16.07.2021 | KPMG Law Insights

Foundations – New foundation law: The 2021 reform of foundation law offers more room for maneuver for founders and foundations

New foundation law: The 2021 reform of foundation law offers more room for maneuver for founders and foundations

The new foundation law is coming

At the end of June, the Bundestag and Bundesrat passed the Act to Standardize the Law on Foundations (government bill: BT-Drs. 19/28173; printed resolution: BR-Drs. 569/21). Instead of the previous individual and, in some cases, very different foundation laws of the federal states, the legislator is now creating uniform federal legislation on foundations. The amendments bring improvements and more flexibility for founders and foundations. The new regulations are not only of interest to future foundations, but it is also advisable for existing foundations to consider whether they should adapt their statutes to the new foundation law.



The German Civil Code (BGB) will regulate foundation law in greater detail and provide foundations with more room for maneuver through new provisions. The new regulations of the foundation law reform will come into force on July 1, 2023. This is intended to give existing foundations sufficient time to adapt their foundation statutes. Furthermore, the federal states are to revise their foundation laws by then. Below we have briefly summarized the most important changes:


Amendments to the Articles of Association and other structural changes

In the future, significant structural changes such as the amendment of statutes, the “merger” or the dissolution of foundations will be facilitated. In this context, the strict concept of “impossibility” has been abandoned, according to which, for example, the foundation’s purpose may only be changed under the law still in force if the foundation can no longer fulfill its purpose. The same has so far applied to the conversion of a foundation into a consumption foundation for a limited period only.

In contrast, the new regulations will focus on whether a foundation can no longer fulfill its purpose permanently and sustainably, i.e. effectively. In the future, it will thus be possible to limit the purpose of the foundation, to convert it into a consumption foundation or to more easily dissolve non-performing foundations.

In addition, the formative provisions of the Foundation’s Articles of Association may be amended in the future in the event of a significant change in circumstances. Other provisions of the Articles of Association may be amended if this serves the purpose of the Foundation. When establishing the foundation, the founder may provide for deviations from this in the foundation transaction, in particular simplified requirements for amendments to the articles of association. However, the foundation transactions of existing foundations will mostly not include such facilitations. Existing foundations should therefore use the time window until July 1, 2023 to adapt their foundation statutes to the new law and thus to the possibly eased requirements.


Foundation assets and reclassification gains

In addition, the legislator will define the foundation assets, which consist of the “inviolable core assets” (so-called basic assets) and other assets, and thus create a uniform concept of assets. The basic assets typically include the assets dedicated when the foundation was established and subsequent endowments of assets. Particularly pleasing is the legal clarification that increases from the reallocation of the foundation’s assets – so-called reallocation gains – can be used to fulfill the foundation’s purpose. Contrary to what was still envisaged in the government draft, this always applies in the version that has now become law, unless it is expressly excluded in the foundation statutes or the preservation of the basic assets is not ensured. The flexible use of assets is thus reinforced for many foundations, and depending on the federal state and the structure of the statutes, even new possibilities open up here.


Directors’ and Officers’ Liability

There is also room for maneuver with regard to the liability standards for foundation bodies (management boards, advisory boards). In addition to the principles that have applied to date, the Business Judgement Rule has been introduced, which grants members of corporate bodies discretionary powers free of liability. In addition, it will be possible in future to adjust and limit the liability of board members by means of articles of association – both when a foundation is established and subsequently.


Foundation Register

Finally, a foundation register that can be viewed by anyone will be introduced on January 1, 2026. The obligation to register in this register applies to both new and old foundations. The latter have until December 31, 2026 to submit the required information (board members, power of representation, etc.). In addition to the name and registered office of the foundation, this portal will also provide access to the articles of association, any amendments to them, and details of the members of the executive bodies authorized to represent the foundation. The new register is intended to ensure greater transparency and legal transaction security. The critics of this expanded transparency in the foundation sector were thus unable to prevail.


What does this mean for foundations and donors?

All in all, the reform of foundation law will offer both existing foundations and foundations to be newly established – on a nationwide basis – the opportunity to make the foundation statutes more future-proof than before. This is because foundations will now be able to respond flexibly to changes in the future if they plan skillfully and with foresight. In the future, the foundation will be able to adapt its articles of association to the foundation’s specific needs more easily than before, provided that the right course has been set in the foundation’s articles of association. This applies both to charitable (tax-privileged) foundations and to family foundations, which can be important for medium-sized entrepreneurs, business families and wealthy private individuals, not least in the context of asset and company succession.

Due to the extensive regulations, in particular with regard to foundation bodies, asset investment and structural changes, existing foundations should review their foundation statutes to determine whether there is a need for adaptation. Foundations could thus use the fortunately extended window of opportunity until July 1, 2023, before the reform comes into force, to modernize their articles of association. The new regulations should also be taken into account today when a foundation is first planned to be established.


Best positioned for you

KPMG Law Rechtsanwaltsgesellschaft mbH can provide you with comprehensive advice on all national and international foundation issues. The experts at KPMG AG Wirtschaftsprüfungsgesellschaft will be happy to provide you with tax advice.

KPMG’s international network of around 227,000 employees in 146 countries also makes it possible to find out about the legal and tax consequences of foundations in most countries around the world. That is why we accompany founders and foundations in all cross-border activities, and have been doing so for over 130 years. Take advantage of our expertise, contact us, we look forward to hearing from you.

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