The question of who may be the founder of a family foundation comes up in almost every succession project that PLA.partners runs. The answer is precise, but its practical application requires an understanding of the family, business and ownership context. The choice of founder has long term consequences, since it is the founder who records in the statute the will according to which the foundation will operate for the next generations.
Who can be the founder of a family foundation
The founder of a family foundation may only be a natural person with full legal capacity, who has made a declaration on establishing the family foundation in the founding deed or in a will. This is a key formal condition that excludes legal persons, organisational units without legal personality and persons who for various reasons do not have full legal capacity from the role of founder.
Maciej Pilarek, attorney and partner at PLA.partners, points out that this condition is not a formality but an expression of the character of the family foundation as an institution closely tied to a specific person and their will. The statute of a family foundation is a record of the founder’s life decision, which is why the legislator linked the possibility of establishing it exclusively to natural persons.
Founding deed or will as the basis of establishment
A family foundation may be established in two ways. The first is the founding deed, drawn up during the founder’s lifetime, most often in the form of a notarial deed. The second is a will, in which the founder includes a disposition establishing the family foundation.
Each of these routes has its own logic. Establishing a family foundation during one’s lifetime allows the founder to observe its functioning, make corrections and conduct the distribution policy in a direct relationship with beneficiaries. Establishing a family foundation in a will means the foundation comes into being only after the founder’s death, on the basis of the disposition made. In projects conducted by PLA.partners, the first variant is decidedly more common, as it gives the founder greater control and the ability to fine-tune the construction to reality.
Several founders in one family foundation
A family foundation may be established by several founders. This is an important practical option, since it allows joint design of a foundation, for example by spouses or by business partners running a joint venture. Joint foundations, however, require exceptional care in the statute, the competences of bodies and the mechanism for resolving any differences of opinion.
PLA.partners experts design multi-founder foundations with the durability of decisions and predictability of functioning in mind. The statute of such a foundation must resolve detailed issues, including the rules of one founder stepping back, the division of decision-making competences and the mechanism for accounting for the assets contributed by each founder.
Family foundation set up in a will, limit of one founder
If a family foundation is established in a will, it may have only one founder. This is an important practical limitation. It means that couples and groups of persons who want to jointly establish a family foundation cannot do so through the testamentary route. The founding deed prepared during one’s lifetime must be used instead.
In the practice of the PLA.partners team this parameter is significant especially in the case of spouses planning to jointly secure their family. Usually then the founding deed is chosen, not the testamentary variant.
Legal and business consequences for the client
From the decision-making perspective in a private company, the choice of founder means:
- the need for the founder to meet the requirement of full legal capacity,
- choice of the route of establishing the foundation, founding deed or will,
- the option to jointly establish a foundation by several founders, but only outside a will,
- statute related consequences resulting from the number of founders,
- tax consequences of contributing assets by different founders,
- liability of the foundation for the founder’s obligations within a defined scope.
Possible actions, a plan for the business owner
In the practice of the PLA.partners team, the decision on the choice of founder involves:
- defining the foundation’s purpose and the circle of persons that have a real influence on its design,
- analysis whether in a given family the natural founder is one person or the multi-founder variant is indicated,
- choice of the route of establishment, founding deed or will,
- design of the statute taking into account the structure of founders and their competences,
- assessment of the tax consequences of contributing assets by different founders,
- implementation schedule covering the contribution of the founding fund and subsequent asset contributions.
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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