Liechtenstein: Country and Foreign Investment
A foundation exists to give effect to the stated, non-commercial wishes of its founder, as set out in a foundation deed and the Articles of Association (Statutes). In effect, the assets with which the foundation is endowed become a separate legal entity. The Foundation has no members or shares; it is set up by a founder (or founders). Most often, this is the form that is used for the continuation of family assets. The Foundation has beneficiaries, who may be identified in a variety of ways.
- No public registration is necessary, except that a copy of the Foundation Deed is lodged with the authorities. It need contain only very general statements about the purpose of the Foundation, while detailed rules are set out in private bye laws.
- Founder's rights are transferable, and they normally include the right to terminate the Foundation or amend the bye laws.
- Commercial activities are not permitted except in so far as they are in pursuit of the Foundation's non-commercial goals. The minimum assets of a Foundation are CHF30,000 (at the time of writing), which can not be divided into shares; the assets do not necessarily have to pass to the Foundation on formation;
- A Foundation is normally administered by what amounts to a board of trustees.
In summer 2008, it emerged that the Liechtenstein parliament had approved a reform of the jurisdiction's foundations law, which the government claimed adhered to international standards while continuing to protect privacy.
The new foundation law entered into force on April 1, 2009 and is part of the government's ongoing modernization of Liechtenstein company structures, which so far has included revision of the law governing associations and cooperative societies, and the introduction of the European Company and the European Cooperative Society.
As announced by the government, a revision of trust law will follow, the cornerstone of which – as in the case of Liechtenstein foundations – was laid in 1926 with the creation of the Law on Persons and Companies.
"Liechtenstein’s total revision of foundation law is based on the contemporary demands and needs of the financial centre's’s clients," the government announced.
"The balanced overall concept of the reform...meets international standards without deviating from the Liechtenstein legal tradition, which has always considered the protection of privacy to be a valuable good," the government said.
The main aim of the reform of foundation law was to harmonize with international standards, but the changes were also carried with the popularity of the foundation and its national economic significance to the Principality in mind.
"The requirements of market participants were taken into account, as well as the need to create a legal foundation that can be measured in accordance with scientific criteria and international standards, as the government stipulated in its guideline at the beginning of the reform process," the government stated.
The new foundation law is a self-contained body of law with a new systematic structure differentiating private-use from charitable foundations and strengthening the responsibility of the founder. The protection of the foundation assets is subject to new rules, as are the supervision of foundations and foundation governance. The non-transferability of the founders’ rights as a further new key feature entails greater legal certainty and clarity.
The “deposited” foundation, which need not be registered in the Public Registry and has thus been an object of criticism, was retained. The government justified the retention of this type of foundation by noting that it serves to protect the confidentiality of the founder if he wants to engage in long-term asset planning in the interest of his family. The exemption from the registration requirement only applies to private-use foundations, however, not to commercially operating foundations, which as a rule are limited to the mere management of assets.
The so-called “Futuro” project launched by the government calls foundations the “heart of the financial centre's" According to “Futuro,” family foundations are increasingly being recognized as autonomized assets and thereby constitute an instrument of succession planning that is sought worldwide.
In the future, the Liechtenstein professional trustee is no longer envisaged as merely a broker and administrator of this structure, but rather – thanks to his internationally recognized competence – will be seen as an important advisor in personal contact with the founders.
“Futuro” also plans to make Liechtenstein into a location for trusts, by harmonizing them completely with Anglo-Saxon trust structures.