The private foundation, which as an ownerless entity is intended to protect the founder’s assets from direct access by his descendants for years, is not an entity for eternity. When the private foundation ends, the assets pass to the final beneficiaries and they can dispose of them completely again from this point in time.
According to § 35 (1) PSG, the following reasons lead to the dissolution of the private foundation:
- Expiry of the period stipulated in the foundation declaration;
- Opening of bankruptcy proceedings on the assets of the private foundation;
- Legal force of the decision not to open insolvency proceedings due to insufficient assets to cover costs;
- Formation of a unanimous dissolution resolution by the foundation board;
- Decision of the court on dissolution;
However, the conclusive list of reasons for dissolution of Section 35 (1) PSG has expanded significantly to the effect that the founders can provide additional reasons for the dissolution of the private foundation in the foundation deed.
In accordance with the statutory provision on the grounds for dissolution of the PSG, the foundation board is obliged to pass a resolution on the dissolution of the private foundation if it has received a permissible revocation from the founder, or a non-profit private foundation whose primary purpose is the care of natural persons , has lasted 100 years, unless all final beneficiaries decide unanimously that the private foundation will be continued for a further period, but no longer than 100 years. In addition, the private foundation must be dissolved if the purpose of the foundation has been achieved or can no longer be achieved.
The Supreme Court dealt with the latter reason for dissolution in a decision at the end of 2021 ( OGH December 22, 2021, 6 Ob 202/21f ) and specified the circumstances that justify dissolution in more detail:
In the cited decision, the Supreme Court took the view that the attainability of the purpose of the foundation must be based on an “overall consideration of all circumstances”. It may also be necessary to make a forecast of future asset development. In any case, the purpose of the foundation should then no longer be achievable if, according to human judgment, no circumstances will arise in the long term that would make the purpose of the foundation achievable.
The materials already showed that the purpose of the foundation can no longer be achieved if the corresponding foundation assets are no longer available.
When assessing whether the purpose of the foundation can still be achieved, the regulations in the declaration of foundation as well as those in any additional did must be observed. The overall purpose of foundations is usually to support the beneficiaries.
If, as was the case here, the beneficiaries have not received any cash benefits for years and will not receive them in the future according to the forecast, the purpose of the foundation can no longer be achieved and the private foundation must be dissolved. In the present case, on which the decision of the Supreme Court was based, the purpose of the foundation consisted in the administration and maintenance of the respective foundation assets as well as support of the respective beneficiaries by distributing the proceeds.
In practice, if the purpose of the foundation cannot be achieved, this can mean that the private foundation can still be dissolved and the remaining assets must be distributed to the final beneficiary, provided the founder has not expressly stated a right of revocation in the foundation did.
For further information, please contact:
Luca Trondl , Associate
Zumtobel + Kronberger, Salzburg
Email: ta.walue@eciffo
t: +43 662 62 45 00
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