It has been three years since the Ministry of Development and Technology (previously the Ministry of Development, the Ministry of Entrepreneurship and Technology) is working on introducing a family foundation into the Polish legal system. In September 2019, the Green Book of the family foundation was prepared, was subject to consultations, and after which a report from December 2019 was released. Then, on March 22, 2021, a draft law on the family foundation was published, which was again subject to consultations, and after which a revised draft from October 15, 2021 was created. The introduction of a family foundation into the Polish legal order then became one of the elements of the so-called Polish New Deal. Still, despite nearly a year of binding laws under the so-called Polish New Deal, no further steps were taken in the legislative process regarding the family foundation.
There is no doubt that the regulatory matter of a family foundation is very complex. It concerns many specific issues, including the ways of shaping the foundation and its registration, its functioning in exchange (including its legal nature as a legal person, restrictions on functioning, the position of the founder and of the beneficiary, rules on the foundation’s representation and supervision over its activities), up to its dissolution (liquidation). The legislator undertook detailed regulation of these issues in extensive draft laws on the family foundation, rightly choosing the model of regulating a family foundation in a separate act. The framework of this post does not allow for a detailed discussion of all the proposed regulations, but it is obvious that the legislator is faced with a difficult task.
Still, a regulated family foundation shows similarities with a “public” foundation, but also with commercial companies. Correct legislation in this area may use the model of legal persons’ functioning already established in exchange, and it even has to properly position a family foundation in the already existing legal system. The same applies to the legal actions of establishing a family foundation, or the liability of the foundation or members of its bodies for obligations – which are already regulated in the area of private law.
Still, a regulated family foundation shows similarities with a “public” foundation, but also with commercial companies
In addition, a family foundation deeply penetrates civil law, especially inheritance law (because it interferes with the model of shaping the succession at the event of death and the related model of mandatory family protection through a legitim), but also the law of obligations (establishing the rules of liability of the foundation or members of its organs for liabilities, protection of creditors) and family law (influencing the performance of the maintenance obligations). It is also of fundamental importance from the perspective of tax law, as well as is related to social security law. Therefore, the introduction of a family foundation requires – apart from the new act – amendments to many acts (9 in the first draft and 11 in the second draft), including the Civil Code and tax laws. It certainly does not make the task of the legislator easier.
Therefore, it wonders that the legislator together with the draft law introduces further changes to the Civil Code, directly regulating the renunciation of the legitim and the renunciation of inheritance in favor of another person (draft Article 1048 § 2-3 of the Civil Code) and modifying the performance of the legitim claim, taking into account the situation of the obligee, including running an enterprise calculated within the basis of the legitim (draft Article 9971 of the Civil Code). These changes were already the subject of a draft of the Minister of Entrepreneurship and Technology of March 2019, but were not passed then. Disregarding the matter of substantive justification of such changes (especially of statutory confirmation of the already established jurisprudentially submodels of contract of renunciation of inheritance), they deserve separate consideration, and not the introduction “under the guise” of a new, significant legal institution, which will undoubtedly divert attention from changes in other legal provisions.
However, the constantly evolving legal structure – from the Green Book to the second draft of the law on the family foundation – seems to fit better and better with the needs of exchange (e.g. the prohibition on economic activity has been corrected in such a way that it is allowed to the necessary extent, cf. Article 6 of the first draft and Article 7 of the second draft). The systemic coherence of the bill is in favor of the legislator (e.g. Article 17.3 of the first draft was abandoned, which provided that the revocation of a declaration on the establishment of a family foundation in a will requires the form of a notarial deed, which was grossly in contrary to Article 946 of the Civil Code).
However, the constantly evolving legal structure – from the Green Book to the second draft of the law on the family foundation – seems to fit better and better with the needs of exchange
At the same time, the second draft still proposes solutions that are inconsistent within the legal system (e.g. by requiring a formal waiver of the beneficiary’s rights, Article 33 of the second draft, which is unique in the legal system). There are also solutions that unnecessarily bring the family foundation closer to the company in areas where it is not necessarily similar (e.g. by using the abbreviation of the name “family foundation” [“fundacja rodzinna”] as “F.R.” similar to the abbreviations of the names of commercial companies, Article 4.2 of the second draft).
It is difficult to predict what the next stage of work on the law on the family foundation will be. The works of the Ministry of Technology and Development show a very varied involvement in the preparation of the project.
First of all, it is not clear to what extent this work will be continued as part of the legislative process at all. Treating its introduction as an element of the so-called Polish New Deal – regardless of the assessment of the so-called Polish New Deal – could have suggested a prioritization of the draft, but this forecast has not materialized. However, even the unapproved project will be an interesting (but now only for lawyers-scholars) example of a solution of inheritance law in its broadest sense.
It is not clear to what extent this work will be continued as part of the legislative process at all
On the other hand, the shape of the finally proposed second project still raises doubts. It is certainly better than the first, but it keeps showing imperfections that should be corrected at later stages of the legislative process. In this regard, a team of lawyers operating under the project “The Dead Hand. Private foundation as a multi-generational estate planning tool” (National Science Center, No. 2021/41/B/HS5/00857) will keep you updated!