Will the Trade of Agricultural Real Estate by Family Foundations Be Unblocked?

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Table of Contents:

  1. Can a Family Foundation Acquire Agricultural Real Estate?
  2. How Was It Before October 5, 2023?
  3. What Must a Family Foundation Do to Acquire Agricultural Real Estate?
  4. Is the Restriction on Contributing Agricultural Real Estate to Family Foundations Necessary?

There is a chance that family foundations will be able to freely trade agricultural land over 1 hectare again. On May 28, a meeting of the Deregulation and Economic Dialogue Team was held at the Ministry of Development and Technology, during which the issue of reintroducing solutions dedicated to family foundations in the Act on Shaping the Agricultural System was discussed. It will be analyzed by the Ministry of Agriculture and Rural Development during the upcoming legislative work on the Act on Shaping the Agricultural System or the Act on Family Foundations.

Can a Family Foundation Acquire Agricultural Real Estate?

As of October 5, 2023, a foundation, as a legal entity, has become the same type of entity as a commercial company, which must obtain the consent of the General Director of KOWR to acquire agricultural real estate.

How Was It Before October 5, 2023?

From May 22, 2023 (the effective date of the Family Foundation regulations) to October 5, 2023, foundations had the right to acquire agricultural real estate over 1 hectare without the consent of the National Support Centre for Agriculture (KOWR), specifically from the founder or through the beneficiary (a relative of the founder) from the foundation.

However, the family foundation had to conduct agricultural activities on this land. It also could not dispose of the land for five years, except for transferring it to or placing it in the possession of a beneficiary of the family foundation who was a close relative of the founder. KOWR did not have the right to acquire the agricultural property (right of preemption) if it was disposed of by the family foundation, provided that the acquisition was by a beneficiary who was a close relative of the founder.

What Must a Family Foundation Do to Acquire Agricultural Real Estate?

  • Post an announcement on the erolnik portal (run by KOWR), where offers for the sale of real estate are published, but if buyers come forward, the Director of KOWR will not give consent;
  • Submit an application to obtain KOWR’s consent;
  • After obtaining consent, proceed with making a statement on establishing the family foundation and signing the statute.

Is the Restriction on Contributing Agricultural Real Estate to Family Foundations Necessary?

A sufficient safeguard for a foundation would be a five-year ban on disposing of and transferring possession of agricultural real estate. Similarly, it is necessary to grant KOWR the right of first refusal to acquire shares or stocks in a company contributed to the family foundation.

A similar problem arises in the case of contributing shares or stocks in a company that owns at least 5 hectares of agricultural land to the family foundation. Many farmers with larger agricultural holdings operate in this legal form.

Under the current legal situation, KOWR has the right of first refusal to acquire shares or stocks in a company. KOWR is increasingly active in exercising its right of preemption and priority purchase.

As a result, this poses a problem for partners or shareholders of family agricultural companies when contributing their shares to the family foundation.