15.03.2019 | KPMG Law Insights

Criminal tax law – Succession and family law

Family Business, Succession & Foundations

Foundations enable the use of the founder’s assets for a purpose determined by the founder. This involves more than mere estate administration. There is a lot to consider when setting up a company, for example the right choice of legal form. It also requires state recognition by the foundation supervisory authority.

The foundation boom of recent years continues. According to the Association of German Foundations, for example, the mark of 20,000 legally capable foundations under civil law was exceeded in Germany in 2013.

Motives for establishing a foundation

A foundation enables the founder to use all or part of his or her assets permanently to promote the purposes he or she has specified, even after his or her death. However, a foundation is by no means just an instrument for settling the estate. In many cases, it is used to make charitable commitments effective during one’s lifetime. For many people, donating is the best way to support projects that are close to their hearts and to give something back to society.

Establishment of a foundation

As different as the motives for establishing a foundation are, as different are the legal forms of the foundation and its design according to German or foreign law. The term “foundation” is not defined by law. It stands for a variety of legal forms, the most common of which is the legally capable foundation under civil law. Foundations are fundamentally established for the long term and must prove capable of acting in the long term in order to achieve their foundation purpose. The consumption foundation, which has been possible since 2013, should also generally exist for a period of at least 10 years.

The establishment of a foundation must be well planned. This requires a so-called foundation transaction and state recognition by the foundation supervisory authority. The foundation transaction is the declaration of the founder to establish a foundation and to endow it with specific assets to fulfill the purpose of the foundation. It must be made in writing and may also be included in a will, for example.

Through the foundation transaction, the foundation must be given a charter. It represents the heart of every foundation. The founder expresses his will in the articles of association when establishing the foundation and defines the framework of the foundation’s activities.

On the basis of the foundation transaction and the articles of association, the founder may apply for state recognition of the foundation at the foundation supervisory authority.

Ongoing foundation activities

The foundation has neither shareholders nor members. This makes the composition of the foundation’s board of directors all the more important. He manages the business of the foundation and represents it externally. In the case of large foundations, an additional management board may be established, consisting of one or more managing directors. In addition, a supervisory and/or advisory body may be established on a voluntary basis. In practice, this is referred to as “advisory board” or “foundation board of trustees”.

All foundations face a variety of challenges on a daily basis and are caught between foundation law on the one hand, which is predominantly state law (and can therefore vary from state to state), and tax law on non-profit status on the other.

This applies to the majority of foundations in Germany, regardless of the respective legal form, the respective foundation model or the activities of the foundation in Germany or abroad. For a foundation to operate successfully and realize its purposes in the best possible way, founders and foundations need specialized services tailored to their individual needs.

Our advice

With our many years of consulting experience, we can support you in every phase of establishing a foundation.

Advice on the establishment of the foundation

  • Advice/support in the selection of the legal form and the foundation model
  • Draft of the articles of association and the foundation business
  • Draft internal regulations such as rules of procedure and guidelines
  • Supervision of the coordination procedure with the foundation supervisory authority and, if necessary, the tax office until the foundation is recognized or until it is recognized as a non-profit organization
  • Advisory support during the transition from the establishment of the foundation to the first start of the foundation activity

Ongoing advice on foundation law

  • Advice on changes in the law and recommendation of new formulations for the foundation documents
  • Preparation of amendments to the articles of association and coordination with the foundation supervisory authority
  • Accompanying structural measures of a foundation (e.g. setting up an organization to avoid mistakes and legal violations, co-operating/merging with other foundations, establishing/reorganizing subsidiaries)
  • Consultation as to whether planned measures are compatible with the foundation statutes and, in particular, with the purpose of the foundation
  • Advice on avoiding liability cases, in particular with regard to the internal and external liability of the foundation and foundation bodies

Ongoing legal advice

  • Solution-oriented advice in all areas of commercial law, for example corporate, labor and real estate law, such as advice on the acquisition and management of real estate
  • Advice in connection with endowments and donations, with the protection of the intellectual property of the foundation and with contracts of the foundation with project partners



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Dr. Claudia Nerius

Senior Manager

Münzgasse 2
04107 Leipzig

tel: +49 341 - 225 72 525

Mark Uwe Pawlytta

Head of Succession and Foundation Law

THE SQUAIRE Am Flughafen
60549 Frankfurt am Main

tel: +49 69 951195012

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