A private foundation loan to a beneficiary needs a clear basis, documented terms and a traceable repayment plan.
BRANDAUER Rechtsanwälte
Foundation law team, Salzburg and throughout Austria
Your matter is handled by a team combining corporate law, asset succession, real estate law and dispute resolution. We review the foundation declaration, board resolutions, information rights and liability issues and set out clear next steps. Mag. Bernhard Brandauer is responsible for the legal advice, supported by further specialised lawyers of the firm where the matter requires it.
A loan from a private foundation to a beneficiary is not simply a family advance. The foundation board must assess whether the financing fits the foundation purpose, its financial position and the foundation’s interests. Terms, security and repayment belong in a traceable file.
The review becomes particularly sensitive where a board member, a related company or several beneficiaries are involved. Conflicts of interest and the correct resolution process must be assessed separately.
This article distinguishes a documented foundation loan from an inadequately supported distribution. It does not replace a review of the specific deed.
Section 15 PSG requires the foundation board to pursue the foundation purpose and safeguard the foundation’s interests. A loan may serve that purpose where repayment, risk and economic benefit are documented. A payment with no realistic repayment prospect may have the economic character of a distribution.
The foundation deed may set rules on beneficiaries, distributions, approvals and security. The review therefore starts with the complete deed and the current asset position, not with a draft contract.
A loan agreement should state the amount, drawdown, term, maturity, interest, security, termination rights and consequences of default. The terms must reflect credit risk; family consensus is not a sufficient record.
For a loan to a beneficiary, purpose, use of funds and repayment capacity should be recorded separately. A large amount, no security or repeated extensions are review signals, not automatic proof of illegality.
Where a board member is the borrower, economically involved or personally affected, section 17(5) PSG requires a separate review. Approval cannot be hidden in a general annual resolution.
Even a loan to another beneficiary requires the board to retain its own decision-making responsibility. The resolution should record the information reviewed and why the financing serves the foundation’s interests.
The repayment plan is part of the original risk decision. Receipts, instalments, interest changes, security and reminders should be recorded over time.
A later deferral or waiver is not merely an accounting matter. It changes the risk and needs a new justification, especially where other beneficiaries or creditor interests may be affected.
Assess economic function and process separately.
| Review point | What must be clarified | Record |
|---|---|---|
| Basis | Deed, purpose, authority | current deed |
| Risk | Creditworthiness, security, repayment | finance file |
| Conflict | Conflict and approval | resolution and minutes |
A fixed sequence prevents implementation from overtaking an open legal question.
Classify the foundation purpose, beneficiary rules and economic function of the financing.
Read the current foundation deed, including its beneficiary rules, and record which foundation purpose is engaged. Also explain why the payment is to be treated as a repayable loan rather than, in economic substance, as a distribution.
Compare creditworthiness, repayment, interest and security with an arm's-length risk assessment.
Compare the amount, term, maturity, interest, security and default consequences with the beneficiary's creditworthiness and the foundation's risk. An arm's-length review is not reduced to an interest rate: the file must explain why the overall terms are defensible for the private foundation.
Disclose involvement, verify authority and make the foundation-interest reasoning visible.
Before payment, establish whether a board member is the borrower or economically affected and whether section 17(5) PSG must be applied. Even for a loan to another beneficiary, the resolution should show the material information, the foundation-interest assessment and the board's own decision-making responsibility.
Set out drawdown, maturity, security and default consequences in an agreement that can be monitored.
Set out the amount, drawdown, term, maturity, interest, security, termination rights and default consequences so that later monitoring remains possible. Align the payment with the documented resolution and record any deviation or missing security expressly.
Track instalments, interest changes, reminders and deferrals as continuing risk decisions.
Record receipts, instalments, interest changes, security and reminders over time. If there is default, a deferral or a waiver, reassess the risk and add the reasoning, especially where other beneficiaries or creditor interests may be affected.
Two answers show whether the file is ready for the next step.
Already know you want to get in touch? Go straight to the enquiry form.
Reconcile the resolution, documents, authority and implementation once more.
Secure the current deed, relevant resolutions and complete facts.
In foundation law, structure, deadlines and evidence decide. Call us directly or write to us, callback within one business day.
Address
BRANDAUER Rechtsanwälte GmbH Giselakai 51 5020 Salzburg
Phone
+43 662 6280000