Liquidation of a foundation in Poland: How do you liquidate a registered charity?

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In Poland in 2022 there will be just over 100,000 non-profit organisations, although these statistics change quite significantly from year to year. When the activity of such an entity turns out to be unprofitable or loses its purposeful justification, its members should decide to liquidate the foundation. What does the liquidation of a foundation look like step by step?

When is it worth considering winding up a foundation in Poland?

Foundations, like associations, form the so-called third sector sometimes referred to as non-governmental organisations (NGOs). The functioning of foundations in Poland is described in detail in the Law on Foundations, which sets out the principles for the establishment, operation and liquidation of such entities. The premises for liquidation are indicated in Article 15, paragraph 1 of the Law on Foundations. In accordance with this provision, a foundation is liquidated in the manner indicated in the statute in the situation when:

  • achievement of the purpose for which it was established;
  • the foundation’s financial resources are used up; – the foundation’s assets are exhausted;
  • the foundation’s assets are used up.

In practice, a popular procedure is also the establishment of foundations for a specified period of time (e.g. 5 years after establishment). The rationale for liquidation will then be the passage of time. It often turns out that the founders are no longer able to subsidise the operation of the NGO and the income from donors is lower than expected. As a rule, the purpose of the foundation is too general to accept the impossibility of achieving it as a basis for liquidation.

Liquidation under the provisions of the foundation’s statutes

The priority is to carry out liquidation under the provisions of the foundation statutes. The founder is obliged to enact the statutes under Article 5(1) of the Foundations Act. Such a document acts as an “organic act” which determines, among other things:

  • the name, registered office and assets of the foundation;
  • the objectives, principles and forms of activity;
  • the formation and organisation of the board of directors or other authorities, if provided for;
  • the possibility for the foundation to carry out economic activities;
  • the possibility of amending the objective or the statutes of the foundation;
  • the possibility of merging with another foundation.

The catalogue of statutory elements is exemplary and nothing prevents including among them the rules for the liquidation of the foundation. In this way, it is possible to avoid the application of legal provisions which – especially with regard to the distribution of assets – may prove unfavourable.

The initiation of liquidation proceedings requires the issuing of a resolution in this respect. As a rule, such a resolution is issued by the foundation’s board of directors, which plays the role of representing the NGO. The statutes may grant this competence to other bodies, if established.

What elements should a liquidation resolution for a foundation contain?

The resolution initiating the liquidation process should first of all contain a justification that will coincide with the reason for the foundation’s dissolution indicated in the statutes. If this has not been indicated in the statute, the liquidators of the foundation (usually they will be members of the management board) should be designated and the rules for the distribution of the NGO’s assets should be indicated. Each of these issues may also be regulated by a separate resolution.

It is worth remembering that if the foundation’s statutes do not specify the distribution of its assets, it will be decided by the registry court taking into account the purpose for which the foundation has been established.

Notification of the foundation’s liquidation to the registration court

Foundations are entered in the National Court Register, which means that also the commencement of its liquidation must be reported to the National Court Register through the Court Register Portal. Thus, there is no need to fill in the forms by hand and deliver them to the registration court, the whole procedure can be finalised online. A number of attachments must be attached to the application for the opening of liquidation, viz:

  • a resolution on the opening of liquidation with justification;
  • a resolution naming the liquidator and specifying the method of representation of the foundation during the liquidation stage;
  • the liquidator’s consent to take up office;
  • a resolution on the allocation of the foundation’s assets after the completion of the liquidation.

The application is subject to a fee of PLN 350 or PLN 150 depending on whether the foundation was registered in the same section as entrepreneurs or in the ‘association’ section.

How is a foundation liquidated in Poland?

The liquidation of a foundation is deceptively similar to the liquidation procedure that commercial law companies go through, although it is of course somewhat easier. Persons appointed as liquidators of the foundation are, first of all, obliged to prepare a balance sheet for the opening day of liquidation, which is also submitted to the register court together with an application for the opening of liquidation. From the moment of the resolution of liquidation, the NGO should use its name with the addition ‘in liquidation’.

The next step is to make an announcement about the liquidation of the foundation. Such a notice should be placed in a place where the announcement can be seen (e.g. the court building). The notice should contain, among other things, the formal details of the foundation, the contact details of the liquidator and an indication of the deadline within which creditors can file their claims.

The next stage is the gradual termination of the activities carried out by the foundation. This consists of the termination of ongoing contracts, the satisfaction of claims and the reduction of employed staff. Often, it is these “liquidation activities” that take the longest time, especially if the entity entered in the National Court Register has carried out business activities. The post-liquidation assets must be divided in accordance with the provisions of the articles of association.

Completion of the foundation’s liquidation in Poland

The final stage is to submit an application to the registration court for the deletion of the foundation from the register. It must be accompanied by a balance sheet for the completion of the liquidation together with a resolution approving it and a liquidation report, as well as a confirmation that the fact of the foundation’s liquidation has been made public. The fee for the deletion of the NGO from the register is PLN 300.

What if the foundation’s statutes do not provide for a liquidation procedure?

If the statutes do not provide for a liquidation procedure, or indeed there is such a procedure but the founders do not follow it, the foundation is dissolved pursuant to Article 15(2) in fine of the Law on Foundations. This means that the competent minister or district governor applies to the registry court for a liquidation procedure.

The liquidation of a foundation in Poland is a multi-stage and quite complex process. Skipping any of the stages results in the refusal of the entity to be deleted by the registration court. In order to ensure a smooth course of the liquidation procedure, it is worth taking advantage of the support of professionals. Linke Kulicki Law Firm offers comprehensive support in the field of legal services for third sector entities. Our lawyers will take care of their establishment, ongoing legal services and, if necessary, efficient liquidation.