date | theme

12. December 2019 | https://www.meyers-partner.ch/expert knowledge/taxation properties/family foundation/

September 2, 2020 | How a dual family foundation prevents the inheritance tax

17. February 2021 | Foundation in Liechtenstein: 6 advantages over a German foundation

8. June 2022 | Donation to affiliated foundation as hidden profit distributions of a GmbH: criteria & legal consequences

06. September 2022 | Self-dissolution of foundations under the new law (this contribution)

The self-dissolution of a foundation under civil law is so far only possible if the statutes contain a sufficiently specific self-dissolution reservation and this is also fulfilled. With § 87 BGB-neu, federal law now provides for the first time a statutory right of self-dissolution, which is also mandatory and conclusive according to the will of the legislature. We explain the precondition of the new right of self-dissolution.

1st self-dissolution under current law

1.1. Statutory authorisation in the Statutes

Numerous statutes of foundations under civil law contain a statutory authorization for self-dissolution. Then, under certain conditions, the foundation board can dissolve the foundation by decision. A prerequisite for this is often, for example, the impossibility of the purpose of the foundation or its fulfilment or a significant change in circumstances. The right of self-dissolution regularly occurs alongside the right to amend the statutes or merge or add.

1.2. Background

The background to such statutory regulations is that foundations as independent and basically permanently invested special-purpose assets are in principle not freely redeemable, but at best on the basis of a recognized legal basis. Since the founder is legally separated from the foundation upon establishment of the foundation and the foundation belongs to himself, the founder cannot simply revoke the foundation afterwards because of a mere change of will. Rather, the foundation must be protected against the corresponding influence of the founder or other persons.

Therefore, federal law only provides for an administrative waiver in accordance with § 87 (1) BGB. But even this applies only under the strict conditions of the impossibility of the purpose of the foundation or its fulfilment or the danger to the common good. At the level of some state foundation laws alone, self-dissolution is envisaged. In NRW, for example, there is § 5 paragraph 2 number 1 NRWStiftG. However, this standard is highly controversial with regard to the competence of the country. This current legal situation explains why numerous foundation statutes provide for self-dissolution by the foundation board or another body.

1.3. Currently self-dissolution effective if statutes are sufficiently determined

Even today, a right of self-dissolution is considered permissible in a statute. However, the founder in the foundation business must determine sufficiently concretely the conditions under which such a dissolution should be possible. Therefore, the founder cannot place the decision of the release in the discretion of the foundation bodies. The requirement of certainty thus ensures that the organs cannot substitute themselves for the original founding will. Therefore, the criteria must be objectively oriented and be able to be determined independently of the will of the foundation bodies and third parties.

2. The self-dissolution according to § 87 BGB-new

2.1 Validity of the new self-dissolution

The new foundation law enters into force on 1 July 2023 in accordance with Article 11 paragraph 2 StiftRGV. As of this date, according to Article 229 § 59 EGBGB-new §§ 82a – 88 BGB-new are to be applied retroactively to all existing foundations. The right of self-dissolution is one of several changes. In addition, there are innovations in the change of statutes and from 2026 a foundation register.

2.2 Prerequisite for self-dissolution

The new statutory right of self-dissolution is in accordance with § 87 (1) sentence 1 BGB-neu to the foundation board. Accordingly, this can dissolve the foundation if it can finally no longer fulfill its purpose permanently and sustainably. However, the statutes of the foundation may also delegate this right to another foundation body. If the prognosis made at the time of establishment of the foundation that the permanent and sustainable fulfilment of the purpose of the foundation appears to be assured has proven to be incorrect, it can therefore be dissolved. This includes in particular distressed foundations that no longer have sufficient assets and for which it is not to be expected that the assets situation will improve foreseeably.

The dissolution requires according to § 87 paragraph 3 BGB-new approval by the competent authority according to state law.

The legal right of self-dissolution is also final and mandatory. This means that statutory regulations that facilitated or made dissolution more difficult are ineffective according to § 134 BGB because of violation of mandatory law. The same applies to a change in the ranking between the amendment of the statutes and self-dissolution.

2.3 Self-dissolution subordinated to the amendment of the Statutes

The right of self-dissolution is subordinated by the factual characteristic of the final non-achievement of the purpose to the statutory amendment according to § 85 paragraphs 1 to 3 BGB-new. Therefore, the amendment of the statutes is always classified as a milder mean, whereas the right of self-dissolution is ultima ratio. If the foundation can give itself another purpose or can significantly limit its purpose, for example by cancelling one of two foundation purposes, dissolution is thus excluded.

2.4. Self-dissolution and administrative cancellation

In material law, according to § 87 (1) sentence 1 BGB-neu, the self-dissolution of an eternal foundation is only possible under one condition, namely if the foundation can finally no longer fulfill its purpose permanently and sustainably. Under the same condition, however, according to § 87a (1) BGB-neu, the administrative cancellation is also provided for. However, the latter may only take place as a subsidiary for self-dissolution pursuant to § 87 (1) BGB-new and thus only if the competent body does not immediately decide on the dissolution. In addition, the authority must revoke because of public health danger.

3. Legal right of self-dissolution and statutes

3.1. Relationship to self-dissolution according to the Statute

The new § 87 (1) BGB, which regulates the statutory right of self-dissolution, comes into force from July 1, 2023. In accordance with Article 229 § 59 EGBGB-neu, this regulation also applies to existing foundations. It is therefore necessary to clarify what consequences this regulation already has for self-dissolution under the Statute.

A preliminary effect would be conceivable, i.e. the influencing of the applicable law by a legislative act that has not yet entered into force. For example, § 87(1) BGB-neu could have to be taken into account in the context of the interpretation of the clause in the statutes. Then the applicable law will also be interpreted in the light of future law, provided that the respective provisions of the applicable law contain room for interpretation or discretion. Such a way is preferable, since the regulation only on 01. July 2023 enters into force and only applies retroactively to existing foundations.

3.2 Consequences for self-dissolution according to the statutes from 01. July 2023

With regard to the legal right of self-dissolution is from 01. July 2023 consequently the right of self-dissolution in the statutes became obsolete. Since § 87 BGB-new is final and mandatory, the dissolution can be bound neither to complicated nor to facilitated dissolution requirements. Such a provision would therefore be null and void because of a breach of § 87 BGB-neu according to § 134 BGB. What remains as a design possibility is therefore on the one hand to concretize the legal ground for dissolution by means of rule examples and on the other hand to assign the dissolution competence to another body. Therefore, the competent foundation bodies should check whether the self-dissolution right in the statutes meets the strict requirements.

4th Conclusion

So far, a forward-looking drafting of the statutes involves granting the foundation board or another foundation body the competence to dissolve the foundation under certain conditions. Until now, the design of such statutory resolution reservations has been quite free. Only the determination requirement, which prohibits granting the foundation board a free right of dissolution, had to be observed.

With § 87 para. 1 BGB-neu, the necessity to provide for self-dissolution in the statutes is basically eliminated. This leaves only limited room for manoeuvre in the drafting of the statutes.

The new law already has a pre-effect in the current transitional phase, since it must be taken into account in the interpretation of the law as an element of interpretation. The consequence of this is that a dissolution of the foundation can no longer be based on substantive reasons.