By Startups.ch, July 3, 2015

When is the purpose of a foundation permissible or not permissible?

The purpose of a foundation must be clearly defined by the Founder for the founding to be successful. Once the purpose has been defined, it is not easy to change later.

In order for a foundation to be set up properly, the Founder must dedicate assets to a certain purpose (Art, 80 Schweizerisches Zivilgesetzbuch – Swiss Civil Legislation) The purpose must describe the work of the foundation and the group of beneficiaries as precisely as possible, so that the Foundation Council can actually use the assets for this purpose. General and abstract definitions of purpose such as “cultural”, “charitable” or “for the common good” are not permissible. The purpose must be defined alongside the other requirements in the deeds of foundation, and publicly certified by a notary (cf. blog entry).

Permissible purposes

Fundamentally, the foundation must pursue a charitable or non-material objective. This means commercial objectives are not allowed. A non-material objective does not have to include the support of the common good or altruism. A musical society or political organisations may also pursue non-material aims.

A purpose is regarded as charitable when an activity is carried out in the interest of the common good. For example, this includes charitable or health related activites. Furthermore, the group of beneficiaries must be as open as possible, and there must be no self-serving purpose.

Impermissible purposes

Assets may not be granted to a certain family (e.g. the founder’s descendants), so that they may exceed the usual living expenses. However, it is possible to grant the assets to a certain life situation of the family (e.g, a college course). Nor are unlawful or immoral purposes permissible (Art. 52 Para. 3 ZGB).

If the purpose is impermissible, the foundation can not be founded. If the deficiencies are not serious, they can be corrected later by the supervisory authorities.

Changes to purpose

The initially defined purpose of a foundation can only be changed with difficulty. However the change can be requested by the founder himself. The deeds of foundation must allow a change of purpose, and at least 10 years must have passed since the creation of the foundation or the last change in purpose. The bodies within a foundation may not make a change themselves. They must first make an application to the relevant body.