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I will publish the results of my empirical study below1 Austrian private foundations2. I have 10% of the foundation's declarations3 of the 2795 private foundations in Austria that existed in Austria on the reporting date 7.2.2023 and were not in liquidation/insolvency4, investigates.5
I am aware that many of the contractual practice regulations researched here are not regulated in the foundation declaration, but in an additional foundation deed — if the foundation declaration provides for such. However, additional foundation certificates cannot be viewed in the commercial register, meaning that the present investigation had to be limited to the foundation declarations.
The results6 are the following:
“Family foundations” are often self-serving foundations that serve to support the family members of the founder (s).
A private foundation can be set up by one, two or more donors. Here are the results of how many founders had set up the foundation:
Based on the total number of foundations examined, 31% were founded by a single founder, 26% by two donors, 13% by three donors, 11% by four donors, 9% by five donors and 10% by six or more donors.
For family foundations, the analysis shows the following number of founders: one founder (26%), two founders (29%), three founders (15%), four founders (13%), five founders (9%), six to ten founders (8%).
For “other” foundations — namely savings bank foundations, employee participation foundations and self-purpose and de facto self-purpose foundations — the analysis shows the following number of donors: one founder (88%), two founders (6%), three donors (0%), four donors (6%).
The following information relates to family foundations:
In 26% of cases, the family foundation was set up by one founder, in 74% of cases by two or more co-founders. If a family foundation also has registered partnerships or legal entities as co-founders, then with the following frequency: domestic (21%) or foreign (2%) registered partnerships, domestic GmbH or AG (48%), other domestic legal entities (37%), such as associations, private foundations and local authorities.
In the following frequency, the foundation was established by a foreign GmbH or AG as a co-founder (6%) or other foreign legal entities, such as a foundation, institution, etc. as a co-founder (13%).8
When a foreign legal person has been appointed as a co-founder, the most common — in 39% of cases — is from Liechtenstein (Liechtenstein foundations or institutions), followed by those from Germany (15%) and Croatia (15%); as well as those from Greece, Great Britain, Italy and the Netherlands (8% each).
In 4% of cases, only foreigners or foreign legal entities established the Austrian Private Foundation as founders. Liechtenstein was the most frequently represented (1.4%), followed by other foreign donors (in alphabetical order) from Angola, Germany, Italy, Japan, Switzerland and the USA (0.4% each).
Among family foundations, which were set up by two or more founders, there was one main founder in 54% of cases and two in 4%. In 42% of cases, there were no significant differences in the allocation of assets that would allow a distinction between “main” and “subsidiary” donors.
99.5% of the foundation certificates of the family foundations state that the purpose of the foundation — as might be expected — is to provide for the founder or the beneficiaries associated with his family. In one case (0.5%), I subsumed other measures to promote the family in a broad sense as falling into this category.
21% of the foundation certificates of family foundations expressly state the maintenance or promotion of one or more companies as the purpose of the foundation; in 79% of the family foundations examined, there was no such reference.
68% of the foundation certificates of family foundations expressly mention the preservation of the contributed assets as the purpose of the foundation, and in 32% there is no such mention.
50% of foundation certificates (41% for family foundations) contain other foundation purposes. For these other foundation purposes, the following information can be found, for example:
Although foundation certificates regularly contain a numerical list of foundation purposes, which is introduced with the number 1, 2, 3, etc. I have investigated whether and to what frequency the foundation declarations explicitly determine a ranking of the foundation's purposes. Such a ranking could be expressed in mE as saying”primary purpose“,”predominant purpose“or”main purpose”. Conversely, the ranking could also be derived from the word”subsidiary“or”subordinate“express.
The question raised here of the ranking of foundation purposes becomes more important when the foundation (also) serves to provide for natural persons (beneficiaries), because Section 35 (2) (3) PSG is the duration of a non-charitable private foundation,”whose The primary purpose of caring for natural persons is“In principle, it is 100 years old, unless all final beneficiaries (then) unanimously decide to continue the private foundation for a further period, but for a maximum of (further) 100 years at a time. Does the foundation declaration mention only one sole purpose, namely the provision of natural persons as beneficiaries, the requirement of this legislative body is met all the more.
The study shows the following result: Only in 7% of cases (7% for family foundations) does the foundation deed explicitly determine a ranking within several foundation purposes. In the remaining cases, the foundation's declarations do not contain any explicit statement about this.
8.5% of foundations are classified as charitable organizations (some of the foundations explicitly describe themselves as selfish; in some cases they are classified as charitable organizations according to their purpose). 91.5% of foundations are classified as “selfish”.
As is well known, under Section 5 PSG, anyone named as a beneficiary in the foundation declaration is beneficiary. Without such a name, beneficiary is anyone appointed by the “body” appointed by the founder9, otherwise identified as a beneficiary by the Board of Directors of the Foundation.
26% of foundation certificates (30% for family foundations) name the beneficiaries.
In other cases, the foundation certificates of the family foundations at least mention a “group of beneficiaries”, namely in 20% of cases from the family circle, in 4.1% of cases from “other relatives” and in 0.4% of cases from a specific other group of persons.
In 4% of family foundations, in connection with the founder's descendants as beneficiaries, their spouses are also included as beneficiaries.
First, reference should be made once again to the statements above with regard to point E). If beneficiaries are not mentioned in the foundation declaration or if further beneficiaries are to be appointed, the foundation deed may name the “body” appointed to identify the beneficiaries; as a subsidiary, the foundation board is appointed as such to determine.
If the foundation deed leaves the naming/appointment of beneficiaries to a “body”, my investigation shows the following result: In 74% of cases (in family foundations 74%), in 8% of cases (in family foundations: 8%) the advisory board or the founder (18%) (in family foundations 20%) is appointed to nomine/appoint beneficiaries; however, the foundation declaration also refers to the foundation additional certificate (3%) (in family foundations 2%) or contains another provision (4%) (in family foundations 3%).10
91% of all foundation certificates (92% in family foundations) included in order to revoke the benefit none regulation. Vice Versa 9% (8% in family foundations) contain such a provision on the revocation of the benefit: 2% of foundation certificates (1% in the case of family foundations) make the revocation dependent on the existence of an important/factual reason. 2% (in the case of family foundations 2%) allow the revocation after the”discretion“, 2% (1% for family foundations) after”free discretion“to the body appointed for revocation. 3% (4% in family foundations), however, refer to the foundation addition deed as far as the revocation is concerned.
The person responsible for appointing members of the Foundation Board is:
None of the foundation certificates required a supervisory board to appoint the members of the foundation's board of directors.
The Board of Directors is a mandatory body within the Foundation. However, there is no need by law to include regulations on the foundation board in the foundation deed. Nonetheless — and quite expedient — contractual practice includes such regulations in the foundation deed. During the present investigation, I checked the order period for members of the foundation board the foundation certificates contain.
The results:
The foundation certificates examined included an age limit for members of the foundation board in 35% of cases (34% for family foundations). Insofar as the foundation declarations of family foundations provide for age limits for members of the foundation board, these are as follows:
Completion of
27% of foundation certificates do not contain any provision as to who is responsible for dismissing the foundation board.
The 73% of the foundation certificates, which regulate the dismissal of the members of the foundation board, declare the following body responsible for the dismissal:
None of the foundation certificates declare any supervisory board responsible for the dismissal.
Insofar as the foundation certificates for the dismissal of the foundation board contain regulations, these are as follows:
In 89% of cases, the foundation certificates do not provide any guidelines for the assessment of foundation assets by the foundation board.
The following assessment guidelines were adopted with the following frequency:13
Other investment guidelines include regulations, such as the investment of funds with a specific savings bank; the “secured investment”; the admission of the investment of 50% of the assets into high-risk asset classes; the obligation to create reserves for future capital increases in the companies belonging to the foundation; the obligation to manage assets sparingly.
The investigation also related to whether the foundation certificates contain rules for naming the foundation auditor:
In 52% of cases (54% for family foundations), the foundation certificate gives the founder (s) the right to name the foundation auditor, in 15% of cases to the advisory board (15% for family foundations), in 26% of cases to the foundation board (24% for family foundations), in 1% of cases to other persons (0% for family foundations). In 6% of cases (7% in the case of family foundations), the foundation deed does not contain any provision for naming the foundation auditor.
During my investigation, I came across a single private foundation that has a supervisory board. This corresponds to 0.4% of the private foundations examined. According to Compass-Verlag GmbH,...% of all Austrian private foundations have a supervisory board.
According to Section 14 (2) PSG, the founders may “provide for further bodies to achieve the purpose of the foundation.” For this reason, the examination of the foundation certificates was also aimed at whether the respective foundation provides for an advisory board or another body, such as a beneficiary committee or a beneficiary meeting.
In 70% of cases (70% for family foundations), the foundation declaration provides for the establishment of an advisory board or a similar body. The following terms are used as names for this body:
In 43% of cases (46% in the case of family foundations), the advisory board or body is supplied by beneficiaries; in other cases, this is not mentioned in the foundation deed.
If the foundation deed regulates the appointment of advisory board members, the following ordering modalities apply:
Neither the election of the members of the Advisory Board by a beneficiary committee nor a combined ordering mode — partly secondment by beneficiaries entitled to secondment, partly majority voting by the beneficiaries — were included in the documents.
Insofar as foundation documents provide for an advisory board, the appointment of advisory board members by the court is only provided for in 2% of cases (1% in the case of family foundations).
91% of foundation certificates (92% for family foundations) do not provide for an age limit for members of the Advisory Board. In the other 9% of cases (8% for family foundations), the age limits are the completion of
The foundation certificates contain the following powers of the advisory board or other body:
2% of foundation documents provide for the appointment of members of the Advisory Board by the court.
As is well known, the Foundation Board decides on contributions to beneficiaries, unless the foundation deed assigns the identification of the beneficiaries to another “body” (Section 9 (1) Z 3 in conjunction with Section 5 PSG).17 The founder can also use himself as a “job”18. In its decision, the body is bound to the purpose of the foundation and to the more detailed provisions of the foundation deed. It must make its decision in accordance with due discretion. In the absence of appropriate regulations in the foundation declaration, the “body” has discretion within the framework of the purpose of the foundation. However, the Management Board must comply with the creditor protection provision of Section 17 (2) PSG.
I have investigated who decides on grants to beneficiaries after the foundation declaration. Here are the results:
When the foundation deed names an institution which decides on grants to beneficiaries, the question is whether this body is obligated or at least in the sense of a”debits“regulation is required to make contributions to beneficiaries (or whether this may be in his”discretion“or”free discretion“stands), the following regulations:
As is well known, the PSG leaves unregulated whether beneficiaries have a (court-enforceable) right to benefits. The legislative materials19 Negate such a claim; mE could and must — if the purpose of the foundation is to supply beneficiaries — affirm such a claim in principle, unless the foundation deed explicitly states otherwise.20
The examination of the regulations in the foundation declarations shows the following results:
6% of foundation certificates (8% for family foundations) explicitly provide that beneficiaries are entitled to benefits. 31% of foundation certificates (34% in the case of family foundations) explicitly state that beneficiaries are not entitled to benefits. In 63% of cases (58% for family foundations), the question of whether or not beneficiaries are entitled to benefits remains unresolved.
None of the examined foundation certificates provided that beneficiaries were entitled to a monthly/annual grant of a specific amount or a one-off contribution (but this could just as well be set out in an additional foundation deed).
In 0.7% of cases, foundation certificates provide for a claim to use the foundation's assets, such as an apartment, house, etc., hunting or anything else.
The fact that beneficiaries are entitled to be appointed as managing directors, board or supervisory board members of subsidiaries or group companies of the Foundation was in no way regulated in the foundation deed.
Irrespective of whether the beneficiaries are entitled to pension benefits (under foundation law), the foundation, which has taken over the founder's main assets, may be liable to the beneficiaries for maintenance payments in accordance with Section 1409 of the Austrian Civil Code if the founder continues to have maintenance obligations to the beneficiary.21
After registration of the private foundation in the commercial register, the founder (s) is not required by law to amend the foundation declaration, unless the founder (s) in the foundation declaration have/have reserved the right to amend it (Section 33 (2) S 1 PSG). If an amendment to the foundation declaration is not possible due to the loss of one founder, due to lack of agreement in the case of several founders, or because there is no right to make changes, the foundation board may make changes to the foundation declaration to adapt to changed circumstances, while maintaining the purpose of the foundation. This change requires the approval of the court (Section 33 (2) PSG).
The investigation covers how often the foundation's declarations regulate a reservation of amendment in favour of the founder (s) and whether the founder (s) may also require the approval of other persons/bodies for the amendment.
In 92% of cases (93% in the case of family foundations), the founder or founders have reserved the full right to change the foundation deed.
In 1% of cases (1% for family foundations), the founder has reserved the right to change the foundation declaration only for certain defined areas.
Only 7% of cases (6% for family foundations) did not reserve the right to amend the foundation declaration.
If there are two or more co-founders, 31% (29% in the case of family foundations) of the foundation declarations subject to the proviso that The benefactors the foundation deed only jointly be able to change.
In 15% of cases (15% in the case of family foundations), the documents give everyone the right to change living Contributors jointly.
In 2% of cases (2% for family foundations) minors or not fully legally competent excluded from participation in the amendment.
44% (46% in the case of family foundations) of the documents state that as long as one or more named benefactors (“first founder”, “main founder”) lives (live), changes can only be made by these (s) alone.
In 4% of cases (3% in the case of family foundations), changes to the foundation declaration can be made by the first founder (“main founder”) together with one of several other donors.
In 0.5% of cases (0.5% in the case of family foundations), one of the founders has the right of conduct when deciding whether the foundation deed should be amended.
1.5% of foundation certificates (1.5% for family foundations) state that changes can be made by the majority of living founders.
16% of foundation certificates (17% in the case of family foundations) contain the order that — even if all other founders have died — the last founder can change the foundation deed alone.
In one case 0.5% (0.5% in the case of family foundations), it was regulated that the amendment to the foundation deed requires the consent of the beneficiaries concerned if the benefit is to be withdrawn from them.
In 40% of cases (40% for family foundations), there were other regulations to amend the foundation declaration.22
See also below.
In 13% of cases (12% in the case of family foundations), the amendment to the foundation declaration is dependent on the collaboration/approval of a second body, such as the board of trustees or advisory board.
As is well known, the founder can or can only revoke the private foundation if he/she has reserved the right to withdraw it in the foundation declaration. For legal entities as founders — the case law23 has also extended this to registered partnerships — revocation cannot be reserved (§ 34 PSG).
The reservation of revocation by the private foundation has consequences under inheritance law. However, it can also have effects if — as far as the case law24 allows — a creditor of the founder has the right to revocation seized and transferred and then revokes the private foundation in place of the founder. The right of withdrawal may also have an impact on the post-marital division of property between the founder and his spouse, as regards the measurement of marital gain.25
59% of the foundation certificates examined (63% in the case of family foundations) contain a cancellation requirement for the founder (s).
In the case of a majority of donors, according to the law26 The founders of the revocation unanimously to decide. However, the right to withdraw may be granted to one of several donors alone or reserved to a majority vote. This also raises questions of equal treatment and the duty of loyalty.27
In 43% of cases (42% in the case of family foundations), the revocation can be given by a founder alone. If there are three or more founders, in 18% of cases (18% in the case of family foundations), the revocation can be pronounced by two or more founders who are not all founders.
In the event that individual donors have died, 37% of foundation certificates (37% in the case of family foundations) regulate the right of withdrawal so that the revocation can be issued by the surviving co-founder (s).
43% of foundation certificates (43% for family foundations) contain other regulations.28
In 5% of cases (6% for family foundations), the founder (s) revokes the approval of the board, in 3% of cases (for family foundations 2%) the approval of the advisory board, in 1% of cases (for family foundations 1%) from the approval of the board and Dependent on the Advisory Board. In 1% of cases (0% for family foundations), the foundation certificates refer to the foundation additional deed.
1% (1% for family foundations) regulate the right of withdrawal to the effect that — if only one founder should survive — the surviving founder requires the approval of the board of directors to revoke the foundation.
The final beneficiary is the person to whom assets remaining after liquidation of the private foundation are to be donated (Section 6 PSG). Section 36 (4) PSG contains a statutory (doubt) provision which allows deviating provisions of the Foundation Declaration.
51% of foundation certificates (52% for family foundations) contain no provision on the question of who is the final beneficiary. In 32% of cases (33% in the case of family foundations), it was regulated that the last beneficiaries were also final beneficiaries. In 14% (11% for family foundations), other persons or bodies were appointed as final beneficiaries.
3% of foundation declarations (4% for family foundations) refer to the foundation addition deed.
In accordance with Section 9 (1) (6) PSG, the foundation declaration must in any case contain information as to whether the private foundation is established for a specific or indefinite period of time. The investigation has shown that:
94% of foundations (95% for family foundations) are established for an indefinite period of time.
5% (3% in the case of family foundations) are built for a period defined by calendar or years.
In 1% of cases (2% in the case of family foundations), the duration depends on the death of a named person.
On the question of whether the supply of beneficiaries of the”predominant purpose“of the Foundation and this implicitly results in a time limit of 100 years for the Foundation, see the comments above on point C.5.
In 3% of cases (3% in the case of family foundations), the foundation deed regulates reasons for the early dissolution of the private foundation by the founder (s), in particular as to
In 51% of cases (53% in the case of family foundations), the foundation deed contains a provision on the dissolution of the private foundation by the board of directors for special reasons. These are usually references to Section 35 PSG or to when the foundation is no longer able to fulfill its purpose.
13% of foundation certificates (14% for family foundations) provide for the admissibility of grants. In 5% of cases (5% for family foundations), the foundation's participation in other foundations as a co-founder is also explicitly allowed.
7% of foundation certificates (6% for family foundations) explicitly allow the foundation's assets to be donated to other foundations.
1.1% of foundation certificates (1.3% in the case of family foundations) also provide for other forms of “division” or “division of real estate” of the foundation among beneficiaries.
In one case (= 0.4%), the establishment of sub-foundations is expressly mentioned if there are different ideas between the beneficiaries about the management of the foundation's assets.
None of the documents examined contained the beneficiaries' right of proposal in the investment of assets by the Foundation.
A “profit center scheme” or a provision that certain beneficiaries should receive benefits from the income of certain assets attributed to them computationally and other beneficiaries should receive income from other assets of the foundation was found in only a single foundation deed (0.4%).
However, experience has shown that such regulations are more likely to be included in foundation additional documents in connection with the claim and extent of contributions to beneficiaries.
93% of foundation declarations (97% in the case of family foundations) provide for the preparation of an additional foundation deed or permit it.
It is also of interest how often the foundation declaration and the foundation addition certificate have been amended since the foundation was established. Because this shows how difficult it is to draft regulations which take sufficient account of the future requirements and needs of the foundation participants as well as changes in the environment, the economy, the profitability of the assets dedicated to the foundation and also the difficult to predict case law, i.e. to anticipate and properly regulate future problems:
As a result of this unpredictability of the future and future requirements, it can be seen that many foundations have made a considerable number of changes to the original foundation deeds and endowment certificates within a few years and decades.
The study shows the following number of changes to the Foundation's declarations:
Foundation additional documents were amended with the following frequency:
As stated in my essay “30 Years of Private Foundations”, is at the forefront of the changes29 mentioned — the Karl Wlaschek Private Foundation with ten (!) Amendments to the foundation deed and 19 (!) Amendments to the foundation addition certificate within twenty years.
