According to the Polish family foundation regulations, the structure of a Polish family foundation includes a founder, beneficiaries, as well as corporate bodies of the family foundation such as a board of directors, a supervisory board (an optional corporate body) and an assembly of beneficiaries.
Founder of a Polish family foundation – who is it?
A founder is the settor of a foundation. A Polish family foundation is a legal entity formed for the purpose of accumulating property, managing it in the interests of its beneficiaries, and fulfilling benefits to the beneficiaries. The founder specifies in the articles of incorporation (statute) the specific purpose of the family foundation and indicates how and to what extent particular individuals (beneficiaries) will benefit from the foundation’s assets and how control and management of the foundation’s assets will be transferred in future.
Most important information about the founder:
- the founder of a Polish family foundation can only be a natural person with full legal capacity who has made a declaration on the establishment of a family foundation either in the articles of incorporation or in a will;
- a family foundation may be established by more than one founder, but only if it is established in the articles of incorporation during the lifetime of the founders. A family foundation established in a will may have only one founder.
- a family foundation may not return (to the founder) the property contributed to cover the initial fund either in whole or in part.
Rights and duties of the founder. Polish family foundation
The rights and duties of the founder are non-transferable and are inseparable from the person of the founder. The founder may, in the articles of incorporation (statute), entrust the exercise of his powers to another person, specifying the scope of this entrustment.
If a family foundation was established by more than one founder:
- they exercise the rights and duties of the founder jointly, unless the statute provides otherwise,
- change of the beneficiary or his powers shall be made with the consent of all the founders, unless the statute provides otherwise.
The founder is entitled to address comments, opinions or recommendations to the corporate bodies of the family foundation (the foundation’s board of directors, the beneficiaries’ assembly or the foundation’s supervisory board) regarding its activities.
During the founder’s lifetime, it is usually him who manages the assets of the family foundation (although the founder may regulate this issue differently in the statute). After his death, according to the foundation’s provisions, the management of the foundation’s assets is transferred to another person(s).
Liability for the obligations of the founder and the obligations of a Polish family foundation
As for the liability of the founder for the liabilities of the family foundation, there is a disclaimer – the founder is not liable for the liabilities of the family foundation.
As for the liability of the family foundation for the obligations of the founder:
- the family foundation is jointly and severally liable with the founder for his obligations arising before its establishment, including maintenance obligations (this liability cannot be excluded or limited without the consent of the creditor),
- the family foundation shall be liable for the performance of the maintenance obligation arising after its establishment burdening the founder (in the event that enforcement from the founder’s assets of the maintenance obligation arising after the establishment of the family foundation proves ineffective, the creditor may pursue enforcement from the assets of the family foundation),
- it is possible to bring an action against the family foundation for the fulfillment of the maintenance obligation charged to the founder arising after the establishment of the family foundation, before the execution from the founder’s assets proves ineffective,
- the scope of this liability of the family foundation for the obligations of the founder is limited to the value of the property contributed by the founder according to the state at the time of contribution, and according to the prices at the time of satisfaction of the creditor.
Beneficiary of a Polish family foundation – who can it be?
It is often the case that the founder, when creating the structure of the foundation, designates other persons who are to benefit from the foundation’s assets and other persons who are to manage these assets.
The statute of a family foundation must specify its beneficiary or the method of determining it, that is, the statute may provide a mechanism for appointing beneficiaries who are not explicitly named in the statute. The founder should therefore determine who is to specifically and potentially be the foundation’s beneficiary. This is extremely important in the context of future potential beneficiaries, and a founder who has the authority to determine the conditions that a person must meet in order to enjoy the benefits of a family foundation should pay special attention to this aspect.
The beneficiary does not have to be a family member of the founder. However, if the beneficiary is a member of the founder’s family, he or she enjoys the greatest tax benefits. When it comes to distributions made to immediate family members as beneficiaries, the total taxation is calculated on the amount of the distribution and is 15%. If, on the other hand, the foundation earns much more than it actually pays out to beneficiaries, taxation will occur at a much lower effective level than in the situation of direct inheritance of profit-generating assets, only part of which is consumed.
The beneficiary can be:
- an individual (family or unrelated to the founder) who, according to the statute, may receive a benefit from the family foundation or property in connection with the dissolution of the family foundation,
- a non-governmental organization (Article 3 (2) of the Law of April 24, 2003 on Public Benefit Activity and Volunteerism), which, in accordance with its statute, may receive a benefit from the family foundation or property in connection with the dissolution of the family foundation,
- a founder.
If the beneficiary of the foundation is: - an individual, the family foundation may, in particular, pay his living or educational expenses,
- a non-governmental organization (Article 3(2) of the Law of April 24, 2003 on Public Benefit Activity and Volunteerism) conducting public benefit activity – the family foundation may support public benefit activity as defined by the Law.
List of beneficiaries. Polish family foudnation
According to the regulations, the statute must specify the rules for maintaining a list of beneficiaries. The list of beneficiaries indicates the details of the family foundation’s beneficiaries and their entitlements. The founder may, for example, specify in the statute that the list is to be secret to some extent, e.g. to other beneficiaries. The reservation of non-confidentiality does not apply to the preservation of beneficiaries’ information data, e.g. to tax administration authorities.
The list of beneficiaries must include:
- name or surname of the beneficiary,
- tax identifier (PESEL or NIP number or, if he does not have it, the number and series of his passport or other identity document or other identification number, together with the country of assignment of such number),
- parents’ names,
- the beneficiary’s address of residence or address for service,
- other data necessary to fulfill the benefit to the beneficiary, including information about the beneficiary’s entitlements.
With the consent of the beneficiary, the family foundation may collect other personal data.
Provision to the family foundation of such personal data shall be in the form of a statement by the beneficiary.
The creation, maintenance and updating of a list of beneficiaries based on the information contained in the statute, as well as the fulfillment of the beneficiary’s benefits under it, is one of the basic competencies of the board of directors.
Payments to the beneficiary of a Polish family foundation
Regarding the benefit from a family foundation granted to a beneficiary of a family foundation, it should be pointed out that:
- a benefit from a family foundation may be granted subject to either a condition or a time limit,
- the benefit from the family foundation is realized upon presentation by the beneficiary or the person representing the beneficiary of an identity document,
- the beneficiary, who is to receive from the family foundation a sum of money needed to supplement the reserved amount or to whom the family foundation fulfills the maintenance obligation incumbent on the founder, forfeits the right to receive benefits and property in connection with the dissolution of the family foundation in the part corresponding to this sum,
- the fulfilled benefits to the beneficiary by the family foundation and the property in connection with the dissolution of the family foundation shall be counted towards the fulfillment of the maintenance obligation incumbent on the founder,
- the founder may stipulate that the items accruing to the minor beneficiary from the benefits fulfilled by the family foundation shall not be subject to administration by the parents (if the founder has not appointed an administrator, the administration shall be carried out by a guardian appointed by the guardianship court),
- the fulfillment of a benefit to a beneficiary of a family foundation shall not jeopardize the solvency of the family foundation vis-à-vis its creditors who are not beneficiaries of the family foundation, and shall in each case depend on the current financial situation of the family foundation,
- in the first instance, the family foundation shall satisfy the claims of those to whom the founder has a maintenance obligation,
- if the family foundation cannot satisfy the beneficiaries in full due to obligations to third parties, the board of directors shall make such payments so as not to disadvantage any beneficiary.
Obligations and rights of the beneficiary of a Polish family foundation
The beneficiary’s rights and obligations are non-transferable (except for the beneficiary’s debts). If a beneficiary wishes to waive his or her rights, written form with a notarized signature is required. The waiver of all rights by the beneficiary is equivalent to the relinquishment of beneficiary status.
A beneficiary to whom a family foundation has provided an undue benefit (contrary to the law or the provisions of the statute) is obliged to return the benefit. In a situation where a family foundation has fulfilled such an undue benefit to a beneficiary, the members of the board of directors, shall be jointly and severally liable with the beneficiary for the return of this benefit to the family foundation.
The beneficiary is entitled to:
- address comments, opinions or recommendations to the family foundation’s organs regarding its activities,
- obtain information about the activities of the family foundation in person or through a person authorized by him/her,
- to inspect the documents of the family foundation,
- to provide explanations from the board of directors (the board of directors may refuse to do so if there is a reasonable fear that this right will be used by the beneficiary for purposes contrary to the interest and purpose of the family foundation).
A beneficiary who has been denied an explanation or inspection of the family foundation’s documents, or who has not received an explanation or been provided with documents for inspection within one month from the date of the request, may apply to the registry court to compel the family foundation’s board of directors to provide an explanation or provide documents for inspection.
The beneficiary’s rights to obtain information, inspect documents, and file a request with the registry court to obligate the board of directors to provide explanations or make documents available for inspection shall continue to apply even after the dissolution of the family foundation.
Statute of a Polish family foundation
The articles of incorporation 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 and the will under which the family foundation is established must be drawn up in the form of a notarial deed.
The foundation’s statute is important. This document, among other things:
- determines the will of the founder as to how control and management of the foundation’s assets are transferred,
- determines the circle of persons benefiting from the foundation’s assets,
- determines the scope and manner of beneficiaries’ use of the foundation’s assets.
For a detailed discussion of the procedure for establishing a family foundation in Poland and the elements of a family foundation statute, see the another post on this blog, named “Establishment of a family foundation”.
Planning to establish a Polish family foundation? Lawyers in Poland can help you!
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.
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