The Family Foundation Act entered into force on 22 May 2023

On 22 May 2023, the long-awaited Family Foundation Act came into force, facilitating multigenerational succession. The Act introduces to the Polish legal system a new legal concept of family foundation, which is a legal person. The new rules aim to protect the assets of a family business and enable family businesses to operate in a stable way after the death of the owner or after their retirement. What is a family foundation and how to set it up?

The Ministry of Development and Technology was responsible for the Family Foundation Act of 26 January 2023 (“Act”). The Act was signed by the President on 6 February 2023. The Act introduces to the Polish legal system a completely new legal concept (legal person) – a family foundation, specifying its organization and principles of operations, including the rights and obligations of the founder and beneficiary. The act also regulates the taxation of a family foundation.

What is and what is the purpose of a family foundation?

A family foundation is a legal entity established for the purpose of collecting assets, managing them in the interests of beneficiaries and providing benefits to beneficiaries. In general, the foundation’s task is to protect the assets of the family business, implementing the founder’s vision and providing funds for beneficiaries. Its detailed purpose is defined by the founder in the statute. 

Who can become a founder and beneficiary of a family foundation?

The founder of a family foundation may be:

• only a natural person with full legal capacity,
• a person who made a declaration on the establishment of a family foundation in the founding act or in the will.

This foundation may be established by more than one founder, including unrelated persons. However, if it is founded in a will, then there can be only one founder.

The rights and obligations of the founder are inalienable. However, the founder may entrust the exercise of powers to another person by specifying their scope in the statute.

The beneficiary of a family foundation may be:

• natural person
• public benefit organizations, and
• founder.

Therefore, beneficiaries may be persons related to the founder. It will be possible, for example, to cover the costs of their education. The rights and obligations of the beneficiary are not transferable. However, beneficiaries may waive their rights. However, the renunciation of all rights is tantamount to renunciation of the status of beneficiary.

How to set up a family foundation?

1. The founder makes a declaration of will to establish a family foundation before a notary in the founding act or in the will.
2. A statute laying down the principles of operation of a family foundation is drawn up.
3. An inventory is drawn up.
4. The bodies of the family foundation are appointed.

5. The property is contributed to the founding capital.

• A family foundation is entered in the register of family foundations kept by the court.

What should be specified in the statute of a family foundation?

The statute of the foundation must be drawn up in the form of a notarial deed. It should specify the following:

• name
• registered office
• specific objective
• beneficiary or the way in which it is identified and the scope of the beneficiary’s rights
• value of the founding capital at the time of creation
• principles of operation of the foundation’s bodies
• distribution of the property of the family foundation after its dissolution
• rules for amending the statutes

Assets of the family foundation

To establish a family foundation, it will be necessary for the founder to contribute property to cover the founding capital in the amount of at least PLN 100,000. The founder must make an inventory of the contributed property, which may be money, securities or other property rights.

How the family foundation is liable for the founder’s obligations?

The overriding principle is solidarity – a family foundation is jointly and severally liable with the founder for their obligations arising before its establishment, including the maintenance obligation. It is also liable for the performance of the maintenance obligation imposed on the founder after establishment of the foundation. However, the liability of a family foundation is limited to the value of the property contributed by the founder (at per the prices at the time the creditor is satisfied). The founder alone is not responsible for the foundation’s obligation.

Can a family foundation run a business?

A family foundation may carry out economic activity. However, its scope is limited. As part of its economic activity, the family foundation may:

• dispose of property (unless acquired solely for the purpose of further disposal)
• rent, lease or otherwise make available property for use
• join and participate in commercial companies, investment funds, cooperatives and similar entities having their registered office in Poland or abroad, as well as participate in these companies, funds, cooperatives and entities
• to acquire and dispose of securities, derivatives and rights of a similar nature
• grant loans to companies (in which the family foundation holds shares), partnerships (in which the family foundation participates as a partner) and beneficiaries
• trade in foreign means of payment belonging to a family foundation in order to make payments related to the activities of the family foundation

What are the advantages of a family foundation?

The most important benefits of establishing a family foundation include:

• facilitating multi-generational succession in a family business (advance succession planning)
• protecting the assets of the family business and keeping them “in one hand”
• financial security of family members
• favourable taxation
• effective wealth management and multiplication
• the possibility of withdrawal of the entrepreneur (founder) from active business without losing income
• maintaining the continuity of the family business after death of the owner or after their retirement
• separation of business and family matters

Legal basis:

Act of 26 January 2023 on the family foundation (Journal of Laws, item 326, as amended).

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