POLAND Law and Practice Contributed by: Wiesław Oleś, Krzysztof Rysz, Joanna Sarkowicz and Kamil Kania, Oleś, Rysz, Sarkowicz
Protecting Business Liquidity From Legitime Claims A major legal consideration is the impact of forced heirship (legitime) claims, which can drain a compa- ny’s cash reserves. Recent 2023 amendments to the Civil Code have introduced vital protections, allowing for legitime payments to be made in instalments or reduced in justified circumstances. These changes are specifically designed to prevent the forced liquidation of family enterprises and ensure business continuity. 9. Trusts, Foundations and Related Entities 9.1 Choice of Planning Vehicle Non-Recognition of Trusts Trusts as understood in common law jurisdictions are not recognised under Polish domestic law, and Poland is not a party to the Hague Trust Convention. Utilising foreign trust structures for assets subject to Polish succession law often leads to significant legal uncertainty regarding property title and taxation, as these structures may be reclassified as gifts or simple contractual obligations. Consequently, foreign trusts are generally avoided for holding Polish real estate or domestic company shares, with practitioners favour- ing local statutory vehicles that offer greater certainty within the civil law framework. Foreign Foundations (Notably Liechtenstein and Austria) Historically, foundations in jurisdictions such as Liech- tenstein or Austria were the primary alternatives for Polish families seeking robust asset protection before the 2023 introduction of the domestic family founda- tion. Unlike common law trusts, these foreign entities possess legal personality, ensuring a higher degree of recognition and structural certainty within the Polish civil law system. While still utilised by high net worth individuals to manage international investment port- folios, their use for domestic assets has declined due to the complexity of Controlled Foreign Corporation (CFC) compliance and the more favourable tax regime offered by the Polish family foundation.
rights to supervise heirs, these hybrid models are increasingly viewed as transitional steps. More com- prehensive separation of management and ownership is generally achieved through specialised vehicles rather than corporate governance alone. Strategic Separation via Family Foundations and Closed-End Investment Funds A prominent trend in Polish succession planning is the strategic separation of economic benefits from man- agement control, primarily through the use of a Polish family foundation. Historically, this separation strategy was often implemented via closed-end investment funds, which continue to be utilised by families hold- ing exceptionally large portfolios of assets. However, foundations are increasingly preferred as they are specifically equipped with tools dedicated to family legacy building. This model satisfies the founder’s desire for long-term business integrity while providing heirs with secure distributions without the necessity of direct operational involvement. 8.2 Legal and Tax Considerations Corporate Continuity and Procedural Hurdles The transition of corporate rights to heirs is often hin- dered by the requirement to formally prove legal title. These procedural delays can block voting rights, a risk amplified in multi-partner enterprises where non-fam- ily partners may exploit the heirs’ temporary inability to act. The situation is even more critical if key assets are inherited by a minor, as significant decisions then require prior approval from a guardianship court. Suc- cession strategies increasingly rely on family founda- tions to insulate governance from these probate and guardianship requirements. Tax Neutrality and Deferral Mechanisms The creation of holding structures and the transfer of assets to a family foundation can often be achieved on a tax-neutral basis. The family foundation model offers a strategic advantage by deferring corporate income tax on income such as dividends until funds are dis- tributed to beneficiaries. This allows for the full rein- vestment of profits into the family business, turning the foundation into a vehicle for capital accumulation.
152 CHAMBERS.COM
Powered by FlippingBook