Foundations in Germany are not defined by law. However, it can be described as an organisation set up by one or more founders who use foundation assets to fulfil a specific purpose.
In principle, only the interest income from the foundation’s assets and, in some cases, donations are used for this purpose, but not the assets as such.
Around 95 per cent of foundations in Germany pursue charitable purposes. In addition, there are also private-benefit foundations, especially family foundations, which primarily serve to provide for the members of one or more families.
Foundations appear in various legal forms and types. The best-known and most common are the legally capable foundation under civil law and the so-called trust foundation.
There should always be sufficient assets to pursue the foundation’s individual purpose. These include assets of all kinds, whether in cash, as shares in a company or in-kind.
In addition, a sufficiently definite purpose for the foundation is required. This is laid down in the foundation statutes, which provide the legal framework for the foundation.
The articles of association should also contain the name of the foundation, regulations on the foundation’s assets, the persons benefiting from the foundation (beneficiaries), and provisions on any foundation bodies and committees.
Under civil law, the legally capable foundation, also called an independent foundation, is regulated by statute under §§ 80-88 BGB. It comes into existence with the foundation transaction and recognition by the competent authority of the federal state where the foundation is to have its seat (§ 80 para. 1 BGB). In North Rhine-Westphalia, the foundation supervisory authority is the respective district government.
The prerequisite for recognising the foundation as legally capable is the written form of the foundation transaction. In it, the founder must bindingly declare to dedicate assets to fulfil a purpose specified by them.
In addition, a foundation charter is required in which the foundation’s name, seat, purpose, assets and the formation of a foundation board are regulated.
Furthermore, the foundation supervisory authority examines whether the foundation’s purpose’s permanent and sustainable fulfilment appears to be assured.
No specific amount is prescribed by law for the foundation assets so that the concrete circumstances of the individual case are examined. Often a capital of at least 50,000 to 100,000 euros is considered necessary, but this depends, among other things, on the respective federal state.
The foundation deed is finally issued with the recognition of the foundation as legally capable.
For recognition, the foundation transaction and the foundation statutes must be submitted to the competent foundation supervisory authority together with the application for recognition.
The foundation transaction may also consist of a disposition upon death (will or contract of inheritance). In this case, recognition of the foundation is applied for by the heir or executor.
If the application is not made, the foundation transaction is notified by the probate court to the competent authority for recognition (§ 83 p. 1 BGB). In principle, the abovementioned requirements must also be fulfilled in this case.
The competent tax office must recognise the foundation as pursuing charitable, benevolent or ecclesiastical purposes to benefit from tax concessions. The requirements must be fulfilled in §§ 51 ff. of the German Fiscal Code (AO). The foundation is only entitled to issue donation receipts for donations once it has been recognised as a non-profit organisation.
For this reason, the founder should only then pay the foundation’s assets into the foundation’s account and have this certified by issuing a donation receipt.
The lawyers at Schlun & Elseven Rechtsanwälte advise on all matters concerning establishing a foundation in Germany.