Preliminary notes:
The Liechtenstein government has released a good information sheet on the most important changes between the existing and the new foundation law becoming effective as at 1 April 2009. As from 1 April 2009 on, there will be two laws living together which might make it not as easy as before for the international investors and the trustees in Liechtenstein. Furthermore, some of the new articles will automatically apply to the "old style" foundations as well, above all the rights of the beneficiaries to receive information from the foundation board.
One of the most significant positive changes regarding the asset protection is the fact that the Liechtenstein law will restrict rights to attack foundations on the basis of foreign forced heirship rights to two years. This will apply to the new foundations or gifts after the relevant date and will have a positive effect as the court does NO LONGER only look at the settlor's nationality or domicile in order to decide how long the period to attack can be, which can be up to 30 years in certain cases. So if the foundation deed and the endowment/gift documents are well drafted, the period can be reduced to 2 years.
The rights of beneficiaries to get full information on the foundation is sometimes contrary to the founder/settlor's will. The new law will surely enhance such legitimate rights, however also here some legitimate finetuning is possible to address the settlor's concern about too excessive investigations by successor beneficiaries.
Below the wording published by the government:
The following summarizes the most important differences between the old and the new law governing Liechtenstein foundations. However, this summary only illuminates some of the most important points and should not be considered exhaustive.
- As under the old law, the founder can in principle freely
choose the purpose of the foundation. The founder may pursue
charitable or non-charitable purposes and, for instance,
establish the foundation to provide for his or her family
members. As under the old law, unconditional distributions
will continue to be possible.
- The founder must henceforth lay down the purpose of the
foundation at least in outline and determine the circle of
beneficiaries in the foundation documents. The founder may
not delegate this task to the foundation board. This is
intended to strengthen the founder's responsibility
for his or her own foundation.
- Where foundations are formed through professional
trustees, the trustor ("beneficial founder") will
continue to be deemed the founder in a legal sense. All
rights reserved by the founder (e.g. right of amendment or
revocation) are vested in the founder on a personal basis.
The founder's rights cannot be transferred or
bequeathed. This does not entail any dilution of
confidentiality, since the identity of the founder does not
have to be disclosed externally. In external relations, the
founder can exercise his or her rights through the
professional trustee.
- Charitable foundations are henceforth subject to
supervision by a newly established Foundation Supervisory
Authority. Charitable foundations must also establish an
auditor responsible for annual verification that the
foundation assets are managed with care and in conformity
with the foundation purpose.
- Non-charitable foundations, especially family
foundations, are as a rule not subject to supervision by the
Foundation Supervisory Authority. To monitor the foundation
board, the beneficiaries have rights of disclosure and
information at their disposal. Alternatively, however, the
founder may also restrict or exclude these rights of the
beneficiaries by establishing an internal controlling body,
such as an auditor, or by voluntarily placing the foundation
under supervision by the Foundation Supervisory
Authority.
- Charitable foundations must be entered into the Public
Registry.
- Non-charitable foundations, especially family
foundations, are not subject to entry into the Public
Registry. Unlike under the old law, the foundation deed now
no longer needs to be presented to the Office of Land and
Public Registration for review. Instead, a notice of
formation by the foundation board suffices, the content of
which must be confirmed by an appropriate professional
(especially a lawyer or a professional trustee).
- The organizational structure of the foundation remains
flexible. As a rule, the foundation need only have a
foundation board to manage the foundation assets. To ensure
realization of the founder's intent even more
effectively, the foundation board must have at least two
members (corresponding to current widespread practice). Only
charitable foundations need establish an auditor as a second
governing body. Beyond this, the founder is free to create or
refrain from creating other governing bodies.
- As under the old law, the founder may belong to the
foundation board and/or be a beneficiary himself or
herself.
- Under the old law governing foundations, adjudication
turned out to be the engine of further development and
specification of the legal situation. The new foundation law
incorporates numerous of the ideas developed by the courts,
thus ensuring legal clarity and certainty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
