In the life of every entrepreneur, the question arises: what will happen in the future to the wealth they have earned and the company they have built over many years? This is especially true for businesses founded years ago, with family traditions. Today, their founders consider passing on their businesses to continue their operations for future generations. Unfortunately, statutory heirs don't always want to take over the family business, or they have chosen a different career path. It often happens that one heir has run the business with their parents their entire lives and knows it inside and out, while the other heirs hold different professions and don't want to continue it, but rather cash it in or be paid off by the heir who takes over the family business. Therefore, a family foundation can manage the assets of an inherited company.
On December 14, 2022, the Sejm passed the Family Foundation Act, which was referred to the Senate. The primary goal of introducing a Polish family foundation is to enable the preservation of assets of family businesses. The introduction of a family foundation will minimize the risk of unsuccessful succession and ensure the continued operation of the business.
How to set up a family foundation?
To establish a family foundation you will need:
- Submission by the founder of a declaration of establishment of a family foundation before a notary in the founding act or in the will.
- Preparation of a statute containing the rules of operation of the family foundation.
- Transfer of assets to the founding fund ( at least PLN 100,000 )
- Establishment of family foundation bodies.
- Entering a family foundation into the court-maintained register of family foundations.
Founders of the family foundation
Importantly, the founder of a family foundation, i.e., its founder, will only be a natural person with full legal capacity. Establishment of a family foundation cannot be performed by a legal entity or another organizational unit. It should be noted that more than one person will be able to establish a family foundation, but only if the foundation is established in a notarial deed. It will also be possible for the foundation to be established by will – in this case, it will be possible to have only one founder. A key issue with the founder is that they will not be liable for the family foundation's obligations.
Foundation activities
It is important to note that the foundation will generally not be able to conduct business activities, which would mitigate the risks associated with such activities and the need to protect the assets contributed to it. The exception is activities that involve:
- disposing of property of which he is the possessor or owner, unless the property was acquired solely for the purpose of further disposing of it
- renting, leasing or otherwise making available property of which he is the possessor or owner
- joining and participating in commercial companies, investment funds, cooperatives and similar entities based in the country or abroad
- acquiring and selling securities, derivative instruments and similar rights
- granting loans to capital companies in which the family foundation holds shares or stocks, to partnerships in which the family foundation participates as a partner, as well as to beneficiaries
- trading in foreign means of payment belonging to a family foundation for the purpose of making payments related to the foundation's activities - running a business as part of an agricultural holding
The introduction of the institution of family foundations into the Polish legal system will significantly facilitate the succession of Polish family businesses and enable the accumulation and protection of family assets. In the next post, we will present the principles of family foundations in detail, as well as the circle of beneficiaries, the taxation of family foundations, and changes in the right to compulsory portions.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of December 21, 2022
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