The Foundation Board’s Authority to Amend: What Changes to the Foundation’s Charter Are Still Possible After the Founder’s Death?
Foundations are legal entities established for the long term. Their purpose is to fulfill a specific mission—once defined—over the long term, within the framework of legal requirements and the foundation’s charter. However, it is precisely this structure, which is geared toward continuity, that creates a tension with economic and social realities: markets change, family structures shift, and tax frameworks are adjusted. What seems sensible today may require reform tomorrow.
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For this reason, it is often of paramount importance for founders to provide for the possibility of making changes to “their” foundation. But what legal options are available for making such adjustments? This article explains the flexibility offered by the Private Foundations Act, where the limits lie, and why forward-looking planning is more important today than ever before.
The Founder's Right to Make Changes
The Private Foundations Act allows the founder to reserve for himself or herself a comprehensive right to make changes during his or her lifetime in the foundation’s charter. To maintain flexibility even after the death of a natural person—and thus for future generations—arrangements involving a so-called “perpetual founder” are also used in practice. In such cases, a limited liability company (GmbH) acts as the founder, ensuring that existing rights to make changes do not expire upon the death of a natural person. As a result, the foundation generally remains adaptable over the long term. In such cases, however, it is essential to carefully plan succession arrangements regarding the GmbH shares.
However, not every foundation charter contains such provisions allowing for amendments. If such a provision is entirely absent, or if the right to amend the charter has expired upon the founder’s death, the question arises as to whether the foundation is effectively “set in stone” or whether there are still ways to make necessary adjustments in the future.
When the Founder Is No Longer With Us: The Foundation Board’s Subsidiary Right to Amend
For precisely such cases, Austrian private foundation law provides, in § 33(2) of the Private Foundations Act (PSG), for a subsidiary right of amendment on the part of the foundation’s board of directors. This ensures the Adaptability of a Foundations & Trusts for “changed circumstances.”
However, to protect the foundation and the founder’s intentions, the foundation’s board of directors is authorized to make changes only within very narrow limits. Circumstances must have changed in such a way that
- it is no longer reasonably possible to carry out the founder’s intentions in accordance with the original version of the foundation’s charter, or
- it can be assumed that, had the settlor been aware of the changed circumstances, he would typically have made a different arrangement.
The decisive factor here is the founder’s intent as reflected in the foundation’s charter. Whenever a change is to be made, it must be ensured that this intent is not undermined. The competent commercial registry court also scrutinizes this very strictly before approving any change. Consequently, a (complete) restructuring of the foundation’s substance—even if it might seem more appropriate or economically sensible—is generally precluded. The only permissible action is to restore the foundation’s ability to function, which has been impaired by changes in external conditions.
Forward-looking design is becoming increasingly important
Because the foundation’s board of directors has the right to make amendments on a subsidiary basis, foundations & trusts are not entirely rigid despite their long-term nature. Within a narrow legal framework, it is possible to respond to changing circumstances. However, the extent to which this flexibility actually applies in individual cases depends largely on the original terms of the foundation’s charter.
To the extent that amendments are not expressly provided for in the foundation’s charter, it must be determined through interpretation whether and to what extent they are consistent with the (hypothetical) intent of the founder. This makes it all the more important to plan ahead when establishing the foundation: On the one hand, the founder should set forth his or her intentions as clearly and in as much detail as possible in the foundation’s charter; on the other hand, it is advisable to include provisions governing the exercise of the subsidiary right to amend.
The more forward-looking a foundation’s structure is, the more likely it is to remain functional even under changing conditions and to fulfill its purpose across generations.
We'd be happy to assist you in the proactive drafting of your foundation declaration, or—if the right to make amendments no longer exists—in exploring the possibilities of the subsidiary right to amend, as well as in filing the corresponding application with the Commercial Registry Court.
Co-author: Sigrid Fichtner | Paralegal
Frequently Asked Questions
Can the foundation's board of directors amend the foundation's charter?
In principle, yes—but only under strict conditions. Section 33(2) of the Austrian Private Foundations Act (PSG) grants the foundation’s board of directors a subsidiary right to make amendments. This right applies when external circumstances have changed so fundamentally that the foundation’s purpose, as set forth in the original declaration of establishment, can no longer reasonably be fulfilled. Any amendment requires the approval of the Commercial Registry Court.
amending a Foundation Charter Following the Founder’s Death in Austria—What Are the Options?
Upon the founder’s death, his or her personal right to make amendments expires. Nevertheless, Austrian foundation law provides a legally regulated solution under § 33(2) of the Public Trust Act (PSG): Under certain conditions, the foundation’s board of directors may apply to the Commercial Registry Court to amend the foundation’s charter. A prerequisite is always that the original intent of the founder is not undermined—the primary focus is on restoring the foundation’s ability to function, not on fundamentally restructuring its content.
Foundations & Trusts – No Right to Make Changes Reserved: What Should You Do?
If the right to amend was not reserved in the foundation’s charter, or if that right has already expired, it must first be determined through legal interpretation whether there has been a change in circumstances within the meaning of the Private Foundations Act and which adjustments are covered by the hypothetical intent of the founder. Thereafter, an application to amend the foundation charter may be filed with the Commercial Registry Court pursuant to § 33(2) of the Private Foundations Act (PSG). Seeking legal advice at an early stage is particularly recommended in such cases in order to realistically assess the actual scope for action.
