News for Foundations: Extensive reform of the Law on Foundations passed

On July 16, 2021, the German Bundestag (Parliament) has passed the "Act to Standardize Foundation Law and to Amend the Infection Protection Act". The new legal provisions in Sections 80 - 87d of the German Civil Code (BGB) do not reinvent foundation law, but they harmonize the aspects of foundation law that have so far been regulated only inconsistently or incompletely. Hence, they create a coherent overall concept for foundations having legal personality under civil law. Foundation law is thus undergoing its biggest transformation since the German Civil Code (BGB) came into force.

The new regulations concern the entire "life" of a foundation - from its establishment to its dissolution. There are rules on the content of the foundation statutes and on how the foundation assets are to be managed. There are also specific provisions for so called principal-depleting foundations, i.e. foundations whose assets are to be depleted in pursuing its purpose (until now, such foundations have only been shortly addressed in the law but not been regulated in detail). The new provisions also concern the composition, tasks and management and representation powers of the foundation bodies (such as the board of directors and supervisory boards). They also stipulate provisions regarding the liability of board members and, for example, anchor the Business Judgement Rule for their activities on behalf of the foundations. At least, the procedure for amendments to the foundation statutes, mergers of foundations or their dissolution is also regulated in detail.

So far, there have only been registers kept by the foundation supervisory authorities. However, they had no publicity effect and provided only limited information about the existing foundations, their representative bodies and statutes. This will change as the new law provides for the implementation of a new public foundation register from which the foundations as well as information on their authorized representatives and their foundation statutes shall be evident. In practice, this public foundation register will make it a lot easier to represent a foundation in legal transactions or – as contractual partner of a foundation – to check the authorization of the acting person.

Entry in the public foundation register also means that, for the first time, there will be a legal requirement for certain name supplements for foundations having legal personality under civil law. In future, they must bear the suffix "eingetragene Stiftung" / "e.S." (registered foundation) or "eingetragene Verbrauchsstiftung" / "e.VS." (registered consumer foundation) to distinguish them from foundations having legal personality under public law and foundations without any legal capacity.

All foundations having legal personality under civil law will be affected by the new regulations. They will come into force on July 1, 2023 - so the affected foundations have about one year to review their need for action and adapt themselves to the new regulations. Only the public foundation register will take a little longer; its operation will start only as of January 1, 2026.