One of the most important ways for the founders to exert influence on the private foundation is by exercising their right to amend the foundation.
The founders are entitled to this right of amendment if they reserved this right when the private foundation was established. If several founders have reserved the right to amend the foundation, this right may only be exercised jointly in accordance with the Supreme Court’s jurisprudence. Thus, if one founder can no longer participate in the exercise of the right of amendment, for example because he has already died, it may no longer be exercised by the other founders.
However, this provision is a nonmandatory right and can therefore also be amended by the founders. However, this must then be expressly stipulated in the foundation deed.
Often the founders also mutually restrict their right of amendment. The most frequent forms of voluntary restriction are the
«Restriction on exercise modalities» or
the «content restriction».
A restriction of content is understood to mean that the founders, when establishing the foundation declaration or when making a subsequent amendment, stipulate that certain regulations are excluded from the right to amend.
With regard to a voluntary restriction of the exercise modalities, many foundation declarations provide that, although all founders reserve the right to amend, they may only exercise the right to amend in stages. Thus, often one (principal) founder has the sole right to amend. Only after the death of the main founder, and usually also in the event of loss of legal capacity, are the remaining (subsidiary) founders entitled to exercise the right of amendment, often only jointly.
In a very recent decision, the Supreme Court dealt with the question of whether the subsequent amendment of a restriction of the right to amend is permissible with regard to the modalities of exercise. In the foundation deed in question there, it was provided that the right of amendment could initially only be exercised by the principal founder. After the death or loss of legal capacity of the principal founder, the four subsidiary founders would be entitled to exercise the right of amendment jointly. This, however, only as long as all four sub-founders participate in the exercise of the right of amendment. The founders wanted to amend this provision retrospectively to the effect that the right of amendment can also be exercised by the joint founders by only three joint founders. In this regard, the Supreme Court expressly stated that a subsequent amendment of the voluntary limitation of the modalities of amendment is permissible and declared the amendment sought here to be permissible.
This decision is also essential for practice. Frequently, family fathers – for a variety of reasons – transferred their assets to a private foundation some years ago. In order to maintain the founder’s rights for as long as possible, they often included their wife and children, who were often minors at the time, as founders. Such family foundations often provide that the family father alone has the right to amend the foundation declaration in its entirety. After his death, this right is usually transferred to the other founders, i.e. the wife and children together. In many cases, however, it has become unnecessary to link changes to the declaration of foundation to the involvement of the mother, among other reasons because the children have already reached the age of majority. Furthermore, this obligation prevents the extension of the right of amendment in favour of the next generation.
Unfortunately, in our practice we often see foundation deeds in which the right of amendment is not structured accordingly and the remaining founders are surprised that they cannot exercise the right of amendment – which they understand they have been granted – after the death of the main founder.
It is therefore often necessary and advisable to adjust the modalities of amendment, along with other points, as long as it is possible to adapt to new circumstances at regular intervals.
