23 November b.r. a government draft of the Family Foundations Act was received in the Sejm, which was referred to first reading two days later at the session of the Sejm.
The project prepared by the Ministry of Development and Technology together with the Ministry of Finance and social partners concerns the regulation of the organisation and operation of the family foundation, including the duties of the funder and beneficiary.
It responds to requests made by business communities to introduce a new institution into the Polish legal system, which will facilitate succession and allow to reconcile business and private interests interests.
The idea of a family foundation is to assume that family property becomes the property of a foundation and is formally separate from family members. This solution is a means of achieving the objective of running a company for many generations and pursuing the vision of the funder, while providing funding to meet the existential needs of beneficiaries. In addition, it will also allow the entrepreneur (founder) to withdraw from active business activities without losing income from the company's activities.
According to observations of similar solutions adopted in other countries, such foundations reduce the risks to the integrity of family assets and financial liquidity of companies in which the family foundation is owned, while at the same time fulfilling benefits to the beneficiaries of the foundation.
Necessary formalities for establishing a family foundation
Only a natural person with the full capacity for legal acts who will transfer all or part of his family foundation assets will be able to be the founder. This foundation will be created in two ways: either in a founding act or in a will.
If a foundation is established in a will, the drawing up of a founding act and a will will will require maintaining the form of a notarial act under the rigor of nullity. The family foundation will be able to be founded by more than one person, including those not related.
Exceptions in this respect will only be introduced in the case of the establishment of a family foundation on the basis of a will, because under Polish law of succession there is no possibility of drawing up joint wills.
The foundation's assets resulting from the transfer by the funder will be a founding fund which should not be lower than 100,000 PLN.
In addition to the document establishing the foundation, i.e. the founding act or will, the most important document will be the statute. It will regulate the most important aspects of the functioning of the family foundation and the bodies established therein.
The application of the establishment of a foundation to a registered court for the entry in the register of family foundations will be made by the funder and, in the event of the establishment of a family foundation in the will, the board. Once registered, the family foundation will acquire legal personality.
The family foundation will bear joint responsibility for the obligations of the funder created before the establishment of the family foundation.
Consolidated assets of the company
Thanks to the new solutions, the company's assets will not be divided among the heirs, but retained in one hands, which will allow the company to develop its business.
According to the justification for the bill, the introduction of this institution is aimed at avoiding the situation where heirs share the estates and then their descendants divide the property into smaller and smaller parts.
The proposed changes are intended to contribute to the integration and management of assets (capital accumulation) in a way that preserves economic activity and provides livelihoods for future generations.
The aim of the draft law is to comprehensively regulate the retention of capital in the country for many generations and to increase the potential of national investments. The family foundation is to be a solution that minimises the risk of fragmentation of family assets and allows business to continue.
The transfer of the family foundation's assets is intended to protect it from division, allow it to be multiplied, and thus benefit from it, which can be used to cover the cost of living of persons designated by the founder.
The most important issue is to ensure the continuity of the whole company, which could affect the development of the company and increase profits while ensuring that the beneficiaries' life needs are met.
Family foundations are a popular worldwide tool for family company succession. The Polish family foundation is based on such solutions in other European countries (e.g. Austria, Germany, Switzerland, etc.).
Even the name of this institution has been taken from the names of similar solutions operating in other countries and is appropriate to the organisational structure and objectives to be met.
This entity will possess assets which will not be divided and will be secured against the loss and use of assets and incomes from it contrary to the will of the funder (the heir).
In addition, the family foundation can be managed by a professional person who will professionally manage and implement the funder's plan and transfer profits to the company's development and to the private needs of its family members or other eligible persons, which will further minimise the risk of loss of the company's founder and family assets.
New provisions on the establishment of the storage
The new rules will introduce changes to the determination of the maintenance. They aim to enable the family foundation to function.
The new rules will be more flexible, including the rightholder will be able to waive the right to retain, the retainer will be able to be distributed into instalments, the postponement of the payment period and even its reduction (in justified cases).
According to the draft law, the beneficiary, who is at the same time entitled to a retainer, will be able to receive only one of these benefits.
Taxation of the family foundation
The taxation of a family foundation takes account of the beneficiary's family relationship with the funder and will in principle be tax neutral. The establishment of a family foundation and the transfer of assets to it will not be taxed. Family foundations will be subject to a corporate income tax exemption.
However, this exemption will not apply to income tax paid or made available by the family foundation directly or indirectly. In addition, the closest family will be exempt from tax. The others will pay. 15% personal income tax. Beneficiaries who are non-governmental organisations will pay corporate income tax under the present rules.
The entry into force of the new rules is foreseen for the first half 2023 According to the observation of similar solutions (foreign family foundations) adopted in other countries, such foundations reduce the risks to the integrity of family assets and the financial liquidity of companies in which the family foundation is owned, while providing benefits to beneficiaries of the foundation.