Family foundations: a new form of inheritance in family businesses

Inheriting a business used to entail a number of problems. The situation was comparable to the freezing of money on the bank account of a deceased person. However, new regulations are about to change this in favor of the inheritors.

Today, when the owner of a business dies and the business is registered to his or her name in the Polish Central Register of Business Activity (CEIDG), the inheritors are unable to fluently operate that business. The death of an entrepreneur equals the loss of the right to manage the business. The owner’s death certificate causes his or her tax identification number to expire, with no access to any permissions or licenses. At the same time, commercial contracts and agreements terminate. If an inheritor wants to continue the business of the previous owner, he or she has to register the business anew.

This means a number of inconveniences, such as the lack of business continuity, and the new registration requires organizational and bureaucratic changes. However, these problems will soon disappear. In 2022, a law (currently processed as a bill) on family foundations is to be passed, facilitating the inheritance of businesses.

The bill makes it possible for an entrepreneur to set up a foundation which, after his or her death, will manage the companies through which the family business is operated. The foundation will be run primarily by the statutory inheritors of the entrepreneur and its mission will be to protect family assets against fragmentation, thus allowing the family business to continue to develop, even after the death of the founder.

This will still mean formalities, but their form will change. To establish a family foundation, only a few documents will be required: an act of incorporation or a testament (which will have to have the form of a notarial deed), a statute, a document outlining assets, and an entry into the register of family foundations. These documents should exist anyway, regardless of whether the new law is passed.