A foundation can be both of a private benefit and of a common benefit. It is a legal entity and it is created by a founder that specifies its purpose and endows it with assets. These assets become thus independent and acquire their own legal personality. As a result thereof, the assets are considered to be separate from the founder’s private assets. One of the most common types of foundations in Liechtenstein is the family foundation which uses the assets comprised therein for the benefit of the members of one or more families. As a mixed family foundation, such a foundation can additionally also pursue common-benefit purposes. Liechtenstein often also sees the formation of corporate foundations whose primary aim is to hold participations in companies and which are often used as a holding.
A common-benefit foundation is deemed to be a foundation the activity of which is intended to be of benefit to the general public. It can provide a benefit to the general public in a charitable, religious, humanitarian, scientific, cultural, moral, social, sporting or ecological sense.
The supreme corporate body of a foundation is the foundation council which conducts the business, represents the foundation in its relations with third parties and is responsible for the fulfilment of the foundation’s purpose. The foundation council must consist of at least two members. The founder can designate additional corporate bodies to manage the assets, and to advise and assist the foundation council.
A foundation can be formed by a single individual. The minimum capital of the foundation is 30,000.00 Swiss francs, euros or US dollars. This minimum capital can also be used for the foundation’s purpose.
The foundation is formed by means of a certified declaration of establishment. The founder need not be mentioned himself/herself, because the foundation can be formed by a trustee. The foundation deed is the mandatory document. Such deed must contain the following information:
- The intention of the founder to form the foundation
- The name and registered office of the foundation
- The endowment of the foundation with specific assets
- The purpose of the foundation
- Provisions on the appointment, dismissal, term of office and nature of the business management and power of representation of the foundation council
- Use of the assets in the event of the foundation’s dissolution
- The family name, first name and place of residence or corporate name and registered office of the founder or, in the case of indirect representation, of the representative
The names of the beneficiaries need not be mentioned in the foundation deed or in the supplementary foundation deed, nor do they need to be clearly specified therein. It is sufficient that a category of beneficiaries, such as a specific family or persons close to the family members concerned, is set forth.
Common-benefit foundations must be entered in the commercial register. Other foundations, which are called deposited foundations, only need to deposit a notification of formation with the Commercial Register Division at the Office of Justice. The fee for the new entry of a foundation in the commercial register is CHF 700.00.
In any case, the foundation council must, in respect of the management and appropriation of the foundation assets, maintain appropriate records of the financial circumstances of the foundation and keep documentary evidence presenting a comprehensible account of the course of business and development of the foundation assets. In addition, the foundation council must maintain a schedule of assets showing the foundation asset position and the foundation asset investments.
Commercial bookkeeping must be maintained only if a business run along commercial lines is conducted. Private-benefit foundations are not allowed to establish such a business, unless it is necessary for the orderly investment and management of the foundation’s assets, e.g. the management of the foundation’s participations in companies. Common-benefit foundations can establish a business run along commercial lines if this serves the purpose of the fulfilment of its common-benefit purpose.
Foundations are free to choose their names. Foundations entered in the commercial register, however, must include the word “Stiftung” in their name or in an addition. Foreign-language additions such as “Foundation”, “Fondation” or “Fondazione” are permissible as well. Made-up names or terms denoting an object can be chosen as well, unless they contradict the purpose of a foundation entered in the commercial register.
Pros and cons
- A Liechtenstein foundation can be of a private benefit or of a common benefit
- Liechtenstein foundations offer a high degree of privacy
- Foundations offer favourable tax benefits
- Compared to other legal entities, foundations have no owner. Upon the foundation’s formation, the founder will specify at least in broad terms in what manner the assets comprised in the foundation should be used during the term of the foundation
- A foundation has no member, stakeholder or shareholder. However, upon the foundations’ formation, the founder has the right to reserve certain rights in the articles of association
- Furthermore, there are beneficiaries under the law on foundations, i.e. persons in whose favour the foundation's purpose is realized and the founder can be one of them.
- They offer extensive options for estate planning and wealth protection
Statutory basis (German only)