NEWSLETTER
No. 24, December 2022
Malinowski & Associates. Legal Advisors. Partnership
Table of contents
The rise of the family foundation
Business activities of the foundation
Family nature of the foundation
Beneficiaries and Beneficiary Assembly.
Responsibility of body members.
Concluding an employment contract through an electronic form.
Expanding the use of trusted signatures.
Emission-free buildings will not be a luxury, but a standard?
Genesis
Government October 28, 2022. has prepared a draft law on family foundations, the purpose of which is to safeguard the interests of entrepreneurs based and conducting business in the territory of the Republic of Poland, and in particular, whose activities involve family members. This is a way out of the expectations of business founders or owners, whose ideological assumption is to secure the continuity of their business. In the absence of a suitable heir who is able to maintain the family nature of the business, skillfully manage the assets, or when there are conflicts between family members over their role in the business after the testator’s death, there may be a sale of the business to third parties. The current state of the law does not provide sufficient protection for the wills of entrepreneurs whose businesses, as a result of testamentary or statutory inheritance, usually in the third generation lose their family character and disintegrate. Moreover, the entry of new partners into the company (we are talking about heirs) may be limited by the company’s articles of association and the lack of consent of the partners already in the company’s structure.
It is not a completely new creation on European soil. Similar solutions have also been introduced in the Czech Republic, Germany, Austria, Sweden or the Netherlands. They do not have a uniform model. There are different approaches to the question of whether a foundation is required to conduct business, the circle of beneficiaries or the purpose for which the foundation is established. An indispensable element linking this regulation is the legislature’s desire to ensure that the founder’s will is carried out.
The bill provides for the establishment of a family foundation, which is a non-shareholding legal entity based in the territory of the Republic of Poland. The founder will specify in the charter the purposes for which the foundation is to be established. The project proponent intends the primary tasks to be the accumulation of assets to finance the needs of beneficiaries. The law is expected to come into force within three months from the date of promulgation
Below we will briefly outline the project’s key features, so we encourage you to read on.
The rise of the family foundation
Only an individual with full legal capacity will be able to become a funder.
In order for a foundation to come into existence, the founder must establish it either in a deed or in a will, and establish statutes. The Foundation is subject to registration in the register of foundations, maintained by the District Court in Piotrków Trybunalski. Importantly, the entry is constitutive, meaning that the foundation comes into existence only upon entry, not upon incorporation. As a general rule, a foundation can be established by any number of people, but in the case of a foundation established by a will, there can be only one founder – this is due to the rules of inheritance law, including in particular the rule that a will cannot be made jointly with another person.
To establish a foundation, the founder is obliged to contribute property with a value of not less than PLN 100,000 to the founding fund. The foundation has no right to return this property to the founder in any part.
In the period between the establishment of the foundation and its registration, there is a family foundation in organization that can already conduct business in its own name.
Business activities of the foundation
A family foundation can only conduct business activities:
- Dispose of, lease or rent property of which it is the holder or owner,
- Participate in commercial companies, investment funds, cooperatives, etc..,
- Securities Trading,
- Lending to related parties,
- Trade in foreign means of payment to make payments related to the above. activities,
- To operate a farm business.
Family nature of the foundation
Since the foundation aims to keep the founder’s possessions within the family, the project assumes the inalienability of the founder’s rights and obligations. However, the founder may waive his powers in the statute and authorize another person to do so.
The rights and obligations of a foundation beneficiary, like those of a founder, are non-transferable. However, already existing claims of the beneficiary against the foundation are transferable.
Bodies of the foundation
The Foundation, as a legal entity, operates through its bodies, among which may be mentioned:
- Management
- Supervisory Board
- Assembly of beneficiaries.
Foundation Board
Management activities (i.e., representation and management of affairs) are entrusted to the foundation’s board of directors. The main tasks will be to control and manage the assets of the foundation and to achieve the objectives, as defined in the statute. A natural person with full legal capacity who has not been previously convicted of an economic crime will be eligible to become a board member.
Members of the board of directors are appointed and dismissed by the founder, and after his death – by the supervisory board or the assembly of beneficiaries (if there is no supervisory board). The regulations for the board are very similar to those set forth in the dot regulations. limited liability companies.
In the event of dissolution and liquidation of the foundation, appropriate liquidators will be appointed from among the members of the board of directors or persons designated by the registry court. Members of the board of directors, supervisory board or liquidators will be liable to the foundation for damages caused by an act or omission that is illegal or inconsistent with the foundation’s charter.
Supervisory Board
The supervisory board at the foundation will be optional. Only if the number of beneficiaries exceeds 25 will the establishment of a supervisory board be mandatory.
It will not be possible to combine board and supervisory board positions.
Beneficiaries and Beneficiary Assembly
Beneficiaries
The foundation’s beneficiary may be an individual with full legal capacity and a non-governmental organization, which is a public benefit organization (not including the founder as the primary beneficiary, if he so indicates). The Foundation is obliged to maintain a list of beneficiaries, which will include basic information to identify the beneficiary.
The beneficiary can waive both his status and individual rights.
Any property benefits accumulated from the foundation’s activities will be judiciously distributed to beneficiaries, taking into account the foundation’s financial situation. If it is not possible to satisfy beneficiaries in full, the board will be authorized to reduce benefits equally to all beneficiaries. Beneficiaries will have the opportunity to inspect the foundation’s charter and review its records and accounts and request explanations from the board. The construction of the rules of possible refusal and appeal against it is confusingly reminiscent of the regulations of this matter concerning limited liability company.
Assembly of beneficiaries
The assembly of beneficiaries will be the main decision-making body in the foundation with powers similar to those of the shareholders’ assembly of a limited liability company.
The Assembly of Beneficiaries, as a collegial body, makes decisions through resolutions.
Liability of foundations
The family foundation will be jointly and severally liable with the founder for the founder’s obligations, including those of a maintenance nature, incurred before its establishment.
What’s more, if enforcement of maintenance obligations incurred after the establishment of the foundation proves ineffective, the creditor will be entitled to pursue enforcement from the foundation’s assets (and this will not require separate payment proceedings). However, the alimony creditor will be able to bring an action against the foundation even before enforcement proves ineffective.
The establishment of a foundation may be encouraged by the principle that the founder is not liable for the foundation’s obligations.
Liability of the heir
A family foundation will be held liable for the reserved portion as an heir when it receives an inheritance or gift from the founder or another person. Such liability is also provided for when a testator funder contributes a start-up fund, provided that the contribution was made no earlier than 10 years before his death. It is worth mentioning that a person entitled to a retainer will be able to receive benefits from the foundation, which in turn will translate into a reduction of the retainer. If the foundation is dissolved within 10 years before the founder’s death, the persons receiving property after the dissolution will also be liable for a retainer.
Responsibility of members of bodies
The civil liability of members of foundation bodies is similar to that of members of corporate bodies.
In addition, it should be pointed out that the foundation’s board members will be jointly and severally liable for the foundation’s tax arrears.
Audit
In a foundation, at least once every four years, a mandatory audit must be carried out to check the regularity, legality and reliability of activities relating to the management of the foundation’s assets. If the financial statements are to be audited by a certified public accountant in accordance with the provisions of the Accounting Law, the audit should take place on the same date as the audit. Audit firms or audit teams appointed by the assembly of beneficiaries will be responsible for conducting the audit. The audit composition may consist of attorneys, legal advisors, auditors or tax advisors. Auditors will have the right to review the family foundation’s records including the current list of beneficiaries.
Tax issues
Beneficiaries or other individuals receiving income from the foundation’s assets will not be subject to inheritance and gift tax. In the situation of acquiring a benefit from a foundation, due to its dissolution or liquidation, there will be an obligation to pay personal income tax, in an amount depending on the degree of relationship of the recipient to the founder. Exempted from the obligation will be those with the so-called “free” status. “group zero,” i.e. spouse, ascendant, descendant, stepchild, sibling, stepfather and stepmother. For others, the tax will be 15%.
A family foundation will be subject to CIT when it is dissolved and assets are transferred to beneficiaries. The obligation to pay will occur at the time of transfer of the assets. A foundation that is a partner in a general partnership will be subject to corporate tax. The drafters stress that the tax rate of 15% was supported by an in-depth market analysis and a desire to avoid favoring foundations over other taxable entities.
Impact on the economy
The mechanism of a family foundation can not only contribute to safeguarding the interests of entrepreneurs running their businesses, allowing them to place their assets in a new legal creation, but can also affect the investment sphere. The funds accumulated within the foundation’s assets can provide a significant stimulus to the economic development of other entrepreneurs, who, according to the foundation’s statute, will become beneficiaries and distribute the funds transferred to them to conduct their business. The continuity and stability of the business in accordance with the founder’s will will, at the same time, secure employees who do not have to worry whether the company’s situation after the death of the employer or passing into the hands of a new owner will result in the loss of their jobs.
DIGITIZATION OF THE HIRING PROCESS – WILL THE EMPLOYMENT CONTRACT BE DRAWN UP BY COMPUTER FOR US?
On November 3, 2022, the Parliament received a government draft law on an ICT system for handling certain contracts (print No. 2766). During the third reading at the Diet, a nearly unanimous decision was made to pass the law, which was forwarded to the President and the Speaker of the Senate on November 17, 2022. The most important of the solutions, aimed at facilitating the handling of selected contracts, will be discussed below, which, in principle, are expected to take effect 30 days after the date of the law’s promulgation.
Concluding an employment contract through an electronic form
At the outset, it should be pointed out that the solutions provided by the law are dedicated to micro-entrepreneurs, employers who employ a maximum of 9 people, farmers and individuals, i.e. For those who employ workers on a more sporadic basis. The intention of the legislator is to make it easier for the above entities not only to enter into contracts, but also to amend or terminate them. For this purpose, a special ICT system will be created, where it will be possible to use the option of concluding, amending or terminating an employment contract, a contract of mandate, a contract for the provision of services to which the provisions on commission or an activation contract apply using a ready-made form. The form made available in the system will contain the basic elements that should be included in any contract between an employer and an employee. For this reason, the prospective employer will be assured that the contracts it enters into are in compliance with the applicable law. However, these forms will be dedicated to simple contracts, so they will not work well for more complicated provisions. The system will also be a tool for the employer to provide relevant information to the Social Insurance Institution and the Tax Office, and at the same time make it easier to keep employee records. As a result, the very process of calculating tax advances or the amount of remuneration to be paid by the employer to the employee will no longer be so complicated. The system will be run by the Minister of Labor and is scheduled to be operational by 2025 at the latest.
Expanding the use of the trusted signature
The legislator, for the sake of increasing digitization, decided to enable the services available in the system by extending the use of trusted signatures and personal signatures to contracting. Thus, a contract concluded using a form provided in the system, bearing a qualified electronic signature or a trusted signature, will have the same effects as a contract signed by hand by each party.
However, it is worth emphasizing that the system is by design only to facilitate the process of establishing an employment relationship in typical situations. However, given the significant impact that employment has on a person’s life, we encourage you to seek professional assistance on all issues related to it, including, in particular, the creation of a future contract template, as well as the analysis of already existing contracts in terms of the legality of their content and the determination of how provisions that at first glance seem insignificant may affect the legal relationship being created.
Emission-free buildings will not be a luxury, but a standard?
The draft directive on the energy performance of buildings is one of the many components of the European Union’s “Readyfor55” (“Fit for 55“) program, which envisions various solutions to improve the implementation of “green policies” and also help achieve a climate-neutral Europe by 2050. We have already written about the program in our newsletter here.
The Energy Performance of Buildings Directive stipulates that by 2030, all new buildings will be zero-emission. For new buildings belonging to public authorities, the deadline is 2028. Exceptions to this plan have also been provided – these include selected historical buildings, places of worship or buildings used for defense purposes.
For the existing buildings, a so-called “building” has been created. “minimum energy performance standards for buildings,” which simply means permitted standards for primary energy consumption (derived directly from natural resources) perm2 per year.
Member states have set maximum energy performance thresholds for non-residential buildings. These thresholds were developed based on the level of primary energy consumption. For non-residential buildings with the worst energy performance, the first threshold will be 15% by 2030, and the second will be below 25%. The 2034 target for all non-residential buildings specifies 15% primary energy consumption by 2030, and less than 25% by 2034.
For residential buildings, things look a little different – standards will be set by member states based on a national trajectory. This trajectory must be in line with the gradual renovation of the building stock, targeting zero-carbon by 2050 in the national renovation plan.
The entire community of member states also agreed to add a new A0 class to the energy performance, which will be assigned just to zero-emission buildings. The creation of a new energy class by member states, given to zero-emission buildings that also transfer electricity generated from renewable sources to the grid (symbol A+), will be introduced. Currently, energy performance is presented on a scale from A to G, with A being the highest and G being the lowest.
Member states have set requirements to be met by new buildings in order to expand the possibility of using them for solar energy production. Installations needed for solar energy generation will be installed by December 31, 2026 on all new public buildings and existing non-residential buildings with a floor area of more than 250 m2,, until December 31, 2027 on all existing public and non-residential buildings with a floor area of more than 450 m2, and by December 31, 2029 on all new residential buildings.
Issues related to the provision of mobility infrastructure were also on the agenda. This mainly involves charging points for cars and electric bicycles in or next to buildings, the creation of appropriate wiring for future infrastructure, and parking spaces for bicycles. Voluntary building renovation passports, or building energy performance certificates, have also been introduced.
Member states have also pledged to create national building renovation plans that will include state-wide goals for 2030, 2040 and 2050, with the first plans to be issued by June 30, 2026. Such a plan will include information regarding the annual rate of building renovation, primary and final energy consumption (i.e., the building energy index) of the national building stock, as well as reductions in operational greenhouse gas emissions. Publications will take place every 5 years.
The project is intended to encourage the renovation of buildings, however, it is worth considering the possible consequences of these actions. The implementation of the new regulations may lead to the development of smaller and larger companies that specialize in the production and installation of all instruments necessary for the production of electricity. This could entail the creation of new jobs in the industry. However, due to the reduction in demand for primary energy sources, we may see a decline in employment in this part of the industry in the longer term. The long-term benefit could be lower electricity bills. Renovations of buildings will undoubtedly lead to an increase in their value, and thus to an increase in property prices. This may lead to a temporary reduction in the number of those willing to purchase building properties, nevertheless, this may prove to be only a temporary phenomenon.
The project has been approved by the European Council and is under negotiation with the European Parliament.
