Family foundations increasingly popular, but return of applications not in short supply?
Once again, we had the opportunity to help our clients establish a family foundation and plan for multi-generational succession to keep the business running smoothly and protect the family assets from fragmentation.
A family foundation is a new institution, introduced into the Polish legal system by the Law on Family Foundations, which facilitates multi-generational succession and reconciles business and private interests.
Although applications for the registration of family foundations could be submitted as early as the end of May, it was only recently that the District Court in Piotrkow Trybunalski (the court designated to keep the register of family foundations) began issuing the first orders for the registration of family foundations in the register.
However, it turns out that many applications are returned to applicants with a request to correct formal deficiencies in the form of submitting a certificate of no criminal record for board members.
According to Article 114(4) of the Family Foundation Law, the application of a family foundation to the Family Foundation Register shall be accompanied by:
1) the articles of incorporation of the family foundation or the minutes of the opening and announcement of the will, in which the family foundation was established;
2) the charter of the family foundation;
3) a statement by the founder to contribute property to cover the founding fund in the amount specified in the statute, and in the case of the establishment of a family foundation in a will, a statement by the members of the board of directors that the founding fund will be contributed within two years from the date of entry of the family foundation in the register of family foundations;
4) proof of the establishment of the family foundation’s organs, detailing their composition, if the composition of the family foundation’s organs does not follow from its charter, and consent to serve as a member of the family foundation’s organs.
The provision does not mention a criminal record certificate. So where does the obligation to submit such a document come from?
According to the provisions of the Law on Family Foundations, a member of the board of directors may not be a person who has been convicted by a final judgment of certain crimes.
An analogous provision operates for members of the boards of directors of limited companies. However, at the stage of submitting an application for registration of a capital company or an application for registration of changes to the board of directors of a capital company, it is not necessary to submit a certificate of no criminal record for the members of the board of directors. So why the discrepancy?
The answer is brought to us by the provisions of the National Court Register Law, which stipulate that the registration court receives from the Information Office of the National Criminal Register, through the teleinformatics system with respect to members of the board of directors, information on convictions for the crimes specified therein.
Since the register of family foundations is a completely separate register from the National Court Register, the provisions of the National Court Register Law do not apply to family foundations.
Going further, since neither the Law on Family Foundations nor the regulations implementing the Law regulate the issue of the District Court in Piotrków Trybunalski’s seeking information from the Information Office of the National Criminal Register ex officio, there is an obligation on the part of the applicants to prove that the members of the Board of Directors have no criminal record – and this obligation is fulfilled only by submitting the relevant certificate.
Is it a rational solution? No – we believe that the Family Foundation Law, or its implementing regulations, could have obliged the registry court to consult the National Criminal Register Information Bureau ex officio. The legislator could also, in the provisions of the Law on Family Foundations, indicate the obligation to accompany the application with a certificate that the members of the board of directors do not have a criminal record.
Nonetheless, it is what it is and the criminal record certificate should be attached to the application.