Foundation

What is a Foundation?

In contrast to companies, foundations are discrete legal entities that have no shareholders, partners or owners of any kind. They are generally established to realize the goals of the foundation founder (individual or company).

The very earliest foundation models were implemented during the Roman Empire on edict of the Church, a period in which foundations were formed to address the needs of communities, not individuals or families.

In the modern age, use of foundations is evidenced in West Europe during the 1920s to manage the inheritance of estates of the Lichtenstein wealthy. Thus the royal families of this historically neutral state could protect their riches in times of war. Since then foundations have become popular around the world, and today there are numerous foundations scattered from Austria to Holland, Panama, Seychelles, the Isle of Man and many more.

The desires of the foundation founder are settled in the foundation's statute or regulations submitted with the foundation registration documents. Generally, these terms state the foundation purpose, conditioned on this goals being reasonable and implementable, legal and in accordance with the ethical and legal mandates of public policy. The beneficiaries of the foundation need not be mentioned directly in this document.

Foundations can be established for a predetermined period of time or indefinitely; they are set up for charity, to realize family goals, and in some cases for commercial reasons. Foundation objectives may even be “mixed” – meaning for the benefit of an individual or group, for a single cause or a combination of several.

Foundations constitute an important tool that should be considered when planning future ownership of family or corporate assets, and particularly when there is no option of establishing a trust.

Foundations resemble companies in several respects, but also provide protection of assets and the possibility of continued ownership of assets usually provided by trusts.

Common reasons for establishing foundations:

• Foundations can be tailor-designed to address the needs of individuals, groups or families (such as passing assets from generation to the next);
• Foundations allow individuals to concentrate ownership of assets around the world in one location;
• Foundations are an important tool for possessors of assets and for capital gains purposes in various countries around the globe;
• Foundations provide wealth protection – whether commercial, political, economic or family-related;
• Foundations help dictate terms of inheritance in a way that reflects individual desires and not according to local laws or relevant inheritance laws in his/her birthplace;
• Foundations protect confidentiality of information – for example, names of founders or people appearing in its registration documentation need not be submitted for documentation in public records;
• Foundations help maintain control of companies and other legal entities;
• Foundations separate voting rights from the economic benefits produced by the asset;
• Foundations are a way to realize philanthropic and charity goals;
• Foundations are a way to maintain art collections.

Type of assets protected by foundations:

• Shares and options in private and commercial companies
• Investment portfolio
• Tangible assets and intellectual property
• Bank deposit
• Life insurance policies
• Additional assets

Foundation office holders:

• Founder – as stated, the person establishing the foundation and dictating its objectives;
• Council – Similar to a company board of directors, the foundation council manages the foundation's assets and work to realize its goals. The council can be an individual or a group;
• Protector / Enforcer – (in some foundations this appointment is not mandatory) – the protector to take reasonable action to insure that the council is indeed working to the benefit of the foundation and its cause(s);
• Beneficiary – as stated, the beneficiary can be an individual or group.