The Ministry of Development and Technology is considering introducing mechanisms for the merger, division, and transformation of family foundations. Julita Zawadzka, PhD, attorney at law and a partner at KKG Legal (Wealth Management, Managerial Contracts, and Family Foundations Practice), believes that allowing family foundations to merge would be the most reasonable course of action. Other transformation mechanisms should not be a simple equivalent of the solutions found in corporate law.
An announcement regarding work on mechanisms for the transformation of family foundations was included in the draft review of the Family Foundation Act published in June.
Merging family foundations can simplify asset management
Merging family foundations with similar or complementary goals could facilitate the consolidation of family assets, reduce costs, and simplify management. However, this mechanism should be exceptional and ensure adequate protection for beneficiaries and creditors.
The division of a family foundation requires particular caution
Such a division would require identifying a specific “foundational” mechanism for carrying it out, one that would ensure the protection of the founder’s intentions, the rights of the beneficiaries, and the fulfillment of the divided foundation’s purpose. If experience shows that it is necessary to separate certain assets into a separate structure, instruments that are strictly foundation-based—such as the ability to create sub-foundations—may prove to be more appropriate.
The transformation of family foundations into corporate entities raises the most concerns
A family foundation is not a corporate entity, and its assets belong neither to the founder nor to the beneficiaries. Converting it into a corporation would therefore require determining to whom—and on what basis—the ownership interests would be allocated.
In the expert’s opinion, such transformations should remain impermissible. Family foundations need separate reorganization tools that will allow them to adapt their structure to changes occurring within the family and the business, without undermining their succession and protective functions.
Aleksandra Helbin’s article presents practical examples of the mechanisms under consideration and a more detailed discussion of them article, published on the WNP.PL website with a commentary by Julita Zawadzka, PhD.