The Disposition of Assets Upon Failure to Register a Family Foundation: A Critical Analysis of Polish Legislative Deficiencies
I. Introduction: The Liminal Status of the Family Foundation in Organization
The family foundation in organization (fundacja rodzinna w organizacji) constitutes a sui generis legal construct under Polish law—a transitional vehicle occupying the temporal interstice between the execution of the founding instrument or the publication of a testamentary disposition and the ultimate entry into the Register of Family Foundations maintained by the Regional Court in Piotrków Trybunalski. This interim phase, though deliberately conceived by the legislature, presents formidable challenges that warrant sustained scholarly attention.
The juridical status of this organizational form demands careful elucidation. While the family foundation in organization has not yet attained full legal personality, the governing statute confers upon it legal capacity sufficient to manage assets in its own name, acquire rights—including real property ownership and other in rem interests—assume obligations, and possess standing to sue and be sued. This construction corresponds to the conceptual framework of “defective legal personality” (ułomna osobowość prawna), a doctrinal category already familiar to Polish jurisprudence through analogous provisions governing companies in formation under the Commercial Companies Code.
During this critical juncture, representational authority vests in the founder, a duly appointed attorney-in-fact, or—in exceptional circumstances where the foundation originates from testamentary disposition—the management board designated by the testator.
From a practical standpoint, the family foundation in organization functions as a substantially operational entity. It may establish banking relationships, acquire assets, and conduct property management activities, albeit within circumscribed parameters. Specifically, while the foundation may administer its patrimony, the prevailing interpretation suggests it lacks authority to alienate those assets constituting coverage of the founding capital. During this period, the entity may obtain requisite identification numbers (REGON, NIP) and establish both banking and brokerage accounts.
This transitional status, notwithstanding its intentional legislative design, may in practice generate serious legal and fiscal complications. Particularly problematic is the scenario wherein, for various reasons, dissolution of a family foundation in organization becomes necessary—one that has already accumulated substantial assets yet ultimately failed to secure registration. Such circumstances precipitate fundamental questions regarding the fate of these assets and the appropriate mechanisms for their disposition.
II. Dissolution Triggers: When Time Expires
Empirical observation reveals that circumstances precipitating dissolution of family foundations in organization occur with greater frequency than initially anticipated. Consider a representative case: A family executes the founding instrument before a notary in January. Despite genuine intentions, unforeseen circumstances—the principal founder’s illness, difficulties in compiling requisite documentation, and escalating familial disputes concerning the foundation’s structure—prevent timely submission of the registration application. By August, the family recognizes the gravity of their situation, yet the statutory six-month period has irrevocably elapsed.
Pursuant to the categorical mandate of Article 85 of the Family Foundation Act, the family foundation in organization dissolves ex lege upon expiration of this period. The statutory deadline is absolute and preclusive in character—no provision exists for extension, restoration, or any form of restitution. Significantly, the limitation period commences invariably from the date of the original founding instrument’s execution, irrespective of any subsequent amendments, corrections, or addenda thereto. The second ground for dissolution arises upon a final and unappealable judicial refusal of registration.
III. The Bifurcated Path: Dissolution With or Without Liquidation
At this juncture, one encounters the fundamental distinction established by Article 91 of the Act, which determines the manner of terminating the legal existence of a family foundation in organization. Dissolution may proceed according to two alternative scenarios, with the dispositive criterion being the foundation’s capacity for immediate and complete satisfaction of obligations to beneficiaries and third parties.
Where the foundation conducted no active operations throughout its organizational existence, incurred no financial obligations, and preserved the contributed assets in their original state, the simplified procedure applies. This mechanism entails a straightforward restitution of assets to the parties who originally contributed them, whereupon the foundation’s existence definitively terminates. The moment of dissolution in the simplified procedure is marked by the completion of the “final settlement”—an act of factual character that nonetheless produces far-reaching legal consequences.
IV. A Fundamental Legislative Deficiency
It is precisely at this analytical juncture that the problematic dimension of the entire regulatory scheme becomes manifest. The introduction of a simplified dissolution procedure for a legal entity not subject to formal liquidation proceedings, coupled with the conditioning of its legal personality’s cessation upon an inherently unverifiable factual act—namely, the “final settlement”—constitutes a legislative solution that invites fundamental dogmatic objections.
The question arises: How might one verify with certainty in legal commerce that a particular settlement genuinely possesses “final” character? How does one distinguish a settlement that is truly conclusive from one that merely appears to terminate the foundation’s affairs but may subsequently reveal additional, previously unknown obligations?
Predicating the dissolution of a legal entity possessing defective personality upon a criterion incapable of objective verification may generate substantial practical difficulties with systemic ramifications. Particularly acute is the risk associated with the emergence—following the putative dissolution of the family foundation in organization—of additional, previously unknown obligations. Such circumstances would produce a legally paradoxical situation wherein an entity that theoretically ceased to exist would require “reactivation” to satisfy newly discovered liabilities, or—more precisely—one would be compelled to conclude that the entity was never dissolved, as the prior settlement lacked finality.
Such “phantom legal persons,” capable of spontaneous materialization in legal commerce depending upon unforeseeable factual circumstances, represent a systemic anomaly difficult to reconcile with fundamental principles of legal certainty. This solution introduces an element of legal unpredictability that may produce far-reaching consequences for participants in commercial transactions, as well as for public administrative authorities and courts charged with applying the law.
From the foundation’s perspective, the prudent course involves conducting formal liquidation proceedings, with the understanding that simplified dissolution represents an additional, facultative pathway that does not preclude a deliberate election to undertake formal liquidation procedures.
V. Liquidation Procedure: Practical Challenges
The procedure for terminating the legal existence of a family foundation in organization becomes considerably more complex when the entity cannot immediately and fully satisfy claims of beneficiaries and third parties. Such circumstances may arise from various causes—perhaps the foundation has already disbursed initial benefits to beneficiaries, contracted with external professional service providers, or assumed other financial obligations encumbering its assets. Under these conditions, the statute mandates comprehensive liquidation proceedings, with dissolution of the family foundation in organization occurring only upon the beneficiaries’ assembly’s approval of the liquidation report.
The mere initiation of liquidation proceedings engenders a series of fundamental practical dilemmas. The first question concerns personnel: Who should serve as liquidator? Where a management board exists, the statute resolves this matter unambiguously—board members automatically assume the role of statutory representatives in their capacity as liquidators. Complications arise, however, where no board has been appointed or where board members decline to serve in this capacity.
VI. Legislative Ambiguity Regarding Liquidator Appointment
In such circumstances, Article 91(1) of the Act provides that the founder, the beneficiaries’ assembly, or the registry court shall appoint one or more liquidators. This formulation, however, leaves unresolved a fundamental interpretive question concerning the hierarchy of appointing authorities. The provision fails to clarify whether the enumerated entities possess concurrent authority (operating under the principle prior tempore, potior iure), or whether the sequential enumeration implies that authority devolves to each successive entity only upon the preceding entity’s failure to exercise its prerogative.
The former interpretation—presuming concurrent authority—appears more consonant with the provision’s literal text, yet simultaneously produces a systemically undesirable outcome. Where multiple authorized entities act simultaneously, competency conflicts may arise for which the statute provides no resolution mechanism. The conferral of identical authority upon multiple distinct entities without establishing priority rules constitutes a legislative deficiency that may, in practice, engender decisional paralysis or legal disputes.
VII. The Problematic Removal and Replacement of Liquidators
Within the context of multiple entities authorized to appoint liquidators of a family foundation in organization, the derivation from existing provisions of principles governing liquidator removal and replacement proves equally problematic. According to the fundamental principle of entity organization, the authority competent to appoint an organ or legal representative should likewise possess competence to effect its removal.
However, assuming concurrent appointment authority, a systemically unacceptable situation arises wherein—for example—a founder could remove a liquidator appointed by the registry court, thereby creating competency chaos.
This issue represents yet another domain requiring legislative clarification. Considerations of commercial certainty militate in favor of a construction whereby the registry court alone should possess authority to effect changes in the foundation’s representation during the liquidation period.
VIII. Standing and Representational Legitimacy
Here, however, one confronts the most practical—and simultaneously most consequential—challenge of the entire liquidation proceeding. The family foundation in organization, despite possessing defective legal personality, appears in no public register. How, then, may a liquidator credibly demonstrate legal authorization before external institutions—notaries, banking institutions, and public administrative authorities?
Commercial practice demonstrates that a substantial proportion of institutions lack preparedness to service such a specialized legal entity. Banks may decline to execute financial transactions, citing inability to verify the representative’s authority. Notaries exhibit natural reluctance to execute notarial instruments on behalf of an entity of indeterminate registration status. Public administrative offices frequently lack established procedures for such cases.
In essence, this entity no longer operates pursuant to a valid founding relationship, yet one must conclude that, since a family foundation undergoing liquidation retains full legal personality, a family foundation in organization—whether during liquidation proceedings or during dissolution without formal liquidation—should similarly retain its defective legal personality.
IX. The Impermissibility of Asset Transfer to Third Parties
This question demands categorical resolution: no formal legal basis exists for the transfer of assets belonging to a family foundation in organization undergoing dissolution to any third parties—whether a newly established family foundation or other legal entities. Such disposition would be legally ineffective by reason of the strictly circumscribed scope of authority vesting in entities acting on behalf of the family foundation during this particular legal phase.
A. Competency Limitations Arising from Juridical Status
Fundamental significance attaches to proper understanding of the legal situation in which a family foundation in organization finds itself following the occurrence of dissolution grounds. Although this entity possesses defective legal personality and retains capacity to hold rights and bear obligations, upon the failure of registration—whether through expiration of the six-month period or by final judicial refusal—one must conclude that a radical narrowing of the authority of persons entitled to represent the foundation ensues.
Systemic considerations support the proposition that liquidators of a family foundation in organization lack legal authorization to undertake any actions exceeding the strictly construed liquidation scope. The catalog of their competencies should encompass exclusively: first, satisfaction of foundation creditors within the limits of available assets; and second, restitution of assets to entitled parties in accordance with the imperative provisions of the Family Foundation Act.
B. The Applicability of Management Board Provisions
The statute provides that provisions concerning management board members apply mutatis mutandis to liquidators of a family foundation. This appears prima facie to confer upon them the right to conduct affairs and represent the foundation, with the inability to restrict these competencies vis-à-vis third parties—as the provision explicitly states. Following this logic, liquidator transactions with counterparties acting in good faith are recognized by the statute as legally effective liquidation activities.
Nevertheless, mechanical transposition of these regulations to foundations in organization would produce a result difficult to accept from the standpoint of systematic interpretation. Such a foundation, by definition lacking full legal personality, operating without a final registry court decision, and lacking a valid legal basis for continued operation, would receive in the person of a liquidator a plenary representative possessing full managerial competencies.
C. The Principle of Proportional Representation
Such an interpretation would contravene the fundamental principle of corporate law, according to which the scope of representation should maintain strict correlation with the degree of formalization and stability of the given entity’s legal existence. A foundation in organization, as a provisional and incomplete legal construct, should not during liquidation possess legal instrumentalities equivalent to those of entities with established registration status and judicially confirmed capacity to conduct operations.
One must seek an interpretation of the provisions that effectively prevents abuse of legal instruments—which would undoubtedly occur were a liquidator permitted to undertake unlimited juridical acts in the name of an entity appearing in no public register and subject to no external institutional oversight. Only such an interpretive approach ensures equilibrium between the necessity of efficient liquidation and the imperative of protecting commercial certainty.
D. The Technical Character of Liquidation Activities
Consequently, all actions that may be undertaken with respect to assets of a family foundation in organization possess strictly technical character and derive directly from statutory provisions governing liquidation proceedings. The spectrum of these activities is limited to two fundamental categories: restitution of assets to the founder or other persons who originally contributed them to the foundation, and discharge of financial obligations previously assumed by the foundation in organization during its operations.
Any attempt to transfer foundation assets in organization to third parties must be assessed as acting ultra vires, exceeding the scope of liquidation authority. Such juridical acts would be affected by the vice of absolute nullity by reason of lack of legal authorization on the part of the statutory representative (liquidator) effecting the disposition.
The assets of a family foundation in organization that failed to obtain registry entry are therefore subject exclusively to restitution according to the strict rules prescribed by the Family Foundation Act, without any possibility of redirection toward purposes other than those contemplated by the legislature within the liquidation procedure framework.
X. Tax Consequences of Failed Registration
A. Retroactive Loss of CIT Exemption
A family foundation in organization that is not entered in the register within the statutory six-month period, or to which the court has issued a final refusal of registration, becomes subject to a severe tax sanction in the form of forfeiture of entitlement to the corporate income tax exemption. This consequence operates retroactively—with ex tunc effect—encompassing the entire period of the foundation’s operation from its inception.
The practical implications of this provision are far-reaching. The foundation becomes obligated to render comprehensive tax accounting and remit tax on all income generated throughout its entire period of operation—calculated from the date of the founding instrument’s execution through the ultimate determination of the impossibility of obtaining registry entry. This obligation encompasses all asset operations conducted by the foundation, regardless of whether realistic prospects for successful completion of the registration process existed at the time of their execution.
This punitive legal construction may produce situations wherein a foundation—acting in good faith and with reasonable expectations of obtaining registration—ultimately bears substantial tax burdens on operations originally intended to be tax-neutral.
B. Asset Restitution: Tax Neutrality
In contradistinction, the restitution of assets contributed toward the founding capital of a foundation that ultimately failed to come into existence should not generate tax consequences under the income tax statutes. In such circumstances, assets physically return to the original contributor—the person who made the contribution—and from an economic standpoint should be treated as a return of one’s own resources.
C. Application of the Substance Over Form Doctrine
Critical significance attaches here to the application of the fundamental tax law principle of substance over form. Guided by this interpretive directive, one must conclude that the analyzed transaction essentially never occurred in a tax sense. The situation may be characterized as follows: assets were temporarily transferred to an entity that was to transform in the future into a full-fledged owner-beneficiary, but ultimately—given the impossibility of realizing this objective—had to return the assets to the original owner, having obtained no actual ability to dispose of them.
In light of the foregoing, the asset restitution operation should be treated as a technical-administrative act restoring the legal status existing prior to the creation of the foundation in organization, and thus devoid of any income tax consequences for the party recovering its assets.
D. VAT Implications: Non-Fulfillment of the “Supply of Goods” Definition
In the case of a family foundation in organization that was not ultimately registered, a legal situation arises requiring special characterization under value-added tax provisions. Analysis of the economic substance of the entire process leads to the conclusion that neither the original transfer of assets to the family foundation in organization nor their subsequent restitution fulfills the definition of “supply of goods” within the meaning of the VAT Act.
Fundamental significance attaches to the fact that the family foundation in organization never acquired actual authority to dispose of the transferred assets as owner. This entity possessed only limited powers of asset management, without the capacity for alienation or any definitive disposition thereof. Consequently, upon the occurrence of dissolution grounds, the founder or liquidator acting on behalf of the foundation in organization possesses only a technical obligation to return assets to the original owner, without any decisional autonomy regarding asset disposition.
E. Absence of Transaction’s Economic Substance
The pivotal argument supporting the absence of VAT liability is the complete lack of economic substance characteristic of a classical supply of goods. The asset transfer to the foundation was intended to accomplish a specific economic objective—the creation of a permanent asset structure serving foundation purposes. This objective is, however, definitively frustrated by the occurrence of circumstances described in Article 85 of the Family Foundation Act, producing a situation wherein the original economic premise of the transaction cannot be realized.
F. Practical Consequences and Adjustments
The foregoing analysis leads to the conclusion that asset restitution from a family foundation in organization that was not registered is not subject to VAT. Moreover, if VAT invoices were issued upon the original contribution of assets to the foundation, their correction becomes necessary, as it ultimately appears that the event constituting the taxable basis did not occur.
The above considerations regarding VAT neutrality upon asset restitution from a family foundation in organization apply exclusively to situations in which the original asset contribution to the foundation was subject to value-added tax in the first instance. It must be emphasized that not every contribution of assets to a family foundation entails VAT liability—taxability is determined in each case by the totality of factual circumstances, particularly the character of the transferred assets and the tax status of the contributing party in the context of the right to deduct input tax upon the original acquisition of the given asset.
G. Exception: Asset Disposition Prior to Liquidation
The situation changes radically, however, where the foundation in organization managed to dispose of a portion of its assets prior to the commencement of liquidation proceedings. Under such circumstances, no legal basis exists for invoice correction, as an actual economic transfer of goods to third parties has occurred. Additionally, such an operation may generate income subject to taxation, further complicating the tax accounting of the entire liquidation proceeding.
A separate topic concerns the extent to which a family foundation in organization may dispose of assets—for purposes of this analysis, we assume this is permissible with respect to assets not designated as coverage for the founding capital, provided the disposition falls within the bounds of managing possessed assets in its own name and ensuring their protection.
XI. Systemic Deficiencies in the Legal Framework
Analysis of family foundation dissolution in organization reveals fundamental structural defects in the new regulation, rendering this domain one of the most problematic in the entire Family Foundation Act. Although the legislature formally prescribed applicable procedures, in practice it left unresolved a series of key systemic questions, generating legal uncertainty and application difficulties.
A. The Dogmatic Deficiency of Legal Entity “Disappearance”
The most acute weakness of the entire regulation is the conception according to which a defective legal person—the family foundation in organization—may simply “disappear” (one struggles to find a more apt description of this legal phenomenon) upon completion of a factual act, namely the “final settlement.” Tethering the cessation of legal personality to an act inherently incapable of precise verification invites serious objections from the standpoint of legal doctrine.
This construction precipitates questions of fundamental character: How may one determine with complete certainty that a given settlement genuinely possesses “final” character? What becomes of the foundation’s legal personality upon the emergence—following putative dissolution—of additional obligations previously unknown?
B. The Problem of “Phantom Legal Persons”
The foregoing questions lead to an even more troubling phenomenon—the possibility of “phantom legal persons” existing in legal commerce whose juridical status depends upon adventitious factual circumstances. Such entities may spontaneously materialize in the legal system depending upon the discovery of new obligations, creating a situation of unpredictability antithetical to fundamental principles of legal certainty. A properly constructed legal system should avoid creating such defective legal personalities of indeterminate status.
C. Systemic Incoherence in Tax Law
An additional layer of problems arises from the lack of systemic coherence regarding the tax consequences of dissolving a family foundation in organization. On one hand, such a foundation must—pursuant to Article 6(9) of the Corporate Income Tax Act—render tax accounting for all income generated during its period of operation, which suggests treatment as an actual tax subject throughout its existence.
On the other hand, in the context of asset restitution, we assume complete tax neutrality of this act, treating it as though the family foundation had never existed in legal and economic reality. This dichotomous approach—simultaneously recognizing and negating the entity’s existence for different tax purposes—produces internal systemic contradictions.
D. Pragmatic Approach Versus Systemic Coherence
It must be emphasized, however, that confronted with the imperfections of statutory regulation, we seek above all such interpretive solutions regarding tax consequences as remain closest to the economic sense of the transactions at issue. Such a pragmatic approach, although it does not achieve complete systemic coherence of adopted theoretical assumptions, permits avoidance of the most irrational tax consequences for commercial participants.
This conscious theoretical inconsistency represents the price one must pay for the attempt to function rationally within an imperfectly constructed legal system, where the priority becomes achieving results consonant with the economic logic of transactions, even at the cost of doctrinal elegance.
XII. Risk Minimization Strategy
A rational strategy under current legal conditions would appear to involve adopting a conservative approach consisting of limiting the assets of a foundation in organization to the functional minimum necessary for operational activity. Larger asset transfers—particularly those involving assets of substantial value or complex legal structure—should be deferred until after obtaining final entry in the family foundations register.
Such an approach, though it may appear excessively cautious and restrictive of estate planning flexibility, permits avoidance of legal and tax complications. In the event of unsuccessful registration, founders will thereby avoid the necessity of resolving complex issues associated with accounting for substantial assets within the liquidation procedure for a foundation in organization.
XIII. Conclusion: The Imperative for Legislative Reform
The ultimate conclusion flowing from this analysis is the identification of an urgent need for legislative intervention aimed at remedying the most serious structural defects of the current regulation. Priority areas for reform should include: first, precise definition of the moment of dissolution in the simplified procedure, departing from the problematic conception of “final settlement” in favor of a formal decision or entry; second, unambiguous specification of the hierarchy of authority regarding liquidator appointment, with exclusive competence for representation changes vested in the registry court; third, elimination of inconsistencies in the treatment of tax consequences upon dissolution of a foundation in organization; fourth, clarification of the scope of authority of a foundation in organization to dispose of assets, with express differentiation between founding capital and assets acquired during operations; and fifth, introduction of protective mechanisms preventing abuse of representational authority by liquidators.
Confronted with the systemic and interpretive problems herein presented, founders contemplating the establishment of a family foundation find themselves in a position of substantial legal uncertainty—one that will persist until consolidated jurisprudential lines develop in administrative and civil courts. This legal uncertainty should counsel particular caution in decisions concerning asset transfers to a family foundation in organization—that is to say, prior to obtaining registry entry.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
