The interpretation of common-benefit foundations in Liechtenstein jurisdiction
In its decision 07 HG.2018.255 of 14 November 2019 the Superior Court dealt with two essential issues which are substantial to foundation law: firstly, the Superior Court had to clarify why the term “common-benefit” (gemeinnützig) is not to be equated with the term “charitable” (wohltätig); and secondly, the Superior Court provided reassurance that the subsequent granting of a right to amend the statutes cannot be achieved by way of an amendment under Art. 552 § 32 PGR.
The subjects of these appeal proceedings were requested amendments to the statutes of a common-benefit foundation which had not been approved by the Princely Court as the court of first instance. Underlying the application were the most recent instructions set out by the now deceased founder in a letter regarding new by-laws after her decease and according to which the entire foundation assets shall remain in the foundation for charitable purposes. The requested changes by the foundation board included potential distributions to recognized charitable institutions and organizations in the areas of public health and social welfare, in particular for single women, disabled people and persons facing difficult life situations in certain countries. In this context, the Princely Court only partially approved the requested amendments: it did not authorize amendments which would have enabled distributions in the field of culture and scientific research. Beyond that, the foundation board motioned that the statutes shall include a new provision, granting the foundation board the right to amend the statutes itself.
THE CONCEPT OF COMMON-BENEFIT
Contrary to the applicants' opinion, the Superior Court did not consider the terms “common-benefit” and “charity” as synonymous. Thus, the pursuit of purposes for cultural and scientific research could not be subsumed under the term “charitable”. With reference to legal provisions, charitable or benevolent activities are – according to the ruling of the Superior Court – understood to be those which specifically serve to support people in need.
SUBSEQUENT RIGHT OF MODIFICATION
The right to modify and amend the foundation documents granted to the foundation board is a highly personal right and cannot be transferred by means of a legal transaction.* According to the Superior Court, the subsequent introduction of such a right would ultimately lead to the annulment of legal provisions. As the founder had not provided for a corresponding article in the statutes, the subsequent introduction of such a right to modification would be unlawful.**
Taking the decision of the Superior Court into consideration, a distinction must be drawn between the concept of common-benefit purposes in general and charitable purposes. According to the court, Liechtenstein law does not use “charitable” and “common-benefit” as synonyms. Hence, while both serve the public good, the charitable purposes of a foundation refer to activities which specifically aim to support people in need. Thus, cultural and scientific purposes do not fall within the definition of charitable purposes. In addition, the subsequent introduction of a right of amendment granted to the foundation board is not permissible. If the founder has not expressly foreseen such a right in the articles of association, the supervisory court cannot approve such a request afterwards. However, the decision of the Superior Court has been appealed to the Constitutional Court (StGH) on the basis that said judgement allegedly violates constitutionally guaranteed rights. Nevertheless, until a judgement of the StGH is rendered, the remarks of the Superior Court in its decision 07 HG.2018.255 of 14 November 2019 will have to be taken into account in practice.
* LES 2010, 144
** cf. Austrian Supreme Court, 24.05.2018, 6 Ob 71/18m
For further information please contact Mag. Johannes Sander