The question of the moment of expiry of the term of office and the mandate of a member of a family foundation body may seem technical at first glance, but in practice it has serious corporate consequences. After the expiry of the term, without proper appointment to perform the function in a given personal composition, the foundation may face risks regarding the effectiveness of decisions taken and problems in current operation. PLA.partners advises private clients on the proper arrangement of the term cycle of the family foundation’s bodies.
Term of office of a management board member, the basic statutory parameter
The term of office of a management board member of a family foundation lasts, in accordance with the law, 3 years. This is the basic parameter that constitutes the starting point for any considerations on the term cycle of the foundation’s bodies. The statutory length of the management board’s term may be modified in the foundation’s statute, but this requires a conscious decision of the founder and a precise wording.
Maciej Pilarek, attorney and partner at PLA.partners, points out that although three years may seem a long period, in practice the term of office of family foundation bodies elapses faster than founders expect. For this reason it is worth recording the moment of the end of the term with appropriate lead time in the foundation’s corporate service plan.
Mandate of a member of a body, when it actually expires
The mandate of a member of a family foundation body does not always expire exactly on the day of expiry of the term of office. The moment of expiry of the mandate must be anchored in the regulations governing family foundations and in the provisions of the statute. In practice the expiry of the mandate may occur at a different moment than the formal end of the term, which is sometimes a source of misunderstanding.
In projects conducted by PLA.partners this parameter is analysed each time in relation to the specific statute of the foundation. PLA.partners experts help the client establish exactly when the mandates of body members expire and when their re-appointment is necessary.
Consequences of incorrect treatment of the term of office in the foundation’s operation
Incorrect treatment of the term of office of family foundation body members may lead to real corporate problems. Decisions taken by persons whose mandate has already expired may be challenged. Lack of a proper composition of the management board or supervisory board may affect the foundation’s ability to take current decisions and the effectiveness of its actions in legal transactions.
From the private client’s perspective this means that the term cycle of the family foundation’s bodies must be supervised systematically, not on an ad hoc basis. The family foundation is an entity operating in a long horizon, therefore the term cycle is one of the elements of its corporate discipline.
Term cycle and continuity of management of the foundation
From the perspective of the founder and beneficiaries, what matters is not only when the term of office expires but also how to design continuity of management of the foundation. It is necessary to prepare procedures for appointing further body members, set rules for their election and plan the moment when personal changes will be necessary.
In the practice of the PLA.partners team this area is designed together with the family foundation’s statute. PLA.partners experts help design mechanisms ensuring continuity of management, regardless of individual decisions of body members, their resignations or other events affecting the personal composition.
Legal and business consequences for the client
From the decision-making perspective within the family, the term cycle of family foundation body members means:
- a statutory length of the management board member’s term of office of 3 years,
- the option to modify the length of the term in the foundation’s statute,
- a distinction between the moment of expiry of the term and the moment of expiry of the mandate,
- corporate risk resulting from incorrect treatment of the term cycle,
- the need for systematic monitoring of deadlines in the foundation’s bodies,
- the need to design procedures for continuity of management of the foundation.
Possible actions, a plan for the business owner
In the work of the PLA.partners team, designing the term cycle of the family foundation’s bodies involves:
- analysis of the statute provisions concerning the term of office of bodies,
- determining the moments of expiry of the term and the mandate,
- designing procedures for appointing further body members,
- preparing corporate documentation supporting term cycle changes,
- monitoring deadlines as part of the foundation’s ongoing servicing,
- periodic review of the composition of bodies and its adequacy to the foundation’s goals.
Contact PLA.partners Law Firm
Do you need legal support or an individual analysis of your matter? Visit PLA.partners and contact our team, we will help assess the situation and propose specific solutions.
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