31 January 2024
Switzerland is one of the world's most popular and traditional locations for foundations. At the end of 2022, the almost 14,000 domestic foundations held assets totalling almost 140 billion Swiss francs. Given the economic importance of foundations, it is not surprising that the foundation system is once again at the centre of political debate and is the subject of numerous legislative changes.
Foundation law has already undergone some amendments as of 1 January 2023 as a result of the revision of the law regarding companies limited by shares. These related to the area of imminent insolvency and over-indebtedness as well as the disclosure of remuneration. One year later, there was still potential to expand the already favourable framework conditions of the Swiss foundation system. Accordingly, the amendments to the law outlined below came into force on 1 January 2024:
According to the new wording of Art. 86a para. 1 CC, the founders may reserve the right to make future organisational changes in the foundation deed. The previous law only provided for a reservation for changes in the purpose of the foundation. Changes to the organisation of the foundation were only permitted if they were urgently necessary to preserve the assets of the foundation or to safeguard its purpose (see Art. 85 CC). Provided that certain conditions are met, this amendment to the law allows the organisation of the foundation to be adapted flexibly and purposefully to changing circumstances.
From 1 January 2024, the supervisory authority may make minor amendments to the foundation deed after consulting the highest foundation body, provided that these appear justified for objective reasons and do not affect the rights of third parties (Art. 86b CC). Until the end of last year, the conditions for such amendments were stricter and "valid" objective reasons were required.
The new Art. 86c CC also provides, for the sake of simplicity, that amendments to the foundation deed in accordance with Art. 85 to 86b CC can be enacted by the competent federal or cantonal authority or by the supervisory authority. Accordingly, public notarization of the amendments is not required.
Art. 84 para. 3 CC now contains an exhaustive catalogue of persons entitled to file a complaint with the supervisory authority against acts and omissions by the foundation bodies that are contrary to the law or the articles of the foundation. Even if this amendment to the law may give rise to criticism in the doctrine, it at least clarifies the right of appeal and is therefore to be welcomed in the interests of legal certainty.
A look into the future suggests further legislative changes in the area of foundation law. A motion by Thierry Burkart is currently pending in Swiss Parliament calling for the ban on family foundations with family support purpose (Art. 335 CC) to be lifted. Under current law, family foundations are not permitted to make distributions for family support purposes, but may only make payments in certain situations (education, equipment, support or similar purposes).
There is a need for revision as Switzerland lacks an instrument which allows family assets to be passed on to descendants in a measured manner. To prevent assets being passed on to heirs "in one fell swoop," Anglo-Saxon trusts or foreign (in particular Liechtenstein) family foundations have been used in practice to date. These foreign institutions are also largely recognised by Swiss law without any substantive control.
If the Swiss family foundation was strengthened and expanded for family support purposes, such reliance on foreign instruments would no longer be necessary. This would not only decrease the outflow of assets overseas but would also offer an alternative to the introduction of a Swiss trust, whose sobering consultation findings are unlikely to be executed. Therefore, in December 2023, the Council of States opposed the Federal Council's proposal and adopted Thierry Burkart's motion. The matter is now before the National Council.
The above statements show that the institution of Swiss foundations is constantly being strengthened through ongoing revisions and adapted to the needs of practice. Our notaries will be happy to advise you on all questions relating to foundation law or the establishment of a foundation by means of a public deed in the Canton of Lucerne or throughout Switzerland.
