Poland: Family foundations and the obligation to report to the Central Register of Beneficial Owners

 

Family foundations have already gained considerable popularity, but some issues related to their functioning still raise some doubts. One of the problematic issues may be the reporting of the beneficial owners of a family foundation to the Central Register of Beneficial Owners (hereinafter: CRBO). In this article, we focus on this issue.

The obligation of family foundations to report information on beneficial owners arises from the Act on Counteracting Money Laundering and Terrorist Financing (hereinafter: the AML Act). On the basis of this deed, a family foundation is subject to the same obligations as a trust. Since the AML Act obliges trusts to report information on beneficial owners, family foundations must also report such information. Doubts arise at the stage of determining who is considered the beneficial owner in the case of a family foundation.

Who is the beneficial owner?

The AML Act contains an extensive definition of beneficial owner. According to its first part, the beneficial owner, in a certain simplification, is any natural person who, through their powers, directly or indirectly exercises control over a given entity. Such powers allow the beneficial owner to exert a decisive influence on the activities undertaken by a given entity.

According to the Act, in the case of a family foundation, the following should be considered the beneficial owner:

• its founder,
• member of the management board,
• a member of the supervisory board, if any, appointed,
• Beneficiary
• a natural person with rights or obligations equivalent to the previously mentioned persons,
• another person exercising control over the family foundation.

 

Doubts in practice

Unfortunately, the quoted fragments of the definition of beneficial owner are not consistent with each other, which in practice may lead to problems when reporting information on the beneficial owners of a family foundation to the CRBO. Doubts arise primarily as to whether the above-mentioned catalogue is definitive, or whether the condition for recognition as a beneficial owner is first to establish that a given person controls a family foundation. It may happen that a member of the supervisory board does not have any powers that would allow him or her to influence the activities of a family foundation, and therefore is not a beneficial owner within the meaning of the first part of the definition contained in the AML Act. A similar contradiction may apply primarily to the beneficiaries of a family foundation, especially if the latter do not have the right to participate in the meeting of beneficiaries.

The current wording of the AML Act means that when determining the circle of beneficial owners of a family foundation, different conclusions can be reached. Guided by the literal wording of the Act, the beneficial owners of a family foundation should be the founder, all members of the management and supervisory boards, beneficiaries, as well as other persons who exercise control over a given family foundation. Guided by the purpose of the regulations on beneficial owners, it may be considered sufficient to report only those persons who actually have a decisive influence on the activities of the family foundation. Importantly, the group of persons determined on the basis of the first concept may differ from the group of beneficiaries determined in accordance with the second view.

Beware of financial penalties!

When faced with the dilemma of how to interpret the provisions of the AML Act when reporting beneficial owners to the CRBO, it is worth bearing in mind that providing information that is found to be inconsistent with the facts may result in the imposition of a fine of up to PLN 1,000,000. For this reason, in view of the ambiguous wording of the regulations, a detailed analysis of each case is always commissioned.

 

For further information, contact:

Robert Staniaszek, Associate

Gorazda, Świstuń, Wątroba i Partnerzy adwokaci i radcowie prawni, Kraków

e: robert.staniaszek@gsw.com.pl

 

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