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The new "merger option" for foundations under the new foundation law

The new foundation law in Germany, effective from July 1, 2023, introduces significant changes, particularly in the context of the merger of foundations. In future and provided certain conditions are met, legally capable foundations under civil law will have the opportunity to merge onto each other (so called “Zulegung”) or to merge to create entirely new foundations (so called “Zusammenlegung”).

Various reasons can prompt a foundation to consider merging with another. These include struggling to effectively carry out activities due to dwindling assets, difficulties in finding suitable individuals for board or council positions, or simply aiming to enhance the efficiency of their work. The desire to merge with an existing foundation or create entirely new foundations often arises in such situations.

The positive aspect of the new foundation law is that it establishes clearer prerequisites and procedures for these merger efforts. Offering both legal certainty and practical flexibility for structuring, mergers will happen by universal succession in the future, i.e. by automatic transfer of all assets "one-to-one" to the assuming foundation.

However, it's important to note that foundations under German law are a unique legal form designed, in principle, to exist in a specific structure according to the founder's intent for perpetuity. Structural changes, including mergers, therefore are subject to strict legal requirements, some of which are mandatory and cannot be freely altered, even by the founder. Therefore, in the future, merging a foundation will only be permissible if there have been significant changes in the foundation's circumstances over time, and there is no milder means of restructuring than through a merger. The foundation supervisory authorities strictly assess whether these conditions are met in the specific case.

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