After nearly seven years of debate, Switzerland’s Parliament passed a revised foundation law on December 17, 2021, set to come into effect on January 1st, 2024. The updated law introduces several key changes aimed at enhancing the rights of founders, simplifying foundation modifications, and providing a legal framework for oversight complaints. This article explores the significant amendments and their potential impact on the Swiss foundation landscape.

Switzerland’s Revised Foundation Law 2024: Enhancing Flexibility and Governance

1. Expanded Founder Rights: One notable change in the revised law is the expansion of founder rights. Previously, founders could only modify the purpose of the foundation if explicitly reserved in the founding documents. The revised law now allows founders to also reserve the right to alter the organizational structure of the foundation. However, this right is subject to certain conditions, including a ten-year waiting period since the foundation’s establishment or the last modification.
2. Simplified Foundation Amendments: The updated law introduces a more flexible process for making unwarranted changes to foundation charters. Minor alterations are permissible if they are justified on substantive grounds and do not infringe upon the rights of third parties. This change is expected to streamline administrative processes for foundations, allowing them to adapt more efficiently to evolving circumstances.
3. Clarification on Document Amendment Formalities: A new addition to the law (Art. 86c nZGB) clarifies that amendments to the foundation charter made by competent federal or cantonal authorities do not require public notarization. This simplification is aimed at reducing bureaucratic hurdles for foundations seeking to make necessary changes, enhancing administrative efficiency.
4. Legally Regulated Foundation Oversight Complaint:The revised law codifies the foundation oversight complaint, offering a clear legal basis for stakeholders to voice concerns. Individuals eligible to file complaints include beneficiaries, creditors, founders, additional contributors, and former or current members of the foundation board. This formalization provides a structured mechanism for addressing grievances related to foundation management, ensuring compliance with legal and foundational documents.
5. Empowering Founders: Reservation for Future Organizational Changes:The law now allows founders not only to reserve the right to modify the foundation’s purpose but also to anticipate future changes in its organizational structure. This innovation provides founders with increased flexibility to influence the foundation’s direction even after its establishment. However, the law places restrictions, requiring a ten-year interval between modifications and stipulating that the right is non-transferable and non-inheritable.
6. Streamlining Charter Amendments:Beyond the reservation of rights, the law introduces two formal simplifications for charter amendments. First, the criteria for minor changes are relaxed, requiring only substantive justification without the need for “compelling reasons.”Second, the law specifies that amendments do not require public notarization; approval from competent supervisory authorities is deemed sufficient.”
7. No Legislative Regulation of Board Remuneration: Despite the reform’s intention to clarify that reasonable board remuneration does not jeopardize a foundation’s tax exemption, Parliament rejected this proposal. The issue remains subject to interpretation by cantonal tax authorities, potentially leading to inconsistencies and legal uncertainties.

Conclusion

While the revised foundation law brings about certain improvements, such as increased flexibility for founders and streamlined administrative procedures, its overall impact on Switzerland’s foundation sector is anticipated to be moderate. The absence of a legislative framework for board remuneration may still pose challenges, but the codification of oversight complaints and other amendments represent positive steps towards modernizing and clarifying the legal landscape for Swiss foundations.

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