A family foundation is a legal form of running a business, and has been long awaited by numerous Polish family owned businesses. The community of firms of this kind itself estimates that there are more than 800 000 family businesses in Poland, which means that they make a considerable contribution to GDP . F urthermore it is vital that the families running businesses of this kind have a means of passing on the business to be managed by the next generations. At the moment, for succession to proceed effectively, entrepreneurs must have successors willing and able to conti nue running the business or at least act in a proprietary capacity while entrusting management to a professional board of directors, but this is not always possible. The number of potential legal successors is also often a factor that hampers plans regardi ng succession. If there is no successor or the family members cannot reach a consensus, usually the proprietors are forced to sell the company, whereby it ceases to be a family business. At the same time, there is a noticeable tendency for foreigners to bu y companies, wishing to acquire a business with a firmly established organizational structure but which more importantly has a good name on the market.
To date, there were only limited options for passing on a business, provided for in the rules laid dow n in the Civil Code Code[1] and Commercial Companies Code Code[2] (CCC). This prompted Polish entrepreneurs to lobby for legislation on family foundations. Accordingly, a family foundation would be an entirely new means of planning succession. This institution has bee n employed successfully in many countries.
The Family Foundation Act of 26 January 2023 [3] addresses these needs and addresses these needs and demandsdemands. . Under the act, a new institution has been introduced that can be used to concentrate the Under the act, a new institution has been introduced that can be used to concentrate the family assetsfamily assets,, enables capital to be retaenables capital to be retained in Poland for many generations, and creates ined in Poland for many generations, and creates greater opportunities for investment projects in Polandgreater opportunities for investment projects in Poland. Creating a family foundation is . Creating a family foundation is intended to mitigate the risk that succession does not come to fruition, and to ensure intended to mitigate the risk that succession does not come to fruition, and to ensure business continuity. It is intebusiness continuity. It is intended to enable the estate to be passed on without being nded to enable the estate to be passed on without being divided up, and to continue to grow, as the crucial factor is ensuring continuity of a private divided up, and to continue to grow, as the crucial factor is ensuring continuity of a private business, in particular to safeguard the familybusiness, in particular to safeguard the family[4].
The founder must be a natural person with full legal capacity. A family foundation may be set up in a will, but in such a case there can only be one founder. On the other hand, if set up in a will, but in such a case there can only be one founder. On the other hand, if the family foundation is set up before then on the basis of a founding deed,the family foundation is set up before then on the basis of a founding deed, this rule does this rule does not apply and there is no legal factor preventing the foundation having multiple founders. not apply and there is no legal factor preventing the foundation having multiple founders. However, in either case, the document must be notarized, However, in either case, the document must be notarized, and whetherand whether it is the founding it is the founding deed itself, or the will containing the family foundation foudeed itself, or the will containing the family foundation founding deed, it will only be valid nding deed, it will only be valid and effective if this requirement is observed. and effective if this requirement is observed.
The founder specifies the precise goal of the family foundation in the statute, but nonetheless the family foundation assets will be managed and will generate benefits for nonetheless the family foundation assets will be managed and will generate benefits for tthe named beneficiaries. This is because the family foundation is a legal person created he named beneficiaries. This is because the family foundation is a legal person created to concentrate and manage the assets in a manner that is in the beneficiaries’ interest, to concentrate and manage the assets in a manner that is in the beneficiaries’ interest, and and to eto ensure that they generate benefits. This benefit is understood to be assnsure that they generate benefits. This benefit is understood to be assets such ets such as cash, tangible items, or rights, transferred to the beneficiary or handed over to the as cash, tangible items, or rights, transferred to the beneficiary or handed over to the beneficiary for use by the family foundation or a family foundation in organization, in beneficiary for use by the family foundation or a family foundation in organization, in accordance with the statute and beneficiary list. Due to being definedaccordance with the statute and beneficiary list. Due to being defined in this way, the in this way, the goals of the foundation are strictly material and designed to provide benefits, even of goals of the foundation are strictly material and designed to provide benefits, even of great value, for particular people, and are not intended as a form of interim assistance great value, for particular people, and are not intended as a form of interim assistance or charity for those seeking help. A family foundation is toor charity for those seeking help. A family foundation is to bebe provided with assets for the provided with assets for the purpose of generating benefits for the entitled foundation beneficiariespurpose of generating benefits for the entitled foundation beneficiaries[5] .
The name of the foundation may be chosen at will, as long as it includes the phrase Fundacja RodzinnaFundacja Rodzinna, and this may be abbreviated to , and this may be abbreviated to FRFR.. The foundation must be The foundation must be registered in the family foundation register kept by the Piotrków Trybunalski Regional registered in the family foundation register kept by the Piotrków Trybunalski Regional Court. While this is a different register to the National Court Register (NCR), lawmakers hile this is a different register to the National Court Register (NCR), lawmakers acknowledge that the family foundation register is modeled on the NCR, and therefore it acknowledge that the family foundation register is modeled on the NCR, and therefore it will have many solutions in common with the NCR. Unlike records in the NCR, family will have many solutions in common with the NCR. Unlike records in the NCR, family foufoundation registry records can only be accessed by the founder, a member of a ndation registry records can only be accessed by the founder, a member of a managing body, a beneficiary, or person with a legal interest, and the records are managing body, a beneficiary, or person with a legal interest, and the records are reviewed in the presence of a registry court official. In the case of a person with a reviewed in the presence of a registry court official. In the case of a person with a legitimate legitimate legal interest, this interest must be demonstrated, and stating a reason at legal interest, this interest must be demonstrated, and stating a reason at random is not sufficient.random is not sufficient.
The founder contributes assets to the family foundation to cover the founding deed, and the value of the assets is stated in the statute. This cannot be lthe value of the assets is stated in the statute. This cannot be less than PLN 100 000. ess than PLN 100 000. Also, the founder is required to draw up an inventory of the assets contributed to the Also, the founder is required to draw up an inventory of the assets contributed to the family foundation to cover the founding deed. This inventory must be in writing to be family foundation to cover the founding deed. This inventory must be in writing to be valid.
The family foundation may conduct business activity as defined in art. 3 of the Business activity as defined in art. 3 of the Business Act of 6 March 2018Act of 6 March 2018[6], which means gainful activity performed continually on someone’s , which means gainful activity performed continually on someone’s own behalf, and this activity may only be:own behalf, and this activity may only be:
- disposal of property unless acquired solely with a view to being resold;disposal of property unless acquired solely with a view to being resold;
- rent orent or lease of property, or making the property available for use on some other r lease of property, or making the property available for use on some other basis;basis;
- acceding to commercial companies, investment funds, cooperatives and similar acceding to commercial companies, investment funds, cooperatives and similar entities with their registered office in Poland or elsewhere, and participation in entities with their registered office in Poland or elsewhere, and participation in such companiesuch companies, funds, cooperatives, and entities;s, funds, cooperatives, and entities;
- purchasing and selling securities, derivatives, and similar rights;purchasing and selling securities, derivatives, and similar rights;
- granting loans to:granting loans to:
a) capital companies in which the family foundation holds shares,
b) partnerships in which the family foundation is a partner;
c) beneficiaries; - trading in foreign tender owned by the family foundation for the purpose of making trading in foreign tender owned by the family foundation for the purpose of making payments related to the family foundation’s business activity;payments related to the family foundation’s business activity;
- producing plant and animal products other than through industrial processes, producing plant and animal products other than through industrial processes, except processed except processed plant and animal products obtained plant and animal products obtained in agriculturalin agricultural production production special units and products subject to excise tax, provided that a minimum of 50% of a particular product is produced using plant or animal products that the family the family foundationfoundation has grown, bred, orhas grown, bred, or reared itself;
- forest management.
The managing bodies of a family foundation closely resemble those of capital companies. The only major difference is that a family foundation is a gathering of companies. The only major difference is that a family foundation is a gathering of beneficiaries including natural persons or NGOs, i.e. the enbeneficiaries including natural persons or NGOs, i.e. the entities for which the foundation tities for which the foundation is intended to provide benefitsis intended to provide benefits[7].
A family foundation is a means for succession hitherto not known in Polish law but to some extent expected. At the moment it is difficult to determine definitively how quickly some extent expected. At the moment it is difficult to determine definitively how quickly this institution will become commonplace and how many business owners will make this institution will become commonplace and how many business owners will make use use of this instrument. It is also not clear how this foundation will function in the long run, in of this instrument. It is also not clear how this foundation will function in the long run, in particular in view of sometimes difficult family situations. Hopefully, however, on the one particular in view of sometimes difficult family situations. Hopefully, however, on the one hand a family foundation will be a means of ending family disputehand a family foundation will be a means of ending family disputes concerning s concerning succession in businesses, and on the other it will enable many firmly established and succession in businesses, and on the other it will enable many firmly established and reputable companies in Poland to be preserved and remain in the family’s hands reputable companies in Poland to be preserved and remain in the family’s hands
[1] Civil Code of 23 April, 1964 (Journal of Laws of 2023, item 1610).
[2] Commercial Companies Code of 15 September, 2000 (Journal of Laws of 2022, item 1467, as amended).
[3] Journal of Laws item 326, as amended.
[4] See Skreczko, Prawne aspekty funkcjonowania fundacji rodzinnej, BISP 2023, no. 2.
[5] P. Blajer, Kwestie zasadnicze związane z Fundacją Rodzinną [in:] Fundacja rodzinna. Pytania i odpowiedzi, Warsaw 2023.
[6] Business Act of 6 March, 2018 (Journal of Laws item 221, as amended).
[7] See Skreczko, Prawne aspekty funkcjonowania fundacji rodzinnej, BISP 2023, no. 2.
