Family foundation – what is it and how to set it up?

From the Explanatory Memorandum to the Draft Family Foundation Act (Parliamentary Document No. 2798), we can infer that the concept of a family foundation is based on the premise that business and family are formally separated from one another, and that the family’s assets become the property of the family foundation. The family foundation is intended to function as a family treasury, providing the family with financial resources whilst also realising the founder’s vision and upholding the values adopted by the founder in business. A family foundation will enable the creation of organisational structures that ensure the continuity of the business and the protection of assets over a period longer than a single generation, without the need for the personal involvement of legal successors. Furthermore, a family foundation is intended to serve as a legal instrument that will facilitate capital accumulation, providing funds to cover the current needs of family members.

How to set up a family foundation?

The establishment of a family foundation will be carried out in the same way as for foundations operating under Polish law pursuant to the Act of 6 April 1984 on Foundations (i.e. Journal of Laws of 2023, item 166, as amended). This can be outlined in the following six steps:

• submitting a declaration on the establishment of a family foundation in the deed of incorporation or in a will (in the form of a notarial deed) – upon the drawing up of the deed of incorporation or the publication of the will, a family foundation in the process of formation is established;
• drafting the statutes – the foundation’s statutes must be drawn up in the form of a notarial deed;
• drawing up an inventory of assets – this must include the property rights contributed to the family foundation by the founder or by persons other than the founder, specifying the contributor and the type and value of each asset contributed, at the value determined according to their condition and prices at the time of contribution and their tax value;
• establishment of the family foundation’s governing bodies;
• contribution of the founding fund prior to entry in the register of family foundations where the family foundation is established by a deed of foundation, or contribution of the founding fund within two years of the date of entry of the family foundation in the register of family foundations where the family foundation is established by a will;
• submitting an application for the family foundation to be entered in the register of family foundations.

What information must the articles of association of a family foundation contain?

In accordance with the Act, which comes into force on 22 May 2023, the articles of association of a family foundation must specify:

• the name of the family foundation;
• the registered office of the family foundation;
• the specific purpose of the family foundation;
• the method of determining the beneficiary and the scope of their rights;
• the rules for maintaining the list of beneficiaries;
• the rules, including the detailed procedure for the beneficiary to waive their rights;
• the duration of the family foundation, if specified;
• the value of the endowment fund;
• the rules for the appointment and dismissal of members of the family foundation’s governing bodies, as well as their rights and duties, and the rules for the representation of the family foundation by the board of directors or by other governing bodies of the family foundation in the cases specified in the Act;
• at least one beneficiary entitled to participate in the beneficiaries’ meeting;
• the rules for amending the statutes;
• the allocation of the family foundation’s assets upon its dissolution, including the designation of the beneficiary entitled to the assets in connection with the dissolution of the family foundation;

In addition, the Foundation’s Articles of Association may also specify other matters, including:

• the rules governing cooperation or collaboration between the bodies of the family foundation;
• detailed rules for the liquidation of the family foundation;
• guidelines on the investment of the family foundation’s assets.

Register of family foundations

The draft Family Foundation Act provides for the establishment of a register of family foundations, to be maintained by the District Court in Piotrków Trybunalski.

An entry in the register of family foundations will include a range of information, such as: the name, registered office and address of the family foundation; the amount of the family foundation’s initial capital; the first name and surname, PESEL number (or, in the absence of such a number, date of birth) and address for service of each member of the governing bodies, the duration of the family foundation, if specified, and a reference to the submitted annual financial statements of the family foundation and the report on the audit of the annual financial statements.

Importantly, the register will be public. The public nature of the data in the register will apply to every entity entered in it, but also to every entity wishing to access the data contained therein.

It is also worth clarifying that data concerning the beneficial owners of a family foundation will be collected in the Central Register of Beneficial Owners maintained by the Minister for Public Finance.

An application for entry in the register of family foundations must include:

• the name, registered office and address of the family foundation;
• the amount of the family foundation’s initial capital;
• the first names and surnames, and PESEL numbers of the members of the management board, and where there is no obligation to hold such a number – their date of birth and their addresses for service, as well as the manner in which the family foundation is represented;
• the first names and surnames, and PESEL numbers of the members of the supervisory board, and where there is no obligation to hold such a number – their dates of birth, and their addresses for service, if a supervisory board is established within the family foundation;
• the first names and surnames, and PESEL numbers of beneficiaries who are natural persons forming part of the assembly of beneficiaries, and where there is no obligation to hold such a number – their date of birth, and their addresses for service; and where the beneficiary is an entity other than a natural person – the name or business name and REGON identification number, and if that entity is registered in the National Court Register – also its number in that register;
• the duration of the family foundation, if specified;

In addition, the following must be attached to the notification:

• the deed of incorporation of the family foundation or the minutes of the opening and reading of the will establishing the family foundation,
• the family foundation’s articles of association;
• a statement by the founder regarding the contribution of assets to cover the founding fund in the amount specified in the statutes, and in the case of a family foundation established by will – a statement by the members of the management board that the founding fund will be contributed within two years of entry in the register of family foundations;
• evidence of the establishment of the family foundation’s governing bodies, specifying their composition, if the composition of the family foundation’s governing bodies is not set out in its statutes, and consent to serve as a member of a governing body.

The registry court will examine whether the documents attached to the application comply with the applicable legal provisions in terms of form and content. It will also examine whether the submitted data comply with the law.

Undoubtedly, the introduction of the family foundation into the Polish legal system represents one of the most interesting legal changes in the coming period. Following the example of Western legislation, the Polish legislator has introduced an interesting institution designed to influence succession in family businesses and support successors in future investment processes.

Author

Adrian Łukasik

Radca prawny, Senior Associate

He gained his professional experience in one of Lublin's renowned law firms, dealing with civil and business law in its broadest sense. At the law firm Hewelt Wojnowski i Wspólnicy spółka komandytowa, he deals on a daily basis with current counseling in the field of business and the development of corporate documentation of companies, such as. Company agreements, bylaws of company bodies, agreements regulating relations between shareholders, resolutions of company bodies, M&A transactions. In addition to…

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