On July 22, 2021, the law for the standardization of foundation law was promulgated, which is also referred to as a reform of foundation law because of its scope: On the one hand, foundation law, which was previously largely dealt with in the respective state law, is now regulated uniformly in the Civil Code as a federal law. On the other hand, the law codifies several aspects that were common practice up to now, but now have a clear and comprehensible basis. In addition, the amendment to the law adds some important innovations to foundation law. The following overview is intended to show the changes associated with the law for existing foundations and foundations to be established and to give foundation bodies a recommendation for action. The changes do not take effect immediately. In order to give the foundations the opportunity
adapt to the new foundation law and make any changes to the articles of association, the new foundation law will only come into force on July 1, 2023. Nevertheless, parts of the law are already having a kind of preliminary effect: within the limits of the current laws, the foundation supervisory authority can already orientate itself on the content of the new regulations in order to take the will and motives of the legislator into account in advance.
Due to the fact that foundation law has not been uniformly regulated nationwide to a large extent, the scope of the actual changes in the new foundation law compared to current practice can vary depending on the federal state. However, the most important changes are as follows:
- More extensive and clearer regulations
First of all, the legislator has created a clearer legal basis with the more extensive regulation in the German Civil Code. Previously, the regulations were divided between the foundation part of the German Civil Code, association and tax law, as well as state regulations and court practice.
- The founder’s will
The reference to the will of the founder is not a major change compared to current practice. However, in the future it will be legally mentioned in Section 83 (2) of the German Civil Code (new version). According to this, foundation bodies and supervisory authorities must observe the will of the founder expressed when the foundation was set up or, alternatively, the presumed will of the founder. The core of foundation law is to clearly work out the founder’s will at the time of founding and then to interpret and implement it correctly.
- Changes to the Articles of Incorporation
In the future § 85 BGB nF, a three-stage system will be created for changes to the statutes, which will distinguish between changes in the purpose of the foundation (paragraph 1), formative changes (paragraph 2; e.g. name, seat, type of purpose) and other changes (paragraph 3) differentiates and makes graded requirements for the respective species. Changes to the purpose of the foundation are only possible if the previous purpose of the foundation cannot be fulfilled in the long term or in the long term or endangers the common good. Changes to defining aspects are possible if the circumstances of the foundation have changed significantly since it was set up and the change is necessary to adapt to the new circumstances. Other changes can be made if they are in the interest of the foundation’s purpose. Also relevant is Section 85, Paragraph 4 of the German Civil Code (new version), according to which the founder can specify different regulations for the amendment of the Articles of Association in the endowment business.
Tip: Existing foundations should check here in particular whether they can still adapt their statutes according to the currently applicable law so that a deviation from § 85 Para. 1 to 3 BGB new version is possible in the future.< /br>
- Differentiations between types of foundations and their assets
In Section 83b of the new version of the German Civil Code, a distinction will be made in future between perpetual foundations (those whose basic assets are to be preserved and which are intended to be active for an indefinite period) and consumptive foundations (those whose entire assets are to be used to achieve the purpose; minimum period of activity of 10 years). . There are also so-called hybrid foundations, in which part of the basic assets may be used up. The content of this subdivision corresponds to current practice. With regard to the regulation of capital preservation, the foundation reform does not make any provisions as to whether nominal or real asset preservation is required. The will of the founder remains decisive here, although in the case of smaller foundations a nominal value retention can be assumed.
- Structural Changes and Termination
Sections 86 to 87d also clearly regulate structural changes (adding and merging as well as changing from perpetual foundations to consumptive foundations) and termination (dissolution and cancellation). The clear regulation of the structural changes should be particularly helpful for many foundations that can no longer fulfill their purpose in the long term for financial reasons, but are now finding ways to bring the foundation to a meaningful end. With regard to terminations, the future § 87c BGB new version applies note, according to sentence 3, the assets of a foundation go to the Treasury in the event of termination if the articles of association do not specify a person entitled to accrue.
Tip: If your articles of association do not yet list a person entitled to an accrual, it could be worth amending the articles of association if you want to prevent the remaining assets from falling to the tax authorities in the event of dissolution or cancellation.
- Business Judgment Rule
The Business Judgment Rule known from the German Stock Corporation Act has also been incorporated into the law in the future § 84a II BGB new version. According to this, members of the governing bodies do not act in breach of duty if they are allowed to assume that they are acting for the benefit of the foundation in compliance with the legal and statutory requirements and with appropriate information.
- Foundation register
Finally, with the foundation reform, a foundation register will also be introduced, which is intended to make the previously unwieldy procedures for legitimating foundation bodies superfluous and, in accordance with the future § 82d BGB new version, will have a negative publicity effect Suffix: “e.S.” for perpetual foundations and “e.VS” for consumption foundations.
However, with regard to the register of foundations, there are still a few open questions that need to be clarified in the coming years. On the one hand, the scope of public inspection has not yet been clearly regulated and family foundations in particular will have little interest in their statutes being available to the public if there is a legitimate interest. On the other hand, it is not yet regulated how the transparency register and foundation register should work side by side and whether, in case of doubt, reports have to be made twice.
III. Recommendations for foundations
The consequences for foundations and foundation bodies vary depending on the extent to which previous practice in the respective federal state deviates from the new regulations.
Nevertheless, you should urgently check whether your current statutes conform to the future provisions of foundation law or whether amendments to the statutes are still necessary by July 1, 2023.
Since the foundation supervisory authorities are currently trying to reconcile previous practice and future law in their reviews, more intensive consultation with the authorities is worthwhile in order to be able to successfully complete changes to the statutes. You should also consider that due to the reform of foundation law, many foundations are currently trying to change their statutes. Accordingly, the foundation supervisory authorities are currently very busy, which can lead to delays in the examination process. In order to be able to make any changes to the articles of association before July 1st, 2023, you should therefore orientate yourself at an early stage.
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