It is estimated that there are approximately 830,000 family businesses in Poland. Their contribution to GDP is around 18%. It is a very important part of the Polish economy. The family nature of the business suggests that the children will take over after their parents. Research conducted by the Family Business Institute shows that only 10% of the successors intend to take over their parents’ enterprise. Therefore, the succession of the enterprise should be carried out in such a way that the business stays in the hands of relatives who want to manage it. Under the current legal status, the transfer of a family business may cause some difficulties. The owners often decide to transfer their enterprise in a form of inheritance or a gift by will. Although such a way allows one to hand over the reins to a chosen successor, it does not secure the succession of a company for the future. A Polish family foundation is supposed to be a favourable solution in such a situation. Currently, the work on a draft act that will introduce this institution to the Polish legal order is in progress.
The aim of the Polish family foundation
The goal of the Polish family foundation is to protect the assets of a family business and to manage it in accordance with the will of the founder specified in the statute. The foundation will be able to manage its property, and the beneficiaries indicated by the founder will participate in the foundation’s profits. The family foundation is supposed to minimize the risk of unsuccessful succession and to ensure the continuation of a family business.
In accordance with the founder’s will, the Polish family foundation will support the indicated natural persons – for example by paying for their education. Additionally, it will be able to provide services for public benefit organizations. The use of the property shall be specified by the founder himself. The fact that the founder will indicate how to use the owned funds will ensure that his will is carried out accordingly.
Due to the fact that the foundation will constitute a separate legal entity, the property owned by the family foundation will not become a part of the estate of the testator, i.e. the founder of the foundation. This is important – according to the initiators of the project, the establishment of a family foundation will prevent fragmentation of the assets of the family business and will make the process of its succession easier. The Polish family foundation is to prevent the need to introduce changes in the organizational structure of the company during the succession process.
So far, family foundations have operated in many European countries, such as Switzerland or Malta. Polish entrepreneurs used these solutions, which resulted in transferring their assets outside Poland. According to the drafters, introducing a family foundation into the Polish legislation will have a positive impact on the economy – it will limit the unfavourable phenomenon of transferring capital outside Poland.
Establishing a Polish family foundation
First of all, it is worth emphasizing that a Polish family foundation can only be established by natural persons who have the full capacity for legal actions. The family foundation may be created in two ways. The first one is to submit the declaration of will to establish a Polish family foundation. This must be done in the presence of a notary public, the founding act shall be in the form of a notarial deed. This way, the foundation can be established by one founder or by a group of several founders.
Secondly, a Polish family foundation can also be established under a lawful testament. The founder shall include in his last will a declaration on establishing the foundation. Due to the nature of the will, foundations established in this way will have only one founder.
A Polish family foundation in the organization will be established at the moment of submitting the declaration on the establishment of the foundation or at the moment of opening of the will. A family foundation in organization will be able to manage its property on its own behalf, until the moment of its entry into the register. In particular, it will be able to acquire rights, incur liabilities, sue and be sued.
The foundation’s statute shall be in the form of a notarial deed. First of all, it defines the goals of the family foundation, its founding capital and property at the time of its establishment. Moreover, it specifies the rules for the operation of the foundation’s bodies and stipulates the scope of rights to which its beneficiaries are entitled. It may also include instructions concerning investing the assets of a family foundation.
The governing bodies of the family foundation will be the management board, the assembly of beneficiaries, and the board of protectors. The appointment of the board of protectors is optional. However, if the number of beneficiaries exceeds 25 people, it is obligatory for a foundation to establish a board of protectors.
The headquarters of a foundation may be located only on the territory of the Republic of Poland. A family foundation can be created for a definite or indefinite period of time.
The Polish family foundation will acquire legal personality upon entry into the register. The open register of family foundations will be managed by the District Court in Warsaw.
The assets of the Polish family foundation
First of all, the founder must provide initial capital to the Polish family foundation. Its minimum value amounts to 100 000 PLN. It shall include property that the founder intends to use to achieve the foundation’s goals. These can be money, securities as well as other rights.
There will be a possibility to make a donation to the foundation. The draft stipulates that making a donation will be possible for the founder himself, the statutory heir of the founder or his spouse and the trust. For the purposes of the Act, the drafter assumed that a trust is a legal relationship regulated by foreign law, on the basis of which ownership or possession of the property is transferred to the trustee. The trustee manages the property and is responsible for making parts of the property available to indicated beneficiaries.
Taxation of Polish family foundation
First of all, a family foundation will be considered a corporate income taxpayer. Simultaneously, the income received from the family foundation by the founder and beneficiary will not be subject to personal income tax. The contribution of property to the foundation by the founder will be neutral to taxation.
As a rule, benefits received by beneficiaries of the foundation will be subject to inheritance and gift tax. The exception to this rule is the acquisition of benefits by the founder and his closest family. The founder and his or her relatives will be exempt from tax for the acquisition of benefits in the form of property contributed to the foundation. The group of relatives benefiting from the exemption is quite comprehensive. Among them, there are spouses, descendants and ascendants, as well as stepchildren. Moreover, the exemption will cover the son-in-law, daughter-in-law, siblings, stepfather, stepmother and parents-in-law of the founder. Beneficiaries not belonging to this group must take into account the obligation to pay tax in the amount of 19% of the tax base.
The family foundation will also benefit from the exemption from tax on revenues from capital gains, including dividends and interest received from companies in which it will hold shares or stocks.
The liability
According to the assumptions of the draft of the bill, a family foundation is responsible jointly with the founder for its obligations that arose before its establishment. Without the consent of the creditor, it will not be possible to exclude or limit this liability. The founder’s liability for the obligations of the family foundation is excluded. It means that the founder is not liable for its obligations.
The family foundation is to be responsible for the fulfilment of the founder’s maintenance obligation, provided that the obligation arose after the foundation was created. A person entitled to maintenance obligation may also initiate enforcement proceedings against the Polish family foundation. It should be emphasised the family foundation’s liability will be limited. It is to be restricted to the value of the property contributed by the founder at the time of acquisition, at prices which satisfy the creditor.
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