Polish family foundations
A Polish family foundation is one of the most advanced wealth planning vehicles available under Polish law. It is designed primarily for entrepreneurs, business owners and private investors seeking to preserve and grow family wealth, ensure continuity of governance and implement a long-term succession strategy.
When properly structured, a family foundation separates ownership from the day-to-day management of the business. This helps reduce succession and governance risks while providing a stable legal framework for preserving family assets across generations.
Strategic Design of a Family Foundation
Establishing a Polish family foundation is far more than a registration procedure. It is a strategic process that requires careful analysis of the family’s assets and relationships, ownership structure and long-term succession objectives.
Every project begins with understanding the family’s business model, wealth planning objectives and long-term vision for both the business and the family.
A well-designed family foundation should reflect the founder’s approach to managing wealth, preserving the family’s values and ensuring the continuity of ownership across future generations.
Family Governance and Control of Strategic Assets
A properly structured Polish family foundation enables the founder to retain control over key assets while ensuring long-term organizational stability. It helps reduce the risks associated with unstructured succession, ownership disputes and the fragmentation of family wealth.
A family foundation creates a durable ownership framework based on clear governance principles, well-defined responsibilities and effective control mechanisms, supporting the long-term preservation and management of family assets.
The Foundation Charter as the Cornerstone
of Family Governance
The Polish Family Foundation Act gives founders considerable flexibility in determining how a family foundation operates. The foundation charter becomes the principal legal instrument for shaping the family’s governance framework, defining the powers of its governing bodies, decision-making mechanisms and the rules governing distributions to beneficiaries.
Carefully drafted charter provisions are essential to the long-term stability and effectiveness of the foundation. The flexibility offered by Polish law allows founders to tailor governance arrangements to a far greater extent than is possible in many other legal structures.
When properly designed, the foundation charter provides an effective framework for protecting the interests of both the founder and future generations, supporting the family’s business objectives as well as its private wealth planning strategy.
Ongoing Legal Support and Adaptation to a Changing Legal Environment
A Polish family foundation requires not only careful structuring at the outset but also ongoing legal support. This includes monitoring legislative developments and, where appropriate, contributing to professional and academic discussions on the future development of family foundation law.
The Firm provides ongoing legal advice covering the operation of the foundation’s governing bodies, amendments to the foundation charter and the adaptation of the structure to changing legal, business and family circumstances.
The objective is to ensure that the family foundation remains an effective wealth management and governance vehicle rather than merely a formal legal structure.
In the long term, the focus is on preserving a coherent ownership structure, supporting the growth of family wealth and ensuring the stable management of family assets across generations.
FAQ
1. Is a Polish family foundation the right solution for me?
A family foundation is not the right solution in every situation. Whether establishing one is appropriate depends on the value and composition of the assets, the complexity of the ownership structure, family relationships and the intended succession model.
The Polish family foundation, introduced into the Polish legal system by the Family Foundation Act of 26 January 2023, is designed primarily for:
- owners of businesses of substantial value (typically worth several to several dozen million PLN)
- multi-entity business structures
- families planning succession across multiple generations
- business owners where there is a risk of fragmentation of shareholdings following the owner’s death
The minimum founding fund is PLN 100,000. In practice, however, establishing a family foundation generally makes sense where the value of the assets involved is significantly higher.
A discussion about establishing a family foundation usually begins with an analysis of the founder’s objectives and their long-term vision for managing the family’s assets.
2. How can a family foundation be structured without losing effective control over the business?
The key element is the proper drafting of the family foundation’s statutes, including a clear allocation of powers among its governing bodies and the definition of the relationships between them.
Maintaining effective control depends, among other things, on:
- the provisions of the statutes
- the structure and powers of the foundation’s governing bodies
- reserving certain powers to the founder
The Polish Family Foundation Act allows, among other things:
- the founder to be granted the right to appoint and dismiss members of the management board
- the establishment of a supervisory board (which is mandatory where the number of beneficiaries exceeds 25)
- the specification of matters requiring the consent of a particular governing body
- the introduction of enhanced approval requirements for key decisions
Every family and asset structure requires an individually tailored approach. The governance mechanisms can therefore be designed to reflect the founder’s particular circumstances, objectives and long-term plans.
With an appropriately structured governance framework, the founder can retain effective influence over strategic decisions concerning both the family assets and the business.
3. Can a family foundation help resolve potential family conflicts?
A family foundation can establish mechanisms and forums for exchanging views and developing decisions jointly. It does not eliminate differences of interest, but it can provide a framework in which different interests are recognised and taken into account. The structure of a family foundation makes it possible to introduce clear rules of responsibility, decision-making mechanisms and transparent rules for the distribution of benefits to beneficiaries.
A family foundation can, among other things:
- introduce formal decision-making mechanisms
- separate ownership from day-to-day management
- define clear rules for the distribution of benefits
- establish rules governing participation in the foundation’s governing bodies
In practice, many disputes arise from the absence of clearly defined rules concerning ownership and responsibility. A well-designed family foundation brings structure to these matters and introduces flexible mechanisms for responding to changing needs. This can significantly reduce the risk of disputes and allow the family to focus on its long-term objectives.
An appropriately designed structure, taking into account the actual needs of individual family members, can therefore provide a framework for structured cooperation. Succession through a family foundation is, above all, an organizational process. It can also create an opportunity to actively involve family members and strengthen cooperation and relationships between them.
4. How excessive formalization of a family foundation can be avoided?
Overly detailed statutes may make it more difficult for a family foundation to operate effectively in the future. The statutes should be precise, but at the same time flexible enough to accommodate changing business circumstances and the evolving needs of beneficiaries.
The statutes of a family foundation should not, for example:
- unnecessarily repeat provisions of the Family Foundation Act
- contain excessively detailed or prescriptive provisions
- make every decision subject to approval by multiple persons or governing bodies
Good practice is instead to:
- set out the key strategic principles in the statutes
- leave certain matters to be regulated in internal rules and regulations
provide flexible mechanisms for amending the statutes
5. Can a family foundation form part of a larger holding structure?
Yes. A family foundation often serves as the parent entity within a holding structure, holding shares in operating companies.
In practice, this means that a family foundation may:
- hold 100% of the shares in an operating company
- consolidate ownership control
- prevent the fragmentation of shareholdings among heirs
- provide greater stability to the decision-making process within the corporate group
6. Can a family foundation protect assets from uncontrolled fragmentation?
Yes. Within a family foundation structure, the foundation itself owns the assets, including shares in companies. The beneficiaries do not become co-owners of those assets.
This means:
- no fragmentation of shareholdings among heirs
- a reduced risk of decision-making deadlock in the companies held by the family foundation
- preservation of the integrity of the family business
7. Can succession be planned through a family foundation with the active involvement of several generations?
Yes. A family foundation makes it possible to design a succession model in which successive generations participate in the structure in an organized and predictable manner. This requires, however, that the rules governing the involvement of individual family members in the foundation’s governing bodies and in the decision-making process are defined in advance.
The foundation’s statutes may regulate in detail, among other things:
- the criteria for appointment to the management board or supervisory board (e.g. education, professional experience or experience in the family business)
- the gradual involvement of the younger generation in management
- the remuneration of members of the foundation’s governing bodies
- the rules governing the distribution of benefits to beneficiaries
- procedures for resolving disputes within the family
Ownership and management functions may also be separated, allowing some family members to exercise supervisory functions while entrusting day-to-day management to individuals with the appropriate professional expertise.
Succession through a family foundation is not simply a matter of transferring assets. It is an organizational process that structures family relationships, defines responsibilities and helps ensure continuity in the management of the family business across generations.
8. How does a family foundation affect the liability of family members?
As a separate legal entity, the family foundation owns its assets. This generally limits the direct exposure of family members to liabilities arising from the operating activities of companies held by the foundation.
Family members are not personally liable for the obligations of the family foundation.
Different rules may apply where family members serve on the foundation’s governing bodies and breach the duties associated with their functions.
The liability of members of the family foundation’s management board is broadly comparable to that of management board members of Polish companies.
A family foundation is not, however, an instrument for shielding assets from creditors or a means of avoiding enforcement proceedings.
9. Can a family foundation adapt to changing economic conditions?
Yes, provided that appropriate flexibility mechanisms are incorporated into the statutes from the outset. The family foundation may provide for different powers and responsibilities of its governing bodies, specify matters requiring the approval of a particular body and establish procedures for amending the statutes.
The statutes may also regulate the principles governing investment decisions, changes in strategy and the establishment of new subsidiaries. The allocation of powers should be designed so that responding to changing market conditions does not require the unanimous consent of all beneficiaries each time a decision needs to be made.
A well-designed family foundation can adapt to changing economic circumstances without compromising the stability of the ownership structure. Flexibility should result from the carefully considered design of the statutes rather than from frequent ad hoc amendments to the foundation’s governing documents.
10. How does a family foundation affect the corporate governance of operating companies?
As a shareholder in operating companies, a family foundation consolidates the ownership structure and prevents the fragmentation of shareholdings among heirs. This enables ownership decisions to be made consistently and with a long-term perspective, without the need to coordinate the positions of multiple individual shareholders.
The family foundation can exercise its shareholder rights in an organized manner, in accordance with an established strategy and the principles set out in its statutes. Separating the ownership function from day-to-day operational management also provides greater clarity as to the allocation of responsibilities within the companies held by the foundation.
In practice, such a structure helps stabilize the decision-making process, strengthens the group’s negotiating position with investors and financial institutions, and supports the continuity of its long-term strategy.
11. How a family foundation is taxed?
The tax regime applicable to Polish family foundations offers a number of distinctive features.
Some of the key tax aspects include:
- A family foundation benefits from a corporate income tax (CIT) exemption in respect of business activities permitted under the Family Foundation Act. Activities falling outside the statutory scope are subject to CIT. This mechanism is intended, among other things, to facilitate the accumulation and reinvestment of assets within the foundation.
- The acquisition of assets by a family foundation is generally not subject to CIT.
- The contribution of assets to a family foundation is generally tax-neutral for income tax purposes and is not subject to tax on civil law transactions (PCC). As a rule, the person contributing the assets does not incur income tax solely as a result of making the contribution. Depending on the nature of the assets and the transaction, VAT implications may, however, arise.
- Taxation generally arises when benefits are distributed to beneficiaries. The family foundation is subject to 15% CIT on benefits provided to beneficiaries. The tax treatment of the beneficiary depends on their relationship to the founder. The founder and beneficiaries belonging to the so-called “zero” inheritance and gift tax group may benefit from a PIT exemption. Other beneficiaries may be subject to PIT at the applicable rate.
- A family foundation may also establish special purpose vehicles, such as limited liability companies (sp. z o.o.), and may contribute assets to such entities, subject to the tax rules applicable to the particular transaction.
Before establishing a family foundation or transferring assets to it, an individual tax analysis should always be carried out.
12. Can assets contributed to a family foundation be withdrawn?
As a general rule, assets contributed to a family foundation become the property of the foundation. This means that the founder no longer owns the assets once they have been transferred. The family foundation is a separate legal entity and holds its assets in its own right.
This does not, however, mean that there is no possibility of managing or disposing of those assets. The foundation’s statutes may provide mechanisms allowing for:
- the payment of benefits to the founder or other beneficiaries
- the sale of particular assets
- the transfer of assets to other companies within the group structure
In certain circumstances, it is also possible to dissolve and liquidate the family foundation.
The decision to contribute assets to a family foundation should, however, be regarded as a long-term arrangement, as the family foundation is designed to provide stability to the ownership and asset structure over many years.
13. Can a family foundation carry out investment activities?
Yes, within the scope permitted by the Family Foundation Act.
A family foundation may serve as a platform for reinvesting profits, acquiring shares in new ventures and developing an integrated investment strategy for the family.
14. What are the most common mistakes when establishing a family foundation?
The most common mistakes and misconceptions include:
- treating the family foundation solely as a tax planning instrument
- failing to analyze family relationships and their impact on the future governance of the foundation
- using standard-form statutes without adapting them to the specific circumstances, objectives and needs of the particular family foundation
- overlooking the impact of the family foundation structure on the corporate governance of the companies held by the foundation
15. Where should a discussion with attorney-at-law about establishing a family foundation begin?
The starting point should be an analysis of three key areas:
- the structure of the assets and shareholdings
- family relationships and succession plans
- the founder’s strategic objectives
Only after these elements have been properly understood is it possible to assess whether a family foundation is the right solution.