Shareholder foundations: passing on a business in the service of the common good

What is a shareholder foundation?

A shareholder foundation⁽¹⁾ is a model for business succession, governance, and value sharing chosen by entrepreneurs seeking to reconcile the preservation of their company with a contribution to the common good. It is a generic term referring to a foundation, or a similar structure such as an endowment fund, which holds all or part of a company’s share capital through a transfer of ownership.

In practice, company founders, often together with their children, decide to transfer part or even all of their shares to a foundation (or an endowment fund). By doing so, they relinquish ownership of those shares so that the foundation can safeguard the company’s long-term future and independence.

Over the past decade, Prophil has played a key role in promoting this model in France through its research, advocacy, and strategic advisory activities, supporting many pioneering French entrepreneurs in adopting this approach.*

How do shareholder foundations reconcile a company’s long-term continuity with philanthropy?

The purpose of a shareholder foundation is to provide a company with a stable, long-term shareholder. By definition, a foundation belongs to no one and therefore cannot be bought out. It has no shareholders of its own. According to the work of leading European researchers, particularly in Northern European countries where this model has existed for more than a century, a shareholder foundation is also intended to become the company’s controlling shareholder. Its mission is to play a fundamental role in preserving the business and safeguarding the material and intangible values that form its unique identity.

Furthermore, under French law, every foundation (or endowment fund) pursues a purpose that serves the public interest. Through the dividends it receives, as well as other sources of funding such as gifts, donations, and bequests, the foundation can carry out a philanthropic strategy, often with significantly greater resources than those available to a traditional foundation, while maintaining a long-term perspective.

As a result, all members of our De Facto community, which brings together French entrepreneurs who have pioneered this model, pursue a dual mission through their shareholder foundations: stewarding the company as a long-term shareholder while advancing philanthropic initiatives. Examples include Léa Nature, Monin, Archimbaud, Bureau Vallée, KS Group, CETIH, Palais des Thés, and Le Monde, among others.

This model is particularly well established in Northern Europe, but much less so in France. What explains this significant disparity between these countries, and what, in your view, are the prospects for shareholder foundations in France?

We recently published a comprehensive two-volume study⁽²⁾, “Shareholder foundations are taking root in France,” dedicated to this topic. The figures are striking, and the differences are significant. There are more than 1,400 shareholder foundations in Denmark, over 1,000 in Germany, and more than 200 in Switzerland. By way of example, international groups such as Carlsberg, Novo Nordisk, Bosch, Bertelsmann, and Carl Zeiss are controlled by shareholder foundations.

In summary, the main barriers in France are primarily cultural, but they also stem from inheritance law, particularly the principle of forced heirship (réserve héréditaire). Additional legal and tax challenges remain, especially when the shares being transferred are held through a holding company. These issues are addressed through the recommendations set out in our study and through ongoing advocacy efforts with public authorities.

We are nevertheless optimistic about the future of shareholder foundations in France. The First Shareholder Foundations Forum, held on 9 June at the French Ministry of the Economy and Finance, brought together more than 400 participants, including over 100 entrepreneurs, leading European experts, and representatives from the main professional networks concerned. Such a level of engagement, which would have been difficult to imagine just a few years ago, demonstrates that at a time of the “great wealth transfer”, and in the face of pressing social and environmental challenges, the shareholder foundation model can provide a highly relevant and forward-looking solution.