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Ashling Cashmore
Head of Impact & Advisory
Despite the vital role they play in society, most businesses currently do little to support charitable causes. According to CAF’s Corporate Giving Report, only a quarter of British companies contributed cash, time, or goods in-kind to charity last year. This is surprising, considering that businesses have a clear stake in fostering stronger, more connected communities.
In today’s climate of economic and geopolitical uncertainty, it may feel difficult for businesses to make strategic, long-term plans around giving. Indeed, charitable giving often remains an afterthought rather than an integral part of the business model. Yet giving is a key aspect of being a responsible, purpose-driven business and there is an expectation that businesses should be giving – according to a CAF survey, only 23% of people think that businesses are never obligated to give to charity.
Interestingly, incoming changes to inheritance tax and business property relief could be about to reshape the landscape for philanthropically-minded entrepreneurs in the UK. These evolving regulations position one type of philanthropic structure as a potential solution for those concerned about social purpose, succession and the long-term future of their businesses.
While there are many ways a business can structure its giving, shareholder foundations present a compelling and often underappreciated solution for professional advisers seeking to guide clients with long-term business strategies in mind.
Shareholder foundations, also known as holding foundations or philanthropy companies, are legal entities, typically established for charitable or public-benefit purposes, that hold a significant equity stake in, or even full ownership, of a business. The profits generated by the company are distributed to the foundation, fuelling philanthropic initiatives in perpetuity. While less common in the UK and US, the model has been widely adopted across Scandinavia and parts of Europe - around 50% of listed companies in Denmark are owned by a charitable foundation – and many of the world’s biggest brands, including Ikea, Bosch, Lego and Carlsberg use this structure.
For many business owners, the changes to inheritance tax and business property relief due to take effect from April 2026 have brought forward conversations about succession-planning.
Imogen Buchan-Smith, a Director at EY who is a private client tax adviser, believes that the significant restriction in the availability of business relief, as well as business owners’ desire to be philanthropic and ensure that their businesses endure, means that the shareholder foundation model may become a more attractive and commonly used vehicle in the UK.
She says: “Going forward, business owners won’t simply be able to pass on their interest in their trading businesses to younger generations free from inheritance tax as they would have been able to previously. Instead, these interests will potentially be subject to inheritance tax at a rate of 20%. Funding such a significant tax charge on death may impact the surviving family’s ability to continue to run that business in the future. Therefore, business owners are more focused on planning for the future and transition of their businesses earlier than they may have previously been, in order to ensure that this is achieved with as little impact on the business (and as tax efficiently) as possible. Alongside lifetime gifts to family members, this could include charitable giving (which should not give rise to inheritance tax charges) and, indeed, owning businesses within a charitable vehicle.”
The idea of leaving a legacy is used by many advisers to begin conversations on philanthropy with high-net-worth individuals. In turn, shareholder foundations provide a great opportunity to align a client’s personal and professional legacies. Traditionally, shareholder foundations have been something considered long after a business is established – the Hans Wilsdorf Foundation became the sole owner of Rolex only after its founder died. Sir Alec Reed was prompted to give money to his charity, the Reed Foundation, 25 years after founding his eponymous recruitment firm, due to diagnosis of a serious illness. The Foundation initially purchased 10% of shares in the company, growing over time to 18%.
However, by setting up a business under a shareholder model early on, NextGen business leaders can demonstrate their values from the start, have social impact now, and ensure those values and social contributions continue far into the future. This was the case with Pascal Lorne, a French entrepreneur, whose charitable endowment fund became the principal shareholder of his digital recruitment firm from the get-go.
For a new wave of entrepreneurs, success is measured by more than just financial returns. Shareholder foundations offer a powerful structure for embedding impact into the operational DNA of a company. By tying ownership to a philanthropic vehicle, business founders can ensure that commercial growth amplifies their contribution to society and ensure a long-term, stable shareholding not focused on short-term gain.
James Reed, Sir Alec’s son and CEO of recruitment firm Reed, says “I think it's up to each business whether it wants to be philanthropic or not. For me it’s a personal thing – it’s an obligation really. If you're making a profit, you should consider whether you can reinvest some of that profit in your community or look to help the wider world in a positive way.”
Handing over corporate shares to a foundation can also help prevent a drift from the founder’s original ethos, especially valuable for entrepreneurs worried about future takeovers or the dilution of purpose after succession. The founder of outdoors clothing brand Patagonia intentionally transferred ownership to a foundation and trust - including the family in decision-making - to protect its environmental values and prevent future buyouts misaligned with the original mission. Family alignment around shared values - as exemplified by Patagonia and also Reed - significantly increases the chances of a successful transition and continued mission-driven operations.
Jennifer Emms, Head of Charities at Maurice Turner Gardner, says: “Shareholder foundations can significantly enhance family harmony, giving rise to far more open discussions about the aim of family wealth and the causes that matter to each family member. Family collaboration and altruism has a ‘feel good’ factor and we find that younger generations are more likely to raise the possibility of philanthropy and social responsibility.”
Shareholder foundations are not only about the founder’s values. Purpose-driven companies are increasingly appealing to both talent and consumers. Our research shows that employees have an increased sense of pride and loyalty when they work for an employer that supports charities. Structuring business ownership through a foundation sends a clear message about corporate priorities, making the company more attractive to like-minded employees and values-driven partners.
James Reed is keen to encourage more businesses to become as he dubs it, a Philanthropy Company or ‘PhilCo’. He says: “It doesn’t matter how big you are. It’s a good way for a smaller business to become a bigger one if that’s part of the ambition because it makes it an attractive company for customers and potential employees.”
There is also evidence that foundation-owned businesses have higher survival rates; in Denmark, the probability of a business lasting 40 years is significantly higher for foundation-owned companies.
While an attractive option for ambitious NextGen entrepreneurs who want to make a social impact, not every company or founder will be ready for the foundation model. Advisers should help clients evaluate organisational maturity, family dynamics and alignment with existing investors when considering whether this structure is right for them.
The foundation model also introduces additional legal, tax and governance complexities. Professional advice on cross-border implications, compliance and operational frameworks is essential.
Emms explains: “Care needs to be taken regarding independence, conflicts of interest/loyalty and other governance issues whilst considering appropriate structuring to involve the family and retain some control. Getting the buy-in of the family at the outset is also important and can help to reduce the risk of a disgruntled family member challenging the gift to the shareholder foundation (whether made during lifetime or by Will), with potentially negative public and reputational ramifications.”
Even for many attracted by the model, the greatest hurdle is moving to action – making the decision to give away all or part of the business they have worked hard to build. In some European jurisdictions this also requires children to formally renounce their inheritance. The more transparent and communicative the process, the greater the chance of long-term success. Facilitating these conversations presents advisers with an opportunity to engage the wider family and deepen key relationships. If they decide a shareholder foundation isn’t right for them, there are still many ways they can create impact and an experienced philanthropy adviser will be able to help explore those options fully with them.
Shareholder foundations offer an ambitious and robust solution for next-generation entrepreneurs looking to combine commercial ambition with a lasting commitment to purpose. We wait to see whether the incoming tax legislation encourages more business leaders to consider integrating philanthropy into their long-term business plans. But for professional advisers, raising awareness of this strategic option and guiding its careful implementation has never been more relevant. In an age where social purpose is increasingly expected of business, shareholder foundations are not just a legacy tool, but a blueprint for future-facing, purpose-driven business.
This article was first published by ThoughtLeaders4 in the High Net Worth Magazine, Next Gen Wealth Edition, Issue 20, October 2025.
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