Parliament Adopts Reform Of Liechtenstein Foundation Law – Entry Into Force In 2009
Liechtenstein has carried out a reform of its law governing Liechtenstein foundations. Following the Government's requirements, this reform meets international standards and at the same time is based on Liechtenstein's legal tradition with a strong protection of the private sphere. The new foundation law will enter into force on 1 April 2009.
With this revision of foundation law, the Government is continuing its modernization of Liechtenstein company structures, after its previous revision of the law governing associations and cooperative societies and the introduction of the European Company and the European Cooperative Society as new company structures. As announced by the Government, a revision of trust law will follow, the cornerstone of which – as in the case of Liechtenstein foundations – was laid in 1926 with the creation of the Law on Persons and Companies.
Liechtenstein's total revision of foundation law is based on the contemporary demands and needs of the financial center's clients. The balanced overall concept of the reform, as explained by Minister of Justice and Economic Affairs Klaus Tschütscher after the conclusion of the parliamentary deliberations, meets international standards without deviating from the Liechtenstein legal tradition, which has always considered the protection of privacy to be a valuable good. The reform of foundation law was due to harmonization with international standards, but also the widespread use of the foundation and its national economic significance to the Principality of Liechtenstein. The requirements of market participants were taken into account, as well as the need to create a legal foundation that can be measured in accordance with scientific criteria and international standards, as the Government stipulated in its guideline at the beginning of the reform process.
The new foundation law is a self-contained body of law with a new systematic structure differentiating private-use from charitable foundations and strengthening the responsibility of the founder. The protection of the foundation assets is subject to new rules, as are the supervision of foundations and foundation governance. The non-transferability of the founders' rights as a further new key feature entails greater legal certainty and clarity. Minister of Justice and Economic Affairs Klaus Tschütscher is convinced that the new system of foundation supervision will serve as a model in the international context. The "deposited" foundation, which need not be registered in the Public Registry and has thus been an object of criticism, has been retained. The Government justifies the retention of this type of foundation by noting that it serves to protect the confidentiality of the founder if he wants to engage in long-term asset planning in the interest of his family. The exemption from the registration requirement only applies to private-use foundations, however, not to commercially operating foundations, which as a rule are limited to the mere management of assets. The Government also asserts that confidentiality in the foundation system is not a Liechtenstein peculiarity. In Austria, whose foundation law is closely based on Liechtenstein law, foundations must be entered in the corporate registry, but since a professional trustee acts on behalf of the founder when establishing the foundation and the name of the foundation may be freely chosen, the beneficial founder can remain in the background. In Switzerland, with which the old Liechtenstein foundation law was closely linked, family foundations are exempt from entry in the commercial registry. And also in Germany, only a limited publicity of foundations applies, which as a rule does not extend to the person of the founder. A switch to a general registration requirement for all foundations, including private-use foundations without a commercial purpose, would significantly diminish the attractiveness of the Liechtenstein foundation in an international comparison.
The foundation plays a special role in the Liechtenstein company system. The "Futuro" project launched by the Government calls foundations the "heart of the financial center". According to "Futuro", family foundations are increasingly being recognized as autonomized assets and thereby constitute an instrument of succession planning that is sought worldwide. In the future, the Liechtenstein professional trustee is no longer envisaged as merely a broker and administrator of this structure, but rather – thanks to his internationally recognized competence – will be seen as an important advisor in personal contact with the founders. "Futuro" also plans to make Liechtenstein into a location for trusts, by harmonizing them with Anglo-Saxon trust structures. Liechtenstein's differentiation as a location is seen in its geopolitical situation, its language, and the use of already existing links to the financial center.
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