Litigation funding for asset-poor private foundations: requirements for legal aid

Section 63(2) ZPO subjects legal aid for a legal person to two reviews. First, the funds required for the proceedings must be unavailable both from the private foundation and from the persons economically interested in the subject matter of the dispute. Second, the intended claim or defence must not appear manifestly vexatious or hopeless.

The rule therefore requires a case-specific assessment. A foundation is not legally aid-poor merely because its assets have a low value. Conversely, an existing asset does not automatically defeat an application if the asset is not readily available or is needed for existing obligations.

The foundation should identify the proceedings and the funding need in concrete terms. This moves the review from a general description of family or wealth circumstances to the financing of one specific claim or defence.

The financial record should begin with the private foundation as the legal person. It should cover accounts, securities, participations, real estate, receivables and other assets. For each item, it is also important to state whether it is readily available, encumbered or needed to meet an existing obligation.

A balance-sheet total alone does not fully answer the question under section 63(2) ZPO. A property may, for example, be unavailable for realisation because it serves the foundation purpose, is encumbered or secures continuing obligations. For a participation, transfer restrictions and actual liquidity must be assessed.

The record should also include due debts, ongoing contracts, staff and administration costs, tax liabilities and foreseeable obligations. The foundation should assign the figures to a reference date and explain which amount is needed for the proceedings.

The foundation board must derive the information from the foundation’s records and take responsibility for its completeness. The article on the supervisory board provides context where a control structure exists. It does not replace the review of the foundation’s own funds.

Section 63(2) ZPO places the persons economically interested in the subject matter of the dispute alongside the private foundation. The relevant factor is an own economic exposure to the outcome. Being a founder, beneficiary, board member or relative does not answer that question by itself.

The review should therefore examine concrete funding commitments, an interest in the affected asset, contractual benefits, recourse relationships and other economic links to the proceedings. A person may be interested in the result without being a party. A purely personal or family interest must not automatically be treated as economic involvement.

For each person or company included in the assessment, the foundation should state the reason for the interest and the separate question of whether that party can provide funds. If no such connection exists, the record should say so briefly on the basis of the available documents. This makes the chosen group of economically involved parties transparent.

Beneficiary information rights are a different legal instrument. The article on a court application for information and inspection deals with access under section 30 PSG, not with funding the foundation’s proceedings.

Financial need is not enough. Section 63(2) ZPO also requires that the intended claim or defence is not manifestly vexatious or hopeless. This is narrower than a final decision on the outcome, but it requires more than a bare assertion.

The foundation should set out the central legal question, its factual position, available evidence and the opponent’s expected objections. For a claim, the legal basis and the specific infringement belong in the file. For a defence, the objections, evidence and intended response should be identified.

The foundation purpose is a separate review point. Proceedings may have economic importance and still fall outside proper pursuit of the foundation purpose. The decision should therefore show why the proceedings belong to the private foundation and which governing-body resolution authorises them.

Legal aid under section 63(2) ZPO is court-ordered assistance for a party. It depends on the statutory requirements and is connected to the specific proceedings. A private litigation-funding agreement is a contract with a third party and does not replace the review under section 63(2) ZPO.

Any third-party funding should also be classified in the foundation file. The review should cover consideration, influence over the proceedings, information rights, cost risks and compatibility with the foundation declaration and purpose. The existence of an offer says nothing by itself about the legal-aid requirements.

The foundation should calculate both routes separately before deciding. The relevant questions are the required funds, the expected procedural benefit and the effect on foundation assets. The article on the dissolution and administration of a private foundation also shows why asset restrictions and creditor protection remain relevant to later funding decisions.