Resolved and Still Unresolved Problems in German Foundation Law

Abstract

The German civil law relating to foundations was originally based both on the BGB of 1900 (Bürgerliches Gesetzbuch – German Civil Code) and on the law of the states (Länder), which have the legislative competence for public law relating with foundations, especially for the official approval of foundations. The Länder subsequently made very different use of the possibility of subjecting the private law relating to foundations to public law supervision. Thus, the different structuring of public law powers for foundations triggered off the call for a reform of foundation law with greater exploitation of the legislative competence of the Federation. Parallel to the debate on civil law reform, enhanced tax relief for charitable foundations had been implemented since the 1990s, partially providing for better status for foundations compared with other charitable corporations. Finally, the Act to Modernise the Law Relating to Foundations of 15.7.2002 has regulated the conditions for the formation of a private law foundation with legal personality exclusively in the BGB, thus eliminating the coexistence of federal and state legal requirements in this connection. The concession system has been retained in that the requirement for the creation of a foundation with legal personality under the new law is also for recognition by a state authority in addition to an endowment transaction under private law. The conditions for changing the objects of the foundation have been restricted. If the objects of the foundation have become impossible to achieve, they may be altered as an exception. In this respect the intention of the founder should then also be taken into account, and, in particular, it should be ensured that the income of the foundation assets is maintained for the group of persons that it was meant to benefit, as intended by the founder. Still, a couple of questions are unresolved in German foundation law as regards the amount of dedicated assets to the foundation, whether or not the recognition authority does still have a certain degree of scope due to the ambiguous terms viability forecast and endangering the common good, the exact relationship to state law and the range of objects of the foundation (e.g. family foundation, foundation tied to enterprises). Overall, the Reform Act of 2002 has largely moved in line with opinions prevailing hitherto on civil law foundations and has hardly created anything new. A new initiative was only taken with regard to the conditions for recognising a foundation as having legal personality. The provisions have been simplified in this respect, and legal certainty has been created by establishing a uniform structure for the whole of the Federal Republic and resolving some questions of doubt. In addition, a number of problems have been addressed in the explanatory memorandum of the Act and have thus been resolved indirectly. One of these questions was resolved only recently by the Act to Enhance Volunteering of 21.3.2013 (BGBl. (Federal Law Gazette) I, 2013:556–560, 2013), which made clear that a foundation may also consume its entire assets after expiry of a given period of at least 10 years.