As of May 22nd, 2023, Polish law provides for the establishment of family foundations. Thus, it is a relatively new entity in the legal market and, contrary to its name, it is not exclusively for families.
The family foundation is attracting increasing interest, among other things, because of its tax exemption. It can be attractive to family business owners, but can also be used as an investment vehicle.
This article will introduce the basic information about a family foundation, including how it can be established, what documents are necessary for its creation and what its purpose is.

Features and purpose of a family foundation in Poland

The family foundation, regulated by Polish law, has numerous similarities with its foreign counterparts.

As a few of its characteristics, we can point out what follows:

• a family foundation allows the founder to control the assets and prepare the transfer of the management of these assets to successors in the future. Importantly, the founder can transfer the management of the assets (without transferring the ownership of the assets) into the hands of the managers. A family foundation makes it possible to separate the ownership of the assets from the management of those assets.
• a family foundation benefits from tax exemption.
• a family foundation can be a tool to determine how and to what extent individuals (beneficiaries) will benefit from the foundation’s assets.

However, it is important to remember that not in every case will a family foundation be a beneficial solution. Sometimes it can turn out to be a costly trap, so each time the situation requires a case-by-case analysis to determine whether a family foundation in a particular case is a beneficial solution.

The structure of a family foundation will include a founder and beneficiaries, as well as corporate bodies of the family foundation such as a board of directors, a supervisory board (an optional body) and a beneficiaries’ assembly.
According to the regulations, a family foundation is a legal entity established to accumulate property, manage it in the interests of the beneficiaries and fulfill benefits for the beneficiaries. The founder defines the specific purpose of the family foundation in its statute (articles of association).
If the foundation’s beneficiary is an individual, the family foundation may, in particular, cover his living or educational expenses.

The three most important pillars of a family foundation’s operations:

• property (setting rules for its collection),
• management of property (which is done in the interest of beneficiaries, setting the rules of management),
• benefits to beneficiaries (establishing the manner of benefits).

However, it is impossible not to point out one more very important aspect – the tax purpose. It is extremely important for entrepreneurs seeking optimization in this area. A family foundation is an entity that allows multiplying assets with a tax-advantaged perspective – entrepreneurs can receive tax-free distributions from companies, and then tax-free reinvest them in further ventures, including companies, real estate.

A family foundation also makes it possible to protect accumulated wealth from loss due to representatives of the next generation not signing prenups or not preparing thoughtful wills.

Name of the Polish family foundation

According to the regulations, the name of a family foundation can be determined freely, but it must include the additional designation “Family Foundation” (in business, the abbreviated designation “F.R.” can be used).

The designations in the name “Family Foundation” or the abbreviation “F.R.” is reserved by law only for family foundations.

How can a family foundation be established?

To establish a family foundation you need:

• filing a declaration to establish a family foundation in the form of a notarial deed, or
• establishing a family foundation in a will.

The founding (initial) fund of the foundation should be at least 100,000 PLN.

The most important documents when establishing a family foundation in Poland are:

•  the statute (its proper formulation is extremely important to specify the rules of transfer of control and management of the foundation’s assets),
• list of beneficiaries.

In practice, there are two stages of a family foundation – during the life of the founder and the stage after his death. During the life of the founder, it is him who can concentrate most of the rights concerning the foundation and only after his death do these rights pass into the hands of the assembly of beneficiaries or the supervisory board – according to his will.

Activities necessary for the establishment of a family foundation in Poland

The steps you need to take to establish a family foundation are as follows:

• the declaration of the establishment of the family foundation in either the articles of incorporation or the will,
• establishment of the statute (as mentioned above, this is one of the most important documents defining the will of the founder regarding the manner of transfer of control and management of the foundation’s assets),
• drawing up an inventory of assets,
• establishing the bodies of the family foundation required by the law or the statute (according to the law, the obligatory organs are the board of directors and the assembly of beneficiaries, the optional ones are the supervisory board; the statute may, for example, designate the supervisory board as a mandatory body),
• payment of the initial fund prior to entry in the register of family foundations in the case of the establishment of a family foundation by deed of trust, or payment of the initial fund within two years from the date of entry of the family foundation in the register of family foundations in the case of the establishment of a family foundation by will,
• entry in the register of family foundations.

Statute of the family foundation in Poland

The statute of a family foundation is the key document creating the existence of a family foundation and is established by the founder.
Both the articles of association (statute) and the will under which the family foundation is established must be drawn up in the form of a notarial deed.

The statute of a family foundation specifies (mandatory elements):

• the name of the family foundation,
• the seat of the family foundation,
• the specific purpose of the family foundation,
• the beneficiary or the manner of its determination and the scope of the beneficiary’s rights,
• rules for maintaining a list of beneficiaries,
• the rules, including the detailed procedure, for waiving the beneficiary’s rights,
• the duration of the family foundation, if designated,
• the value of the founding fund (may not be less than 100,000 PLN),
• the rules of appointment and dismissal and the powers and duties of the members of the family foundation’s bodies, as well as the rules of representation of the family foundation by the board of directors or by other bodies of the family foundation in the cases indicated by the law,
• the entity authorized to approve the actions of the board of directors of the family foundation in the organization,
• at least one beneficiary entitled to participate in the assembly of beneficiaries,
• rules for amending the statute,
• the allocation of the property of the family foundation after its dissolution, including the determination of the beneficiary entitled to the property in connection with the dissolution of the family foundation.

It is also possible to specify in the statute of a family foundation (in addition to mandatory elements) other issues, such as:

• principles of cooperation or collaboration of the family foundation’s bodies,
• detailed circumstances of dissolution of the family foundation,
• guidelines for the investment of the family foundation’s assets.

If the statute is amended in some part, the amendment is effective when the amendment is entered in the foundation register.

If the declaration made on the establishment of a family foundation would be invalid, this does not affect the validity of the legal actions of the registered family foundation.

Family foundation “in organization”

A family foundation in organization is established upon the execution of the articles of association or promulgation of the will establishing the family foundation.

The name of a family foundation in organization shall include the additional designation “in organization.”

A family foundation in organization:

• manages in its own name its assets and ensures their protection (in particular, it acquires rights, including ownership of real estate and other rights in rem, incurs liabilities, can sue and may be sued in legal proceedings),
• is represented by the founder or an attorney appointed by the founder and, in cases indicated by the law, by the board of directors,
• upon registration in the register of family foundations, it becomes a family foundation and acquires legal personality – it becomes the subject of the rights and obligations of a family foundation in organization.

Registration of a family foundation in Poland

The register of family foundations is kept by the District Court in Piotrków Trybunalski. As soon as the foundation is entered in this register, it acquires legal personality and also becomes the subject of the rights and obligations of a family foundation in organization.

Can a Polish family foundation carry out business activites?

A family foundation may carry out business activities (as defined by the Polish Law of March 6, 2018 – Entrepreneurial Law) but only to a limited extent.

Business activities performed by a family foundation may consist of:

• disposal of property (if the property was not acquired solely for the purpose of further disposal),
•  leasing, renting or providing property for use on any other basis,
• accession to, and participation in, commercial companies, investment funds, cooperatives and entities of a similar nature, established either domestically or abroad,
• acquisition and disposal of securities, derivatives and rights of a similar nature,
• granting loans:
  • to capital companies in which the family foundation holds shares or stocks,
  • to partnerships in which the family foundation participates as a partner,
  • to beneficiaries,
• trading in foreign means of payment belonging to the family foundation for the purpose of making payments related to the activities of the family foundation,
• the production of non-industrially processed plant and animal products (subject to the exceptions provided by the law and only in connection with the family foundation’s farm),
• forest management (exclusively in connection with the family foundation’s farm).

Are you planning to establish a Polish family foundation? Lawyers in Poland can help!

If you are planning to establish a family foundation in Poland, would like to structure your business or are wondering if a family foundation is a good solution for you, just contact us.
We will answer all your questions, help you decide if a family foundation is the solution for you and, if necessary, carry out the process of creating a family foundation or further structuring activities.
Our team has many years of experience in building legal structures in business using both Polish and foreign instruments. We have also been dealing with the subject of family foundations in Western European countries for years.