The family foundation as a shareholder: how to align the foundation's statute with the articles of association

Why the foundation does not run the business itself

A foundation may conduct business activity only within the scope listed in Article 5 of the Act. It may join companies and participate in them (Article 5(1)(3)), grant loans to companies in which it holds shares or is a partner (point 5), and freely dispose of shares (paragraph 3). Operating activity – manufacturing, trade, services – ends for the foundation with the 25% penalty CIT rate. That is why the typical model has two tiers: the company runs the business and pays a dividend, and the foundation receives it tax-free and decides how much stays in the foundation and how much goes to the family as distributions.

Contributing shares – a checklist

1. Articles of association. I check the restrictions on the transfer of shares: the company's consent requirement, pre-emption rights, rights of first refusal. If there are any, they must be complied with or the articles amended first.
2. Form. Transferring shares in a limited liability company requires written form with notarially certified signatures (Article 180 of the Commercial Companies Code).
3. Spouse. If the shares form part of the spouses' joint property, the other spouse's consent is required.
4. Notifying the company of the transfer of shares, with proof (Article 187 of the Commercial Companies Code), and updating the list of shareholders in the National Court Register (KRS).
5. Inventory of assets. The shares are entered in the inventory at their value at the time of contribution – the PIT proportions depend on this.
6. Exit plans. If you are considering selling the company within two or three years, we talk about it before the contribution. From 2027, assets contributed to a foundation will be subject to a two-year holding period, and a foundation set up for a quick sale is exactly the structure the legislator wants to curb.

What to change in the articles of association

• Appointing and dismissing the company's management board. Where the foundation is the sole or majority shareholder, in practice the foundation's management board decides on the company's management. The articles may provide for a supervisory board or personal rights – and they should, if different branches of the family work in the business.
• Dividend policy. How much profit stays in the company for development and how much goes to the foundation. Without this rule, every year becomes a negotiation between the children working in the business and those living on distributions.
• Other shareholders. If the foundation does not hold all the shares – tag-along and drag-along rights, a deadlock mechanism, valuation rules.
• Inheritance of shares. Shares held by the foundation do not form part of the founder's estate. Other shareholders' shares still do – Article 183 of the Commercial Companies Code allows you to regulate what happens to them.

What the foundation's statute must include

• Who votes on behalf of the foundation at the shareholders' meeting, and on what terms.
• Consents of the foundation's supervisory board or of the founder to key acts concerning the company: disposal of shares, amendment of the articles, capital increase, merger, division, appointment and dismissal of the company's management board.
• Conflicts of interest. A member of the foundation's management board who is also the company's CEO assesses himself. The statute should provide for exclusion from voting or the consent of the supervisory board.
• Distributions and work in the business. Whether a child working in the company receives a salary and distributions, or only a salary. It is worth settling this before anyone starts counting.

Partnerships from 2027

A foundation may be a partner in a limited or general partnership. From 2027 – if the act enters into force – income from tax-transparent partnerships loses the exemption to the extent it would not be exempt if the foundation earned it directly. A limited partnership letting premises to unrelated parties will keep the preference; a manufacturing partnership will not. Structures with the foundation as a limited partner must be reviewed before 1 January 2027.

The foundation's management board is liable too

A member of the management board of a family foundation manages someone else's assets in the interest of the beneficiaries and is liable for damage caused by acts contrary to the Act or the statute. For seventeen years I have dealt with the liability of company board members; I build the same mechanisms – documenting decisions, consent procedures, the body's by-laws – into foundations. More on this part of my practice at pawlowski-partners.pl.