Update Your Foundation's Articles of Incorporation: Have Your Foundation's Articles of Incorporation Reviewed Now
Is your foundation charter still up to date? In our day-to-day practice, we see family foundations operating with outdated foundation charters. These are often more than twenty years old and have hardly been reviewed since the foundation was established. It is not uncommon for neither the founding family nor the foundation’s board of directors to be familiar with the exact content of the relevant provisions, since the foundation is managed by mutual agreement among the parties involved anyway.
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The foundation charter and the supplemental foundation charter form the foundation of every foundation & trust, and all actions taken by the board of directors must be guided by them . For this very reason, it is advisable to review the foundation’s charter and any amendments to it on a regular basis and to update them as needed.
Why Your Foundation's Mission Statement May Be Out of Date
The Private Foundations Act (PSG) offers an exceptionally wide range of options for structuring foundation governance. However, this flexibility has been limited in the past For decades, through extensive Case Law specified. The Supreme Court has clarified numerous issues relating to foundation law, identified possible structuring options, and at the same time established legal boundaries.
As a result, Austrian foundation law has evolved significantly—even though the frequently announced legislative reforms were ultimately not implemented. Many older foundation declarations and supplementary foundation documents therefore no longer comply with current legal standards in key respects.
The following issues regularly come to light during a professional review of a foundation's charter:
- Outdated phrasing : Many provisions that were considered standard when the foundation was established are now interpreted differently than originally intended. This applies in particular to provisions regarding asset preservation and investment principles. This can result in unwanted restrictions on administration of the foundation's assets, which could go so far as to jeopardize the foundation's long-term success.
- Regulations Governing the Advisory Board : The Case Law the Advisory Board has attracted particular attention over many years. Although numerous foundation charters were amended to bring them into line with case law, the changes were often limited to the advisory board’s powers. Less well known, but equally significant, are the lines of case law concerning the quality of governing bodies and the so-called “secret governing body.” As part of a review of a foundation’s charter, it should therefore be determined whether the advisory board was established in a legally valid manner and can actually fulfill its oversight and protective functions.
- Role of the Foundation Auditor : In the early years of the Austrian foundation system, little attention was often paid to the foundation auditor. In fact, however, the foundation auditor is the only oversight body for the foundation’s board of directors that is required by law. A modern foundation charter should therefore contain clear and well-thought-out provisions regarding the appointment and independence of the foundation auditor.
- Outdated Governance Structures : In many older foundations & trusts, the organizational and decision-making structures no longer align with current best practices. More than three decades of experience with foundations have shown which governance models function efficiently, in compliance with the law, and sustainably. Provided that the right to make changes still exists, it should be examined whether decision-making processes, control mechanisms, and areas of responsibility are structured in a manner appropriate to the times.
- Take family changes into account: In addition to legal developments, family circumstances have often changed as well. The birth of children or grandchildren, Business Succession, changes in financial circumstances, or new family needs can mean that the original beneficiary provisions no longer align with one’s wishes. If comprehensive amendment rights still exist, updates can also be made in this regard.
Act Now: Foundation Declaration update and ensure legal compliance
Especially while the right to make changes still exists, now is the ideal time to review the foundation's charter. As part of a professional review of a foundation’s charter, we analyze the charter—as well as any supplementary documents that may exist—to ensure they are legally up-to-date and practically appropriate.
In particular, we review the following:
- the foundation's organizational and governance structure,
- the control mechanisms and the responsibilities of the various bodies,
- the beneficiary regulations and grant policy,
- the assessment guidelines.
An updated foundation charter provides legal certainty, strengthens foundation governance, and helps ensure that the founder’s intentions are upheld over the long term. Have your foundation charter reviewed now to find out whether it makes sense to amend your foundation charter or supplementary deed.
Frequently Asked Questions
When does a foundation charter need to be amended?
If broad amendment rights exist, the foundation charter should be reviewed to ensure it remains up to date, particularly when the legal or family circumstances have changed significantly. Regular reviews are particularly recommended for older foundation deeds and supplementary foundation deeds, as Austrian foundation law has evolved significantly over the past decades as a result of case law.
Outdated Foundation Declaration—What Should You Do?
The best way to determine whether a foundation charter is outdated is through a professional review of the charter. This review also analyzes whether—and to what extent—changes are even possible under the provisions of the foundation charter itself and under the provisions of the law. If the necessary rights to make changes exist, the foundation’s charter can then be updated as needed. This process often reveals opportunities for adjustments to governance structures, beneficiary provisions, control mechanisms, or investment guidelines.
Have a foundation charter reviewed in Austria
Regularly reviewing a foundation’s charter is an important part of responsible foundation management. We regularly review foundation charters and supplementary documents to ensure they remain legally up-to-date, practical, and free of potential areas for improvement. Particularly for foundations & trusts whose charters were established many years ago, a review can offer significant benefits and help prevent future conflicts or legal uncertainties.
Foundations & Trusts: Keeping the Foundation Declaration Up to Date
The foundation charter forms the foundation of every foundation & trust and sets the rules for the management of the foundation’s assets and the distribution of benefits to the beneficiaries. Regularly reviewing and, if necessary, updating the foundation charter provides legal certainty, strengthens the foundation’s governance, and ensures that the foundation continues to align with the founder’s intentions in the future. Continuously adapting to legal developments and changing family circumstances contributes significantly to the long-term success of foundations & trusts.
