The new foundation law will come into force on 1 January 2024. What are the new elements regarding the founder's prerogatives?
«Since 2006, the Swiss law on foundations provides for the possibility for the founder to reserve the right to change the purpose of the foundation, a right that the latter can exercise every ten years until his death. When the founder is a legal person, this right expires after twenty years. The new law, which will come into force on January 1, 2024, extends this possibility so that the founder can also reserve the right to change the organization of the foundation. This right also applies every ten years and runs parallel to the right to change the purpose."
As you rightly pointed out, from now on the founder can change not only the purpose of the foundation but also the organization after ten years. What concrete consequences does all this have?
“While the right to change the statutory purpose has only very rarely been used, the right to change the organization will have a completely different scope in the day-to-day practice of foundations. The founder can now, for example, change the governance of his foundation, create or abolish bodies, change the election requirements of the foundation's administrative bodies, adapt the rules on asset management or even introduce completely new rules for all matters organizational arrangements, all as it deems appropriate. This gives the founder a completely new position in the internal structure of the foundation: after the establishment of the foundation, he no longer regards the foundation as a third party, but will maintain a lifetime relationship with the foundation and thus also a power in its comparisons".
Among other things, the founder has the right to install himself and his family on the board of trustees and also to change the entire board of directors of the foundation. What consequences could this new ability have?
«Already at the time of establishing the foundation, the founder could appoint himself or his family to the foundation council or envisage himself as an elected body. The key factor is that he now he can do and change all of this later. This certainly has advantages and disadvantages. For example, a founder who sees a responsible generation of grandchildren grow up may later establish a family body for his family's participation in the foundation. Conversely, he can abolish this family body, which he had introduced when the foundation was established, if the family does not behave satisfactorily. Therefore, in the future, if the founder has reserved this right for himself, the foundation bodies will live under the sword of Damocles of the founder's influence for life. This is a major change from the previous law and will impact the internal structure of many foundations."
However, the Board of Trustees is responsible for the correct functioning of the foundation, for compliance with the statutory purposes and for the correct management of the assets, all without receiving a fee. Do you foresee difficulties in recruiting foundation councilors in the future?
«In fact, the new law has brought flexibility for the founders and therefore the possibility of adapting the foundation to the new circumstances, which was more difficult before. For foundation boards, however, the situation is no simpler. Now they have to live under the (potential) influence of the founder, but at the same time have responsibility for the foundation's activities (and thus for the implementation of the founder's initial will). Furthermore, the new law failed to provide that adequate remuneration of the governing bodies does not undermine the tax exemption. This important clarifying intervention was rejected by Parliament at the last moment, so that the foundation boards continue to live in uncertainty regarding their remuneration and are at the mercy of the different treatments of the cantonal tax offices. This is a very negative signal in terms of professionalisation and generational turnover in the foundation sector. I hope that future members of the Board of Trustees who want to take on responsibilities will not be discouraged by this situation. However, a strengthening of Switzerland's position, as the legislator actually intended to do, has a different aspect.
What advice would you like to give to new founders?
«I believe that in the future it will be very important to have great sensitivity and foresight to manage one's foundation adequately. Even in the past, the founder had the responsibility of setting up the foundation with foresight at the time of its establishment (and then stepping into the role of a third party or helping to implement his or her original will). This responsibility now also carries over into the management of the foundation, because the founder remains attached to the foundation for life. Even if the founder now has the opportunity to revise many of its original provisions and to abolish the principle of separation de facto, he must nevertheless be cautious in doing so. In case of doubt, major changes in governance lead to changes in the qualifications placed on foundation directors and thus ultimately also in their profiles. However, if the trustees cannot count on a sustainable vision from the founders, it will be difficult to recruit people who commit themselves (as already mentioned, mostly on a voluntary basis) to implement the founders' will. Incidentally, the same applies to people who donate to assets at a later stage (so-called co-founders) and donors. Despite the new rights, the founder must therefore credibly embody his own sustainability vision externally if he wants his foundation to be successful ».
