal costs and whether any person receives a benefit if the family invests.
Keep independent diligence independent
The 13 September private-investment due diligence guide explains the wider deal review. For a conflicted co-investment, assign the work to people who are not dependent on the sponsor’s recommendation.
Use original documents and direct access to management where appropriate. Test the business case, ownership, financial position, legal rights, valuation and exit assumptions. Label information supplied only by the conflicted party.
Where legal documents, fiduciary duties or enforceability require formal advice, the family office should instruct a suitable Singapore law firm and any relevant foreign counsel. The adviser should know which relationships may affect the instruction.
Use a decision record that shows the recusal
| Record | What to capture | Control |
|---|---|---|
| Declaration | Person, interest, date and expected benefit | Made before access or influence |
| Recusal | Meetings, papers, negotiation and vote affected | Scope approved independently |
| Terms | Allocation, fees and rights by participant | Differences explained |
| Diligence | Independent sources and unresolved issues | Conflicted input labelled |
| Decision | Participants, reasons, conditions and vote | Only authorised people decide |
Minute the discussion naturally
The minutes should identify the declaration, when the person left or stopped participating, the independent members present and the information considered. Record questions and conditions that mattered to the decision.
A standard line saying that all interests were declared is not enough when the conflict shaped access or economics. Attach the specific declaration and refer to it without exposing unnecessary personal information in widely circulated minutes.
If the governing body approves participation despite a conflict, explain the safeguards and why the investment remains within the mandate. If it rejects or defers the proposal, record that too.
Monitor the interest after investment
A conflict can continue after closing. Track board seats, follow-on rounds, related transactions, adviser appointments, distributions and exits. Require a new declaration when the person’s interest changes.
Set an independent owner for valuation and performance reporting. Where the sponsor supplies marks or operating data, record the family’s verification and any limitations.
Review voting and consent requests before the conflicted person participates. A recusal should not disappear simply because the initial investment was approved.
Use Singapore’s ecosystem without giving up control
EDB materials describe co-investment opportunities and the value of professional family-office governance. Its family-office ecosystem update notes opportunities to connect with peers, while its family offices report illustrates board, investment committee and investment-team roles.
Those networks do not replace the family’s own decision. The office should understand who introduced the opportunity, who benefits and who is accountable for the recommendation.
The family office governance operating model is the pillar cornerstone. The family council conflicts guide covers the wider family setting. The investment policy statement guide anchors the mandate. The Family Office and UHNW hub connects the library.
A good conflict record does not imply mistrust. It protects relationships by making the process visible: the interest was disclosed, the affected person stepped back, independent people tested the deal and the family can see who accepted the final risk.