• Family Foundation Can Ensure the Continuity of a Business
  • July 31, 2015
  • Law Firm: GRP Rainer LLP - Cologne Office
  • A family foundation can be established as a way of avoiding inheritance related disputes. The purpose of a family foundation is generally to ensure ongoing support for relatives.

    GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: A family foundation is frequently used to try and preserve assets and prevent them from fragmenting. It can also be used to circumvent inheritance disputes. Additionally, they are usually aimed at providing family members with permanent economic security.

    For these reasons, a foundation can also play an important role within the scope of business succession. Transferring company shares to the foundation secures the continuity of the firm, as a foundation cannot be sold in part or in its entirety. In doing so, it is also possible to prevent disputes from arising among multiple heirs, which could potentially jeopardise the firm’s continued existence, because the disposal, voting and control rights are transferred to the foundation’s executive bodies, such as the executive board. The family members can be taken into account in the foundation.

    The constitutive documents of a foundation are key. They establish the aim and purpose of the foundation as well as set out its structure. The foundation is managed by an executive board, which e.g. is supervised by a board of trustees. The beneficiaries of the foundation are also specified. They receive payments out of the proceeds of the foundation. The foundation’s assets remain untouched.

    The establishment of the foundation must accordingly be thoroughly prepared. The constitutive documents should lay down, for instance, the aim and purpose of the foundation, the amount of endowment capital and the line of succession. Furthermore, the legal framework must of course be adhered to. That being said, there is also a lot of creative leeway when it comes to the constitutive documents of a foundation to ensure that the founder’s will can be given due consideration. A foundation can be established during the founder’s lifetime or mandated in a will or contract of inheritance.

    Experienced lawyers and tax advisors can be consulted when establishing a foundation. They can see to it that the constitutive documents are properly prepared and the foundation’s purpose is clearly defined. This makes it possible for potential legal disputes to be avoided.