Family Foundation is a modern form of management that was introduced into the Polish legal system by the Act of 26 January 2023. The provisions introducing Family Foundation were created for those family businesses that were built with hard work by their founders, who now received a succession tool from the legislator that allows them to secure the existence and development of the company without the need for division of the estate or the consent of all stakeholders.
Contents:
What is a family foundation?
A family foundation is, in principle, an entity that serves to secure family assets and facilitates succession for many generations. To a certain limited extent, a family foundation may also conduct business activities.
Scope of economic activity family foundation.
- disposal of property, unless the property was acquired solely for the purpose of further disposal;
- renting, leasing or making property available for use on any other basis;
- joining commercial companies, investment funds, cooperatives and entities of a similar nature, having their registered office in the country or abroad, as well as participating in these companies, funds, cooperatives and entities;
- acquiring and selling securities, derivative instruments and similar rights;
- granting loans:
- capital companies in which the family foundation holds shares or stocks,
- partnerships in which the family foundation participates as a partner,
- beneficiaries;
- trading in foreign means of payment belonging to a family foundation for the purpose of making payments related to the activities of the family foundation;
- production of plant and animal products processed in a manner other than industrial, with the exception of processed plant and animal products obtained within the framework of special branches of agricultural production and products subject to excise duty, provided that the quantity of plant or animal products from own cultivation, breeding or breeding, used for the production of a given product constitutes at least 50% of that product;
- forest management.
Moreover, the Act stipulates that the activities referred to in the last two points may be carried out by a family foundation only in connection with the agricultural holding it runs.
Why is it worth establishing a family foundation?
Securing family assets
- A family foundation allows for the separation of family assets from private assets. It protects them from risks resulting from business activities, creditor claims or property disputes.
Succession planning
- Thanks to the foundation, you can plan the succession of family assets in an orderly manner, avoiding the division of assets between heirs. This is a solution that helps ensure the continuity of assets over generations and the separation of business and family assets.
Tax benefits
- A family foundation can bring tax benefits, such as reducing the burden of inheritance or donations. In Poland, family foundations benefit from preferential tax rules, e.g. no CIT for non-commercial activities.
Flexible asset management
- The Foundation enables flexible management of various forms of assets, including real estate, financial investments and shares in companies.
- accumulation of capital, with parallel allocation of funds to meet the essential needs of the founder and his family.
Protection of family values
- The foundation’s statute may define goals and mission, thereby supporting the maintenance and development of family values, traditions and intergenerational responsibility.
Support in managing a family business
- Family foundation takes over management of family business
What does it take to set up a family foundation?
To establish a family foundation, the following steps must be taken:
- submitting a declaration of establishing a family foundation in the founding act or in the will,
- determining the content of the statute,
- preparation of an inventory of property,
- establishment of family foundation bodies required by law or statute.
- contribution of the founding fund,
- entry into the register of family foundations.
Does a family foundation work in practice?
A family foundation in Poland is a relatively new legal institution that is gaining popularity among entrepreneurs planning the succession of assets. Since the entry into force of the Family Foundations Act on May 22, 2023, interest in this solution has exceeded expectations. During the first year of the Act's validity, 1,651 applications for registration were submitted, of which 1,012 foundations were registered by the District Court in Piotrków Trybunalski. April 2024 was a record, when as many as 227 applications were submitted. By November 2024, the number of registered family foundations exceeded 1,200, and the number of applications for registration submitted was over 2,000. Forecasts indicate that the number of family foundations in Poland may exceed 3,000 in the near future.
Therefore, after the first full year of the provisions on family foundations being in force, it is safe to say that the popularity of this tool indicates that Polish entrepreneurs have appreciated its potential in securing assets and planning the future of family businesses.
Summary.
A family foundation is a modern form of wealth management and intergenerational succession, which debuted in Polish law in 2023. This solution allows for the effective separation of family and private assets, protecting them from the risks associated with business activities or property disputes. A family foundation allows for orderly succession planning, avoiding the division of assets between heirs, and at the same time offers tax preferences, such as the lack of CIT in the case of activities specified in the act.
The key advantage of the foundation is its flexibility, which allows its structure to be adjusted to the needs of individual founders.
The process of establishing and registering a family foundation is complex, which is why the author encourages you to use expert knowledge, who specialise in this issue, because only a family foundation that is thoroughly thought out and tailored to the needs of individual founders will meet their expectations.
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