Along with a foundation and a non-profit company, a representative office of a foreign foundation is one of the legal forms through which charitable activities can be carried out in Poland. However, due to a sparsity of regulations, the functioning of representative offices of foundations in Polish law is not entirely clear. The topic is particularly timely, as with the outbreak of war in Ukraine many foreign foundations wanting to operate in Poland have voiced the need to open representative offices here. Previously, such outposts were relatively rare, as there was little need for them.
What is a representative office a foreign foundation?
Under Art. 19 of the Foundations Act, foreign foundations with their seat abroad may establish a representative office in the territory of Poland. According to the view developed in the legal literature, a foreign entity that wants to establish such a representative office in Poland does not necessarily have to be a foundation within the meaning of Polish law. What is relevant is that the entity be defined as a foundation and have the nature of a foundation under foreign law, even if in Polish terms it would be considered, for example, a commercial company. Thanks to this approach, in Poland it is possible to create representative offices of American foundations, which under state law are sometimes referred to as “public-benefit non-profit corporations” and thus (literally) corporations and not foundations (which are defined only under federal law). If it were not for the functional approach in the literature, the establishment of a representative office in Poland by an American non-profit would be impossible.
The basis for the operation of a representative office of a foreign foundation in Poland is to obtain a permit for establishment of the representative office, which at the same time implies approval of the minister to carry out the activities specified in the permit. A permit is granted by the relevant minister with regard to the activities and objectives of the representative office. So, to obtain a permit to establish a representative office of a foreign foundation, the first step is to carefully analyse the charter of the parent foundation to determine the appropriate authority to issue a permit.
Determining the relevant ministry is critical to ensuring the smooth handling of the case, as different ministries have separate requirements regarding the form and content of the application and the documents to be enclosed with the application.
An interesting aspect is that a foreign foundation can conduct business activity through its representative office (provided that this field of activity is covered by the permit from the minister). However, the business activity must not predominate over statutory activities. It should be an ancillary activity serving to raise funds to carry out statutory activities.
Submission of application
In practice, there is no uniform template for the application for permission to establish a representative office of a foreign foundation. In principle, there is no fixed form for drafting the application. However, the contents of the application, first and foremost information regarding the parent foundation and the representative office, should meet the requirements outlined by the given ministry.
The key information is essentially the same, regardless of the ministry. First, the applicant should identify:
- The person representing the representative office of the foundation in Poland
- The statutory purposes of the parent foundation
- The main objectives of the representative office
- The scope of activities of the representative office
- The sources of funding for the representative office.
Unlike a foundation, a representative office of a foundation does not have a separate charter, but operates under the documents of the parent foundation. This greatly simplifies the procedure for establishing a representative office. All documents will need to be in the form required by the given ministry (e.g. notarised, with an apostille clause and a certified translation).
In principle, the ministry should consider an application for permission to establish a representative office of a foreign foundation within 30 days. In more complicated cases, the deadline may be extended. In practice, this is most often the case, as the ministry may request an opinion from other authorities competent for the proposed scope of operations, or ask the applicant for clarifications regarding its planned activities in Poland.
After obtaining a permit, the representative office is not subject to entry in a separate registry, so it operates only on the basis of the permit. In theory, this is a convenience, but in practice it happens that proceedings at the ministry are sometimes extended several times before a final decision is issued.
An integral part of the application for a permit to establish a representative office of a foreign foundation is declarations made by the authorities of the parent foundation. As with the application itself, the need for declarations and the scope they should cover lie within the discretion of the competent ministry. In principle, the requirement is that the representative body of the parent foundation declare in writing that it intends to establish a representative office in Poland and select a person authorised to act for the representative office in Poland.
Submission of such declarations (if the ministry requires them) is a condition for issuance of a positive decision on establishment of the representative office.
In recent months, we have seen significant interest from foreign clients in establishing representative offices of foreign foundations within Poland and using this form to carry out charitable activity. This growing trend is influenced by the relaxation of the procedure for obtaining the permit, but the main driving factor is the ongoing war in Ukraine.
However, despite the potentially uncomplicated formal requirements, obtaining a permit can take quite a long time, as the ministries conduct a thorough analysis of foreign entities wishing to operate in Poland. This process is conducted under the rules of administrative procedure. In the course of reviewing an application, it is not uncommon for ministries to rely on Art. 7b of the Administrative Procedure Code and decide to seek opinions from other authorities for the purpose of verifying the foreign applicants.
With the growing popularity of representative offices as a form for carrying out charitable activities and the increasing number of applications processed by ministries, it will be possible to develop an assessment of the most effective form for charitable organisations to carry out activities in Poland. The practice will show whether the potentially uncomplicated procedure for establishing representative offices of foreign foundations helps or hinders the use of this form for providing assistance to beneficiaries.
Dr Kinga Ziemnicka, attorney-at-law, Oliwia Kruczyńska, M&A and Corporate practice, Wardyński & Partners