Beneficiary advisory board appoints the foundation board: influence limit and incompatibility

Under section 14(2) PSG, the founders may provide for additional bodies to safeguard the foundation purpose. The provision does not create a standard advisory board. The foundation deed must show whether the board merely receives information and gives advice or also participates in appointing a foundation board member.

The appointment rule should identify the authorised persons, procedure, required majority, acceptance of office and the response to a vacancy. A general reference to safeguarding the foundation purpose does not replace a concrete allocation of powers.

The first foundation board is different. Section 15(4) PSG assigns its appointment to the founder or the foundation curator. Whether an advisory board may appoint a later member therefore depends on the deed and the particular appointment instrument.

Sections 14(3) and 14(4) PSG expressly address decisions by an additional body to remove the foundation board or one of its members. Section 14(3) generally requires three quarters of the votes cast, and unanimity where the body has fewer than four members. Section 14(4) limits the combined voting influence of beneficiaries, relatives and instructed interest representatives for specified removals.

These rules must not be turned into a blanket statement that beneficiaries may hold at most half the votes in every appointment. Appointment and removal require separate analysis. The absence of an express half-vote rule for appointment still does not give the advisory board unlimited power to hollow out the board’s independent responsibility.

The broader the advisory board’s powers, the more carefully purpose, function, selection and actual influence must be recorded. An appointment designed merely to replace an independent management organ with one controlled by beneficiaries creates a serious validity and liability risk.

Section 15(1) PSG requires at least three members on the foundation board. Two members must have their ordinary residence in an EU Member State or an EEA contracting state. This must be checked against the future board as a whole, not only against the selected person.

Section 15(2) PSG excludes beneficiaries, their spouses and life partners, certain relatives and legal persons from membership of the foundation board. Sections 15(3) and 15(3a) cover further situations involving beneficiary legal persons and persons acting for the interests of beneficiaries or their relatives.

A beneficiary advisory board may therefore not appoint a person excluded by section 15 PSG. Professional suitability or family confidence does not replace the statutory incompatibility review. The review should be recorded in writing before the resolution.

A body does not become a supervisory board merely through its name. If the advisory board receives broad information, inspection and monitoring rights together with ongoing control or consent powers, its actual function must be examined.

Section 23(2) PSG contains incompatibilities for the supervisory board and limits beneficiary influence. Section 25 PSG describes the core supervision of management and the foundation’s affairs. These provisions cannot automatically be applied to every advisory board without a functional comparison. They do show which intensity of control is legally sensitive.

The appointment file should therefore show whether the advisory board makes one selection decision or permanently directs the management organ. In an arrangement comparable to a supervisory board, the incompatibilities and position of beneficiary members require a separate legal assessment.

The file should contain the relevant foundation deed and amendments, notice of the meeting, the advisory board’s composition and voting rights, the candidate review, the resolution and acceptance of office. The minutes should explain why the appointment fits the foundation board’s function and the foundation purpose.

For an advisory board dominated by beneficiaries, the review should also record economic and personal connections of those voting. Abstentions, conflicts and the calculation of the majority must be traceable. A reference to family interests alone is insufficient.

Under section 15(5) PSG, the board members and their representation authority, including expiry or changes, must be filed with the Companies Register without delay. Publicly certified evidence of the appointment must be attached and the members must submit publicly certified specimen signatures.