The Shareholder Foundation: Or, How to Divest to Govern More Effectively, Ease Family Tensions, and Engage in Charitable Work?

What entrepreneur—whether male or female—hasn’t dreamed of making their vision a lasting reality?

The shareholders of a for-profit company may wish to ensure its long-term survival while establishing a charitable organization. They will then transfer all or part of their shares to a shareholder foundation, which will then have a twofold mission:

  • Economic: As a stable shareholder, it promotes—through a long-term vision, which is often aligned with the founders’ vision—sustainable collective projects. Granting “voting rights protection” to a majority or blocking minority stabilizes the shareholder base and helps prevent, for example, hostile takeover bids. This way, management can remain within the family, but in a different form.
  • The foundation engages in philanthropy by funding charitable projects through various sources of funding: dividends, of course, but the foundation can also secure other sources of funding, such as grants and donations. These funds will be used to support initiatives that serve the public interest, such as those addressing disabilities, environmental issues, and so on.

It’s also a way to pass on a different perspective—a mission for the future—to one’s children. And if there are no heirs, to ensure the company’s and the project’s long-term survival.

The framework is flexible and has many facets:

  • A permanent gift of full ownership, or for a fixed term with a temporary usufruct …
  • … a majority or a minority of shares…
  • …with a choice of three structures: a foundation, an endowment fund, and a sustainability fund, all of which are exempt from business taxes (corporate income tax, VAT, and local taxes)
  • Other shareholders (private individuals, employees, etc.) may join the foundation
  • Securities may be contributed as a single donation or in installments, either during the donor’s lifetime or as a bequest.
  • The foundation helps instill values of social responsibility into the corporate culture

The shareholder foundation, which is well known among our European neighbors (Sweden, Denmark, Germany, and Switzerland), is beginning to attract some interest in France.

What if it were you tomorrow?

FareWell is here to advise and assist you in establishing a foundation.