Creditor access to founder rights: attachment and avoidance

Upon registration, the private foundation becomes a separate legal entity. Assets effectively endowed to it are therefore generally no longer part of the founder’s property. A personal creditor of the founder cannot attach land, an account or a shareholding of the foundation merely because the debtor established it.

Rights held by the founder against the private foundation are a separate matter. Section 3(3) PSG states that the founder’s formative rights do not pass to legal successors. The Austrian Supreme Court nevertheless distinguishes succession on death from enforcement against valuable aggregate rights. Merely describing a right as personal therefore does not by itself decide whether it can be attached.

Our overview of founder rights, amendment and revocation explains which rights may be validly reserved. Creditor access additionally requires an assessment of whether the particular right can produce an economic benefit.

Under established case law, the founder’s aggregate rights may be subject to enforcement where revocation was reserved and, under the foundation documents or section 36(4) PSG, the founder receives at least part of the liquidation surplus. A reserved amendment right may also be valuable because it can permit the founder to establish his or her own beneficiary position or provide for distributions to himself or herself.

The current enforcement framework is found in sections 326 et seq EO. Section 326 EO covers valuable rights not already dealt with by another type of enforcement. Under section 328 EO, attachment is effected by the court order prohibiting disposition. An appointed administrator may under section 329 EO make the declarations required to exercise and realise the right, enforce the resulting claims and realise the resulting assets.

This does not mean that every creditor holding a monetary claim automatically controls the entire foundation. The court and administrator remain bound by the content of the attached right. If a right was never reserved, has lapsed or may only be exercised jointly with other founders, the available access changes. With several founders, section 3(2) PSG and above all the wording of the documents must be examined.

Our article on reserving founder rights explains the drafting perspective at formation. In enforcement, the same documents are read from a different perspective: which precise power exists now and what economic inflow may arise from exercising it?

Under section 34 PSG, revocation is possible only if a natural person reserved it in the foundation declaration. A lawful revocation does not trigger immediate payment. It starts the foundation law steps towards dissolution and winding up. Remaining assets are transferred to the ultimate beneficiary under section 36 PSG only after the statutory winding up steps and protection of the foundation’s own creditors have been observed.

If the foundation documents do not provide otherwise for revocation, section 36(4) PSG treats the founder as ultimate beneficiary. That connection may give a revocation right economic value. Enforcement then does not consist of an immediate seizure of foundation assets. It concerns exercise of the formative right and a later claim arising from that exercise.

An amendment right under section 33(2) PSG may have economic relevance if it permits the founder to shape beneficiary rules or distributions to himself or herself. Its scope and limits follow exclusively from the law and foundation documents. An administrator receives no greater powers than the founder previously had.

The foundation law steps after revocation are explained in our overview of dissolution and liquidation. For creditors it remains essential to distinguish the founder’s later claim against the foundation from the prior exercise of the formative right.

A founder may attempt to weaken his or her position later, for example by waiving revocation or restricting an amendment right. Such an amendment is not automatically ineffective. It may, however, be a legal act concerning valuable founder rights that can be challenged outside insolvency proceedings under the conditions of sections 438 et seq EO.

In case 17 Ob 19/25f, the Austrian Supreme Court confirmed the established principles for a situation in which a founder had accepted prejudice to a maintenance creditor and other creditors when amending the foundation deed. The waiver of revocation and restriction of the amendment right could not simply be relied upon against enforcement. At the same time, the Court emphasised that successful individual avoidance always requires a statutory ground and a claim for performance or toleration directed towards satisfaction.

Not every economically adverse amendment can therefore be challenged. The enforceable claim, prejudice to prospects of satisfaction, the relevant avoidance ground, knowledge and intention, chronological sequence and correct form of relief must all be examined. Relative ineffectiveness benefits only the successful challenging creditor and does not generally destroy the amendment of the foundation documents.

The decision did not finally determine whether reserved rights to appoint and remove members of foundation bodies are also attachable. The appellate court had answered that question in the affirmative, but the Supreme Court could leave it open because the revision failed to address the legal reasoning specifically. Such rights must therefore not be equated broadly with amendment and revocation rights.

For a creditor, a commercial register extract and an assumption that the foundation is wealthy are insufficient. The file should include the enforceable title, current claim calculation, relevant versions of the foundation documents, evidence of reserved rights, ultimate beneficiary provisions and a chronology of later amendments. If the complete documents are unavailable, the first question is which legal route can provide the necessary information.

On the foundation side, the board and advisers should document with particular care every amendment that may affect creditors. An amendment close in time to due claims, threatened enforcement or insolvency needs a traceable legal and economic basis. A wish to achieve subsequent asset protection is not a substitute for lawful structuring.

The claim, enforcement and remedies under foundation law may connect several proceedings. Our overview of foundation disputes and enforcement explains the internal roles. Creditors must additionally keep their title and enforcement file complete.