The statute of a family foundation – what should it include?

On 22 May 2023, a Polish family foundation came into effect. Its formation was the legislator’s response to the demands of family members in businesses, who wanted to ensure a smooth transition of family assets built over the years after the owner’s death. The foundation’s cornerstone is its statute. What should it contain? We present answers in the article below.

Table of Contents

• Elements of the statute of a family foundation
• The importance of a family foundation statute
• Inventory of assets
• The creation of a family foundation
• The main objectives of a family foundation
• The statute of a family foundation – summary

Elements of the statute of a family foundation

The statute of a family foundation defines the rules of its operation in all areas. It regulates the activities of the foundation and its bodies. We can distinguish two aspects of this document:

• formal, as the basis for an entry in the register,
• material, as the founder’s long-term objectives regarding the operation of the family foundation.

According to the legislator, the statute must:

• be determined by the founder or founders
• be in the form of a notarial deed, meaning that any changes will only be effective upon registration.
• be concluded at the latest with the submission of the founder’s statement on the establishment of a family foundation.

The obligatory elements of the statute include:

1. Name.
2. Registered office.
3. Specific purpose.
4. Identifying data of the beneficiary or the method of determining the beneficiary and the scope of his rights.
5. Rules for maintaining the list of beneficiaries.
6. Principles, including the detailed procedure for the beneficiary’s renunciation of rights.
7. Duration of the family foundation if specified.
8. Value of the founding capital
9. Rules for appointing and dismissing members of the bodies (during meetings, through written voting, or remotely), as well as their rights and obligations.
10. Rules for the representation of the family foundation by the board or other bodies of the family foundation in cases indicated by the Act.
11. Entity authorized to approve the actions of the foundation’s management in organization.
12. At least one beneficiary entitled to participate in the beneficiary assembly.
13. Rules for amending the statute.
14. Disposition of the family foundation’s assets upon its dissolution, including identifying the beneficiary entitled to the assets in connection with the dissolution of the family foundation.

The statute of the family foundation may also include information concerning:

1. Principles of cooperation or collaboration between bodies.
2. Detailed circumstances of its dissolution.
3. Guidelines regarding the investment of its assets.
4. Possibility of creating local units or branches.

The importance of a family foundation statute

The statute of a family foundation is crucial for its operations. On one hand, it establishes the organizational framework. On the other – it determines the scope of the founder’s intentions regarding the realization of the family foundation’s goals. Moreover, it defines the rights of its bodies and beneficiaries.

Due to the significant consequences, the statute should have a legally defined form and precise content. This is important for the ongoing functioning of the family foundation. But it is also crucial for the achievement of its long-term objectives. Additionally, it prevents interpretational uncertainties of the statute’s provisions. Especially in the event of the founder’s death or incapacity to exercise granted rights.

A well-thought-out and transparent scope of the family foundation’s activities is important in terms of:

• Managing the foundation’s assets.
• Determining the rules for beneficiaries’ use of income.
• Managing investments conducted by the family foundation within the scope specified by the statute and the law.

Inventory of assets

After preparing the statute of the family foundation, the founder creates a written inventory of assets. The obligatory management board is responsible for updating the inventory after any changes. This entity is accountable for the accuracy of the provided information. The inventory of assets includes property rights contributed to the family foundation by the founder or other individuals. In other words, it includes information about:

• The person contributing the assets.
• The type and value of each asset contributed, based on their state and prices at the time of contribution, as well as their tax value.

The inventory of assets also records the current proportions of the value of assets contributed to the foundation by each founder, or by the family foundation itself.

The creation of a family foundation

The founder is the creator of the family foundation. Only the following individuals can be founders:

• Natural persons with full legal capacity.
• A person who has made a declaration of establishing the family foundation in the founding deed or in a will.

More than one founder can establish a family foundation. However, it should be noted that a family foundation established in a will can have only one founder.

To establish a family foundation, the following steps are necessary:

1. Making a declaration of establishing the family foundation in the founding deed or in a will.
2. Establishing the statute.
3. Creating an inventory of assets.
4. Appointing the bodies of the family foundation as required by the law or the statute.
5. Contributing the founding capital before registration in the registry of family foundations in the case of a family foundation established in the founding deed. Alternatively, contributing the founding capital within two years from the date of registration in the registry of family foundations in the case of a foundation established in a will.
6. Registering in the registry of family foundations.

It is important to note that the founding deed of the family foundation must be prepared in the form of a notarial deed. The same applies to the will establishing the family foundation.

The main objectives of a family foundation

A family foundation serves two fundamental purposes:

1. The first one is facilitating multi-generational succession planning. Especially in cases with multiple legal successors of the business. It ensures business continuity and provides resources for the current and future generations of heirs.
2. The second one is opening new tax possibilities through the optimization of asset accumulation.

For the purpose of personal income tax, the legislator has defined rules for determining the proportion of the value of assets contributed to the family foundation by each founder or by the family foundation itself. It is established in relation to the total value of assets contributed by all founders and the family foundation. The legislator assumes an equal division of assets if they are contributed by:

• Common descendants
• Ascendants
• Siblings of more than one founder

Assets contributed through donation or inheritance:

• by the founder (his spouse, descendants, ascendants, or siblings) – qualify as contributed by the founder.
• by other individuals – qualify as contributed by the Polish family foundation itself.

The statute of a family foundation – summary

The introduction of a family foundation into Polish law aims to ensure the continuity of business and the ability for beneficiaries to use its profits in the future. This allows us to ensure the stability of a family business built over a long period of time. To achieve this goal, it is necessary to prepare a family foundation statute. It must meet the formal requirements set by the legislator.

If you find the above topic interesting and want to know more, we invite you to visit our website “Family Foundation in Poland”. If you would like to discuss your specific case, our experts are at your disposal. Contact us today and schedule a meeting.