A brief overview of the new foundation law from 2024
Articles
Legal
Inheritance / Succession
Notary
Changes in the foundation law allow a little more flexibility
Stefan Keller
Senior Legal Associate
Dr. Thomas Müller
Legal Partner
Switzerland is globally recognized as a popular and traditional location for foundations. The Canton of Zurich alone is home to more than 2’000 foundations with an estimated total assets of 18 billion. The Canton of Zug is also a popular location with a steady increase in new foundations, particularly in the fintech and blockchain sectors.
On January 1, 2023, as part of the revision of stock company law, the legislator amended the foundation law in the area of imminent insolvency and overindebtedness (cf. Art. 84a CC; see further information thereto in: Thomas Müller, Neues Stiftungsrecht: Stärkung des Gläubigerschutzes (Art. 84a ZGB)?, in Jusletter 11. September 2023) and the disclosure of remuneration (Art. 84b CC).
In addition, a parliamentary initiative was submitted in 2014 with the aim of extending the already favourable framework of the Swiss foundation system. Parliament subsequently decided to revise the foundation law accordingly in 2021, so that the revised foundation law will now enter into force on January 1, 2024 with the following amendments.
Further changes to the law could follow. Thierry Burkart's motion is currently pending in the Parliament (Burkart Motion). Burkart Motion provides for the abolition of the ban on family foundations with family support purpose (Art. 335 CC). The Council of States adopted the motion in December 2023 and the matter is now before the National Council for debate.
For the coming year, the following new provisions will be in force:
Extension of the right of amendment (Art. 86a nCC)
Founders can now reserve the right to make any future organisational changes in the foundation deed or in the last will. The previous law only provided for a reservation for changes to the purpose of the foundation. However, under previous foundation law, it was possible to change the organization of the foundation in exceptional cases if this was urgently necessary to preserve the foundation's assets or to maintain its purpose.
According to Art. 86a nCC, the founders can now adapt the organisation of the foundation more flexibly and specifically to changing circumstances. For example, by changing the organisation, the founders can appoint new foundation bodies, revise the existing rules for managing the foundation's assets and convert a foundation that was originally intended to be perpetual into a foundation which spend down its endowment. As before, when changing the purpose of a foundation, it is important to note that at least ten years must have elapsed between the establishment of the foundation or a previous organisational change. In addition, only the founders themselves can apply for a change of organisation. Also, only new foundations can benefit from this additional right.
Simplification of amendments to the foundation deed (Art. 86b nCC)
In future, minor amendments can be made to the foundation deed if they appear justified for objective reasons and do not affect the rights of third parties. Previously, "valid" objective reasons were required for such amendments.
Art. 86c nCC also stipulates that amendments to the foundation deed in accordance with Articles 85-86b CC may be made without public notarisation and are confirmed by the competent supervisory authorities.
Legally regulated foundation supervisory complaint (Art. 84 para. 3 nCC)
An exhaustive catalogue of persons entitled to file a complaint (beneficiaries or creditors of the foundation, founders, contributors, as well as former and current foundation board members) has now been introduced, who can file a complaint with the supervisory authority against acts and omissions of the foundation’s bodies that are contrary to the foundation deed or unlawful. This foundation supervisory complaint was not explicitly regulated in the previous law and the new exhaustive catalogue of persons entitled to file a complaint has already been critically examined by the doctrine (further explanations on the foundation supervisory complaint can be found in our previous magazine article).
Conclusion
Although the revision of the foundation law brings certain simplifications and a little more flexibility, there are not any noticeable changes to the traditional foundation system in Switzerland. This also applies to the new law, which came into force at the beginning of 2023 – there is still a lack of efficient and concise rules on capital and creditor protection and on the liability of the foundation board. The support of family foundations with support purpose (Burkart Motion) is a step in the right direction – but the need for further revision goes beyond this topic. The MME Foundation Law Practice Group therefore advocates a comprehensive revision and liberalisation of Swiss foundation law.
If you require advice on foundation law, the MME Foundation Law Practice Group will be happy to assist you at our offices in Zurich and Zug.
