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How to set up a family foundation? Legal assistance from a law firm

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A family foundation is a specific type of legal entity that is created to accumulate and manage assets in the interests of beneficiaries and to fulfil benefits for beneficiaries. The specific purpose of a family foundation may be further specified in its statutes.

A family foundation can be a valuable tool for both new business activity and control of accumulated family wealth, can build family governance and serve capital accumulation. It enables the family to define long-term goals and missions that can be pursued over multiple generations. Its establishment also requires carefully considered planning and consultation with legal, financial and governance experts.

Our offer

The offer of Skarbiec Law Office includes:

Analysis of the facts and preparation of a succession strategy including the use of a family foundation
Recommendations for the establishment of a family foundation structure
Establishment of a family foundation with complete documentation
Corporate handling of the family foundation
Implementation of tax and reporting obligations of the family foundation
Preparation of an action for annulment of a resolution of a family foundation
Preparation of an action for annulment of a family foundation resolution
Dissolution and liquidation of the family foundation

Why set up a family foundation?

Setting up a family foundation is not taxed
The transfer of assets to a family foundation is not taxed
Income from activities in accordance with the Act is exempt from CIT
A family foundation is exempt from CIT on its activities and other capital gains received from companies of which it will be a shareholder
The beneficiaries of a family foundation who are members of the founder’s immediate family (and the founder himself) are exempt from income tax and do not pay inheritance and gift tax
A family foundation established by a will can be an heir if it is entered in the register within 2 years from the date of the will’s promulgation

Family foundation vs. holding company

A family foundation is somewhat reminiscent of a holding company, the purpose of which would be to manage the assets accumulated by the whole family or by a single owner. However, there are important differences between a foundation and a company.

First of all, a foundation does not have shares – its beneficiaries therefore have no intangible rights in their assets with which to control the foundation. Their powers derive from the content of the articles of association and, together with the articles of association, can be amended. Nor do the beneficiaries have to be members of the same family and the order of succession of the beneficiaries does not have to correspond to the order of succession of the founder.

Procedure for the establishment of a family foundation

Six steps are required to establish a family foundation:

STEP 1: establishment of the Family Foundation

The establishment of a family foundation begins with the writing of a foundation deed, which can take the form of a foundation deed or a will. These are the only two actions to which the law attributes the power to establish a family foundation.

The founder of a family foundation can only be an individual with full legal capacity who has declared the establishment of a family foundation in a foundation deed or in a will.

The status of the founder of a family foundation is not transferable to other persons – it is not inheritable and cannot be transferred by contract. Its exact position in relation to the bodies of the family foundation, will result from the statutes.

Once the founding document has been signed or the will has been opened, a family foundation in organisation is created, which includes the additional designation “in organisation” in its name.

The family foundation in organisation manages its assets, acquires rights, incurs liabilities and may conduct court cases. The persons representing the family foundation in organisation may be the founder or a representative appointed by him. Their responsibility ceases with the approval of their actions by the board of directors.

STEP 2: drawing up the statutes of the family foundation

The next document that should be written in the form of a notarial deed is the statutes of the family foundation. In this document, the name of the foundation, its registered office and the specific purpose of its activities should be specified. It is also important to specify the beneficiary or how the beneficiary is to be designated, as well as the scope of its powers.

Rules for the maintenance of a list of beneficiaries and a detailed procedure for the waiver of powers by the beneficiary should also be established. If the foundation has a specific duration, this must also be indicated in the statute. The document must also contain information on the value of the initial fund.

STEP 3: drawing up an inventory of the property of the family foundation

The first inventory of property, which covers the property rights contributed by the founder or others to the family foundation, must include information about the person requesting the contribution, the type and value of each asset and their tax value, determined on the basis of prices at the time of the contribution. This inventory is used to determine the foundation fund.

Once the inventory has been drawn up, the foundation’s board of trustees is required to update this information regularly with each new contribution of property. The inventory of property is not attached to the application for registration of a family foundation, but must be available and up-to-date in the foundation’s records.

STEP 4: establishment of the bodies of the family foundation required by the law or the statutes

An important prerequisite is that the organs of the family foundation are constituted in accordance with the requirements of the law and the statutes. To this end, it is necessary to set up a board of directors, a beneficiaries’ assembly and a supervisory board if the existence of such a body is required by the law on family foundations or is set out in the statutes, even though there is no obligation to set them up.

If the statutes do not contain any other provisions, the person setting up the foundation has the power to do so by appointing or dismissing the members of the first board of directors, and upon the death of that person, this power passes to the supervisory board, if there is one. If there is no supervisory board, after the death of the founder, the assembly of beneficiaries may decide to appoint or dismiss a member of the board.

If a family foundation is created in a will, the founder specifies in the will who will be a member of the first board. Board members are elected for a three-year term, unless the statutes say otherwise. They may be appointed for successive terms.

The person or group of persons who establishes the foundation may decide that a board of trustees will be appointed. If the number of beneficiaries of the foundation exceeds twenty-five persons, the creation of a supervisory board is necessary.

If the statutes do not provide otherwise, the founder has the right to appoint and dismiss the members of the supervisory board and, after his death, the decisions are made by the assembly of the beneficiaries of the foundation. If a family foundation is established in a will, the founder has the possibility to appoint persons to become members of the first supervisory board.

The same person cannot be a member of the board and the supervisory board at the same time.

STEP 5: contribution of the initial fund

The founder contributes property to the family foundation to cover the founding fund of a value specified in the statutes, but not less than PLN 100,000. This property may include various types of assets, such as real estate, securities, shares in limited liability companies, cash, works of art and others.

According to the regulations, the founder contributes property to cover the founding fund through a type of unnamed contract, with a legal character similar to that of an in-kind contribution to a limited liability company.

In the case of a family foundation established by a will, the contribution of the initial fund may be extended over a period of two years from the date of registration of the foundation in the register of family foundations.

STEP 6: entry in the register of family foundations

When we set up a family foundation, it is when we enter it in the register of family foundations that it is granted legal personality. This register is kept by the District Court in Piotrków Trybunalski.

Proceedings before this court are governed by the provisions of the Act of 17 November 1964. – Code of Civil Procedure, subject to certain separate regulations in the provisions on family foundations.