An Overview of the Liechtenstein Foundation

Josef Bergt
2023

In the realm of legal entities, the concept of a foundation holds a unique position. As per Art 552 § 1 to 41 of the Liechtenstein Persons and Companies Act (“PGR”), a foundation is a distinct legal and economic entity, established through the unilateral declaration of intent by the founder. The founder earmarks specific assets for the foundation, delineates its purpose, and identifies the beneficiaries.

The foundation can be either private-benefit or public-benefit. Family foundations, either pure or mixed, are particularly apt as private-benefit foundations. Public-benefit foundations, on the other hand, fall under the purview of the Foundation Supervisory Authority, as do private-benefit foundations that are subjected to supervision through a provision in the foundation deed. The Office of Justice serves as the Foundation Supervisory Authority.

Public-benefit foundations are required to be registered in the Commercial Register. Private-benefit foundations may voluntarily register in the Commercial Register, but they must do so if they engage in commercial activities on a special statutory basis.

The establishment of a foundation can be initiated by one or more natural persons or legal entities. The foundation comes into existence through a written foundation declaration. Public-benefit foundations and private-benefit foundations that engage in commercial activities on a special statutory basis must arrange to be entered in the Commercial Register and acquire legal personality only once they have been registered.

The foundation deed, also known as the articles of the foundation, must encompass the necessary information and provisions mandated by law. Certain provisions and details are only valid if they are included in the articles. The founder also has the option to create a supplementary foundation deed, or bylaws, which can contain parts of the foundation declaration that are not obligatory to be included in the foundation deed and may also draw up a non-binding letter of wishes. Both the foundation deed and the supplementary foundation deed must be written, and the founders' signatures must be certified to be valid. A foundation is an independent asset dedication with an external purpose. It serves, among other things, succession planning and asset protection purposes. Even more independence and asset protection may be achieved by appointing a protector.

For further execution of the foundation deed or the supplementary foundation deed, the founder, the foundation council, or another foundation body may issue internal directives in the form of regulations, provided this was stipulated in the foundation deed. In this context, regulations issued by the founder take precedence over those issued by the foundation council or by another foundation body.

The purpose of the foundation can be either public-benefit or private-benefit. A public-benefit foundation is one that is primarily dedicated to serving public-benefit purposes as per Art. 107 Para. 4a PGR. On the other hand, a private-benefit foundation is one that is primarily dedicated to serving private or personal purposes. Family foundations and mixed family foundations fall under private-benefit foundations. In the case of a private-benefit foundation, the founder must specify the beneficiaries or the group of beneficiaries in the foundation deed, unless a reference is made to a supplementary foundation deed that regulates this matter.

Public-benefit foundations may engage in commercial activities only if these directly serve the achievement of their public-benefit purpose or if this is permitted under a special law. Private-benefit foundations may establish a commercial operation as long as it is required for the proper investment and management of the assets of the foundation. The purpose of the foundation must clearly state whether or not it is engaged in commercial activities. The investment and management of assets or the holding of participations or other rights does not constitute an activity of a commercial nature, unless the nature and size of the enterprise requires commercial operations and orderly accounts.

The minimum capital of the foundation is CHF, EUR or USD 30,000.00. The minimum capital must be fully paid up or contributed at the time of foundation.

The foundation council is responsible for administering the foundation and representing it externally. It is tasked with fulfilling the foundation's purpose in accordance with the provisions set out in the foundation documents. The foundation council also manages the assets of the foundation in accordance with the foundation's purpose and the principles of good management, taking into account the intention of the founder. The foundation council must consist of at least two members, who may be either natural persons or legal entities.

The founder may also provide for additional managing bodies, such as protectors or advisory boards. These bodies may be given not only supporting and controlling functions but also decision-making powers. However, they do not have the power of representation.

For public-benefit foundations and foundations that have voluntarily placed themselves under the supervision of the Foundation Supervisory Authority, the Princely Court of Justice shall appoint an audit office.

Source: Factsheet AJU/ h70.008e.03

Executive Summary:

• A foundation is a distinct legal and economic entity, established through the unilateral declaration of intent by the founder.
• The foundation can be either private-benefit or public-benefit, with the latter falling under the purview of the Foundation Supervisory Authority.
• The establishment of a foundation can be initiated by one or more natural persons or legal entities.
• The foundation council is responsible for administering the foundation and representing it externally.
• Additional managing bodies, such as protectors or advisory boards, may be provided for by the founder.
• For public-benefit foundations and foundations that have voluntarily placed themselves under the supervision of the Foundation Supervisory Authority, the Princely Court of Justice shall appoint an audit office.
• The foundation deed and the supplementary foundation deed must be written and the founders' signatures must be certified to be valid.
• The founder, the foundation council, or another foundation body may issue internal directives in the form of regulations.
• The purpose of the foundation can be either public-benefit or private-benefit.
• Public-benefit foundations may engage in commercial activities only if these directly serve the achievement of their public-benefit purpose or if this is permitted under a special law.
• The minimum capital of the foundation is CHF, EUR or USD 30,000.00. The minimum capital must be fully paid up or contributed at the time of foundation.