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September 5, 2022 | Changes in foundation law: Then you have to adapt your foundation statutes (this article)

The law for the unification of foundation law enters into force on 1. July 2023 in force. The fact remains that the establishment of a foundation with legal capacity, a foundation transaction, a statutes and recognition by the competent authority are necessary. However, some new regulations deviate considerably from the previous foundation law. For this reason, existing foundations with legal capacity should also review their statutes for adjustments before the legal reform enters into force. We explain the innovations and what you should check.

Foundation Law: Objective of the Reform

1.1. Standardize Foundation Law

The aim of foundation reform is to unify foundation law. Foundation law concerns the creation and constitution of the foundation under civil law with legal capacity. It is based on federal law and state law. Therefore, there is no uniform foundation law. Therefore, there were often disputes in the application of the various state law regulations and the combination with federal law. Foundation law is now more finally regulated in the BGB. Accordingly, the individual state foundation laws must be adapted to the reform.

1.2 More transparency for foundations under new foundation law

In addition, the foundations should become more transparent in legal traffic. The current registers of foundations of the Länder have no publicity effect, but for example the commercial register or association register for other legal persons under private law. Therefore, the first January 2026 the foundation register with publicity effect introduced. This is intended to make it easier for foundations to participate in legal transactions. Registered foundations carry from this date onwards the addition “e.S.” and consumer foundations the addition “e.VS.”.

1.3. Greater flexibility in the statutes under new foundation law

The new foundation law grants the founders greater flexibility in the establishment and design of the statutes. Existing foundations with legal capacity should therefore consider their need for adaptation as a result of the reform and the time difference until entry into force. In the following, we discuss any adjustment requirements.

2nd Amendments to Foundation Law

2.1. Prohibition of the execution of the permanent will in the new foundation law

With the wording of § 81 (1) no. 2 BGB new version, the legislature has clarified in the new foundation law the dispute whether a founder who appoints a foundation to be established as heir can order the execution of a permanent will with regard to the inheritance of the foundation. The legislature has ruled out such an order in a disposition of property upon death. The reason for this is that the inheriting foundation must be able to manage or co-manage the assets itself. Therefore, the foundation must not only be the owner of the foundation assets, but also be able to dispose of its own assets without restriction.

According to the new foundation law, the arrangement of the execution of the permanent will in the establishment of a foundation by disposition of death leads to a refusal of recognition of the foundation with legal capacity, since the recognition requirements of § 82 sentence 1 BGB do not exist. Therefore, the founders who have ordered the establishment of a foundation and the execution of the permanent testament in their willful disposition of death should review their will or contract of succession for adjustment. In this way, a refusal of recognition of the foundation can be avoided.

2.2 Form of foundation business

The legislature has clarified in § 81 paragraph 3 BGB new version that the foundation business among living requires the written form, unless a stricter form is prescribed in other regulations. Therefore, there is no need for a notarial deed in analogous application of § 311b BGB or § 15 paragraph 3 GmbHG in such foundation transactions in which the founder promises the contribution of real estate or a GmbH share. On the other hand, for the foundation business, which is contained in a disposition of death, the written form requirement does not apply. Rather, it is subject to the stricter formal rules of disposition of property upon death.

2.3 Foundation assets under new foundation law

2.3.1. Division into basic and other assets

§ 83b BGB new version contains regulations on the composition of the foundation assets. For foundations with legal capacity which have been set up for an indefinite period, the foundation assets consist of the basic assets and the other assets.

The basic assets include the assets dedicated to the foundation. In addition, the basic assets also include the assets attributed to the foundation, which were intended by the donor to become part of the basic assets. Finally, the assets designated by the foundation as basic assets also constitute basic assets.

Other assets must be distinguished from this. The other assets refer to the consumable assets of a foundation and should not be confused with the funds to be used in a timely manner according to § 55 (1) no. 5 AO. Therefore, all assets belong to other assets that are not basic stock assets.

2.3.2 Empowerment of the Founder to Determine Basic Property

§ 83b paragraph 2 no. 3 BGB new version grants the founder a greater leeway in drafting the statutes. The founder can stipulate in the statutes that the foundation organs can determine other assets that do not necessarily have to be used for the purpose of the foundation as basic assets. This includes, for example, income.

The founder has different possibilities to make use of this authorization. For example, the statutes may oblige the foundation bodies to use a certain percentage of the foundation income to increase the basic assets (thesis clause). On the other hand, the foundation bodies can decide at their due discretion to what extent they determine other assets as basic assets, provided that the statutes do not contain any provisions.

However, the new foundation law does not contain any provisions on the formal requirements for a subsequent change in the basic assets. The statutes also do not have to contain any further provisions on the assets of the foundation. A capital increase under foundation law therefore takes place outside the statutes and is neither subject to notification nor approval vis-à-vis the supervisory authority. Nonetheless, the foundation bodies should examine the legal admissibility of such measures.

2.3.3 Authorization of the Founder to determine other property

According to § 83b paragraph 3 BGB, the founder will in future also have the opportunity to determine part of his dedicated assets in the foundation business for other assets. Therefore, the assets do not have to be transferred exclusively to the basic assets. Through such a provision in the statutes, the foundation has assets from the outset, which it may use to fulfill the purpose of the foundation. These are also not subject to the obligation to use funds in a timely manner in the case of tax-advantaged foundations in accordance with 62 paragraph 3 no. 2 AO.

Therefore, through careful planning, the founder can determine in the statutes how the other property is to be used and under what conditions it may be consumed. For example, the founder can reimburse the founding costs from the other assets. If, on the other hand, the statutes do not contain an explicit provision, the other assets will be used for the realization of the purpose of the foundation at the due discretion of the competent foundation body.

2.4. Management of the real estate under new foundation law

The basic stock is to be maintained undiminished and the purpose of the foundation is to be fulfilled with the uses from the basic stock. As a result, the legislature has for the first time standardized the foundation law principle of the preservation of assets in the new foundation law in § 83c (1) sentence 1 BGB new version. This preservation of assets refers to the basic assets as a whole and is not limited to the prohibition on the consumption of basic assets. Rather, it requires the competent foundation bodies to administer the assets as a means of fulfilling the purpose of the foundation in such a way that the sustainable fulfillment of the purpose of the foundation is guaranteed by the uses made of the assets at present and in the long term.

However, the legislature does not prescribe how the property is to be preserved. Therefore, you have to work out your own way based on the purpose of the foundation, the type and extent of the basic stock and the concrete use of the basic stock. You should observe the following procedure. If the foundation fulfils its purpose, for example, directly through the use of individual property, such as through the use of foundation-owned property, the use value of the object must be preserved for the preservation of property. If, on the other hand, the foundation fulfils its purpose by means of the income from the investment of the basic stock assets, the preservation of the profitability of the investment must be maintained. Accordingly, the plant should be carefully planned in order to avoid subsequent loss of value. Due to the low-interest phase, the legislature has opened up the possibility that increases from the reallocation of the basic stock assets can be used for realisation of purposes, insofar as this was not excluded by the statutes and the maintenance of the basic stock assets is guaranteed.

2.5 Organs of the Foundation

Now more the foundation law contains its own regulations on the foundation bodies. According to § 84 (1) sentence 1 BGB new version, each foundation must have a board of directors, which manages the business and represents the foundation. His power of representation is unlimited. The restriction of the representative power of the Foundation Board therefore requires an express regulation in the statutes.

This can lead to liability problems for the Executive Board in legal dealings with third parties if the third party has no knowledge of the statutory restriction. In these cases, the Board of Directors can act as a falsus procurator, whereby the legal transaction requires subsequent approval for effectiveness. Therefore, the statutory restriction on charitable foundations can lead to significant liability problems. The introduction of the foundation register as of January 1, 2026 solves the problem of transparency by entering statutory restrictions on the power of representation in the register in accordance with § 2 no. 6 of the foundation register law. However, registration in the Foundation Register eliminates any difficulties in understanding the limitation of liability. Therefore, you should make concrete and clear rules in the statutes.

2.6. Limitation of Liability of a Foundation Member

In the future, the liability of foundation members can also be limited. Accordingly, according to § 84a paragraph 2 sentence 2 BGB new version, there is no breach of duty if a foundation body in the management, in compliance with the legal and statutory requirements, could reasonably assume on the basis of appropriate information, to act for the benefit of the foundation. This becomes especially relevant in the case of adverse investment decisions of the foundation assets. Therefore, a board member who, for example, complies with the legal and statutory requirements in decisions regarding the investment of the foundation’s assets and acts on the basis of appropriate information for the benefit of the foundation, does not violate his management obligations.

In addition, in accordance with § 84a paragraph 3 sentence 3 BGB, the foundation law now makes it possible to exclude the liability privileges of volunteer or marginally remunerated board members. In the case of other board members, on the other hand, according to § 84a (1) sentence 2 BGB new version, a limitation of liability to intent and gross negligence can be made by a provision in the statutes. An arrangement of the pin is not necessary for this purpose.

Conclusion on the new foundation law