Can the Family Foundation run a business?

Statutory restrictions on the Family Foundation’s business activities

The legislator has introduced a significantly restricted scope of business activities that may be carried out by a Family Foundation (Section 5 of the Family Foundation Act), i.e. only in respect of:

• the disposal of property, provided that such property was not acquired solely for the purpose of subsequent disposal,
• letting, leasing or making property available for use on other terms,
• joining commercial companies, investment funds, cooperatives and similar entities, whether based domestically or abroad, as well as participating in such companies, funds, cooperatives and entities,
• the acquisition and disposal of securities, derivatives and rights of a similar nature,
• granting loans:
  1. to capital companies in which the family foundation holds shares
  2. partnerships in which the family foundation participates as a partner,
  3. beneficiaries,
  4. trading in foreign currency belonging to the family foundation for the purpose of making payments related to the family foundation’s activities,
• transactions involving foreign means of payment belonging to the family foundation for the purpose of making payments related to the family foundation’s activities,
• the production of plant and animal products processed by non-industrial means, with the exception of processed plant and animal products obtained within the framework of specialised agricultural production sectors and products subject to excise duty, provided that the quantity of plant or animal products derived from own cultivation, breeding or rearing, used in the production of a given product constitutes at least 50% of that product,
• forestry.

It should be emphasised that the above list is exhaustive, which means that the Family Foundation may not carry out economic activities for any purpose other than that specified in Article 5 of the Family Foundation Act.

In accordance with the above, we can state that a Family Foundation may not engage in direct commercial, service, manufacturing or any other operational activities. The primary purpose of its activities is the management and growth of the assets transferred by the Founder.

Benefits of having a Family Foundation

The Family Foundation aims to organise the succession of assets within the family. Thus, where a family owns a business, the inheritance process is made easier for the heirs by the very existence of the Family Foundation. The Founder may specify in the statutes the rules for disbursing funds to Beneficiaries, which allows for effective asset management and constitutes a long-term solution.

The issue of liability

In accordance with Article 3, a Family Foundation acquires legal personality upon entry in the Register of Family Foundations. Consequently, the Family Foundation possesses its own assets, which are separate from the Founder’s personal assets. The Family Foundation Act explicitly states that the Founder is not liable for the Family Foundation’s obligations. Further on, attention should also be paid to Article 23(3), which determines the liability of a Family Foundation in the process of formation, i.e. from the moment the deed of incorporation is drawn up but before its entry in the register. According to this provision, a Family Foundation in the process of being established manages its assets in its own name and ensures their protection; in particular, it acquires rights, including ownership of immovable property and other rights in rem, incurs liabilities, brings legal proceedings and is sued.

Author

Adrianna Bracichowicz

Associate

Adrianna Bracichowicz is a dedicated lawyer at our firm, specializing in business law and also in litigation law. She graduated with a master's degree from the University of Wroclaw, and also developed her skills while studying at the University of Bergen in Norway under the Erasmus+ program. She is currently continuing her legal education by completing the first year of her lawyer's apprenticeship.

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