Duties of care of the foundation board: what the board must deliver in practice

The board is neither owner of the foundation assets nor representative of individual founders or beneficiaries. Under section 17(1), it manages and represents the foundation as a separate legal person. Its standard is fulfilment of the purpose within the governing declaration.

Purpose compliance means more than quoting a purpose clause. The board must establish whether a measure is permitted by the deed and supplemental deed, which part of the purpose it serves and whether consent rights or resolution requirements apply. Competing purposes require a reasoned priority.

Economical performance requires proportionate use of foundation funds. External advice, administration and remuneration may be necessary, but must remain reasonable in relation to the task, assets, risk and expected benefit to the foundation.

For beneficiary distributions, section 17(2) contains an express creditor-protection boundary. A distribution is permitted only if and to the extent that it does not reduce creditor claims against the foundation. A formally purpose-compliant resolution is therefore insufficient without reviewing liquidity and obligations.

Before a material decision, the board must identify the relevant facts. These include the governing documents, asset data, contracts, existing obligations and realistic alternatives. Depth depends on significance, complexity and risk.

Where expertise is missing, qualified advice may be necessary. Instructing a lawyer, tax adviser, valuer or asset manager does not replace the board’s own decision. Selection, scope of instruction, plausibility review and treatment of visible gaps remain board tasks.

Useful minutes record more than the outcome. They identify participants, conflicts, material reviewed, key assumptions, alternatives and the principal reason for the resolution. A later review can then distinguish the information available at the time from subsequent developments.

Care continues after signature. Long-term investments, construction projects, participations and payment plans need reporting, thresholds for renewed consideration and responsibility for monitoring. New information can require the board to revisit an earlier decision.

The foundation board has at least three members. Unless the declaration provides otherwise, declarations of intent are made jointly. Section 17(3) permits authorisation for specified transactions or types of transaction, but does not remove governing responsibility.

Portfolios can distribute work efficiently. They require written internal rules, reliable reporting and a catalogue of matters reserved to the full board. A finance portfolio must not leave other members unaware of financial statements, liquidity or material risks.

Each member must ask questions when warning signs arise. Persistently missing records, contradictory figures or action outside the declaration are not merely portfolio issues. The full board needs an information structure capable of exposing material problems.

New members should inventory governing documents, register entries, appointments, bank powers, assets, open contracts, disputes, insurance and the latest audit report. The foundation board onboarding inventory provides a working structure.

A conflict does not begin only with personal enrichment. Relationships with founders or beneficiaries, personal holdings, family ties, recurring commercial relationships or a second governing position may affect impartial judgment. The conflict should be disclosed before decision and addressed in the voting route.

Where the foundation has no supervisory board, section 17(5) provides a special approval structure for transactions between the foundation and a board member. Approval of all other board members and of the court is required. Market terms alone do not replace those approvals.

Transactions with related persons may also require enhanced review. The service, price, selection process and comparisons should be recorded. The board must be able to explain why the transaction serves the foundation rather than a personal relationship.

If a member cannot participate impartially, the remaining ability to act must be checked. Representation, quorum and any court step derive from statute and declaration and should not be improvised during the meeting.

Section 18 requires the board to keep the foundation’s books and apply the listed accounting rules by analogy. The management report must also address fulfilment of the foundation purpose. Accounting therefore records not only assets but the connection between figures and purpose.

The board must organise the closing process, valuation issues, completeness of obligations and information flow to the foundation auditor. Open audit findings belong in board work with responsibility and follow-up.

An unqualified audit opinion does not answer every duty-of-care issue. It does not replace purpose review of a distribution, treatment of a conflict or the commercial reasoning for an investment. Audit and board decision have different functions.

Conversely, recurring findings, late documentation or unexplained accounting differences are clear warning signs. The board should resolve and monitor cause, correction and future controls.

Under section 29 PSG, every member of a foundation body is liable to the foundation for loss caused by a culpable breach of duty. An adverse commercial outcome alone does not establish liability. The specific duty, fault, loss to the foundation and causal connection require separate examination.

The private foundation itself is the holder of the claim. This is distinct from a personal disadvantage suffered by a beneficiary or founder. Changes in governing bodies and internal conflict may complicate enforcement but do not alter the statutory basis of the claim.

Protective documentation must be created contemporaneously. A later paper cannot cure missing information, an untreated conflict or a resolution without authority. Sound records therefore improve present decisions as well as later accountability.

When warnings appear, the board and supervisory bodies should separate facts, authority, preservation needs and possible conflicts. Removal of the foundation board explains when duty concerns also affect the future functioning of the body.