Asset protection: Who is the beneficial owner of a private foundation?
The currently unfolding case of fraud related to a certain real estate development investment involving two towers has caused the terms “beneficial owner” and “person exercising actual control” to appear in the public space in relation to a certain foundation and its subsidiary company.
It is worth using this opportunity to remind the principles regarding the determination of who is the beneficial owner of a similar entity – a private foundation, which is finding increasing use among wealthy clients.
What is a private foundation?
It is a type of legal entity not known under Polish law but existing in many other jurisdictions, particularly in Liechtenstein, Austria, Panama, and the Netherlands Antilles. A private foundation is established by a founder who contributes assets to it. The foundation then manages these assets for the benefit of designated beneficiaries according to the rules set out in the foundation’s statutes.
The key feature of a private foundation from an asset protection perspective is the separation of assets from the founder. Once assets are contributed to the foundation, they belong to the foundation as a legal entity, not to the founder. This provides protection against creditors, inheritance disputes, and political risks.
Determining the beneficial owner of a private foundation is particularly complex because the traditional ownership structure (shareholder → company) does not apply. Instead, there are multiple parties with different roles: the founder, the foundation council (board), and the beneficiaries.
Under AML regulations, all of these parties may need to be disclosed as beneficial owners depending on the level of control they exercise over the foundation and its assets.
Paweł Osiński
Attorney, expert in asset protection and private foundations