When an Austrian private foundation needs a supervisory board, how employee numbers are calculated and which composition and approval rules apply.
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.
An Austrian private foundation does not need a supervisory board merely because it holds substantial assets, has many beneficiaries or uses a powerful family advisory body. Under section 22 PSG, the statutory duty depends on employee numbers and certain corporate holdings. If the threshold is overlooked, the foundation lacks a legally required control body and the approval procedures assigned to it.
The assessment therefore goes beyond the employees of the foundation itself. Employees of domestic companies that are managed on a unified basis or directly controlled through a majority holding may be relevant. Appointment, composition, employee participation, powers and documentation must then fit together.
Section 22(1)(1) PSG covers the direct case: the private foundation itself employs an average of more than 300 employees. Exactly 300 is not enough. The statutory threshold is crossed only when the relevant average is higher.
The second case concerns corporate groups. A supervisory board is also required if the foundation manages domestic corporations or cooperatives on a unified basis, or controls them through a direct holding of more than 50 per cent, the employees of those entities together average more than 300, and the foundation does more than merely administer the shares in the controlled entities.
The percentage alone is therefore not decisive. For the unified management alternative, the actual management structure and section 15(1) AktG must be considered. For direct control, the holding must exceed 50 per cent. It is also necessary to determine whether the foundation carries out activities beyond passive share administration. The participation chart, organisational structure and management arrangements must be reviewed together.
Our overview of advisory and supervisory bodies explains the different control functions. A statutory duty to establish a supervisory board triggers concrete steps on appointment, composition and powers.
Assets, family size or the name given to a committee do not replace the statutory assessment under section 22 PSG.
| Starting point | Legal approach | Evidence required |
|---|---|---|
| Foundation as employer The private foundation employs staff directly. | More than 300 on the relevant average | Monthly employee figures at the end of each month in the preceding calendar year. |
| Corporate group The foundation manages or controls domestic corporations or cooperatives. | Management or direct majority plus employee count and activity test | Holdings, employee figures, management structure and the foundation’s actual activities. |
| Family foundation below threshold The foundation manages assets and has an advisory board but meets none of the conditions in section 22 PSG. | Not subject to the duty for that reason alone | The foundation deed and the advisory board’s powers still require a separate review. |
Under section 22(2) PSG, the average is calculated from employee numbers at the end of each month in the preceding calendar year. A snapshot at the financial year end is therefore insufficient. In the corporate group case, the relevant entities must provide the foundation board with the necessary information in time.
The foundation board determines the average as at 1 January. If the result exceeds 300 employees, it must notify the court. The next determination is generally made three years later. Changes within that period do not affect the requirement to maintain the supervisory board.
If a determination does not exceed the threshold, the assessment must be repeated on 1 January of the following years until an excess is established. A reliable file should combine monthly figures, included entities, participation percentages, management basis, calculation and the foundation board resolution.
Under section 23 PSG, the supervisory board must have at least three natural persons. Its members and the relatives covered by section 15(2) PSG may not simultaneously sit on the foundation board or act as foundation auditor. Organ positions and family relationships must therefore be identified before appointment.
Beneficiaries, their relatives and persons instructed to represent their interests on the supervisory board may not together form a majority. The law does not exclude all beneficiary participation. It prevents the statutory control body from being dominated by a majority aligned with beneficiary interests.
A person already serving on the supervisory boards or comparable bodies of ten private foundations is also ineligible. Candidate due diligence should therefore record identity, organ mandates, beneficiary links, family relationships, professional instructions and any representation of another person’s interests.
As a rule, the court appoints the supervisory board. Only the first supervisory board at the time the foundation is established is appointed by the founder or, if one is acting, the foundation curator. The appointment route, declarations of acceptance and incompatibility review should be reconciled with the current companies register record.
If the private foundation is no longer required to have a supervisory board, the court must remove it. An individual member may resign without cause. Section 24(3) PSG requires at least four weeks’ notice and written notification to both the private foundation and the court.
If prescribed organ members are missing, the court may appoint them on application or on its own initiative under section 27 PSG. Gross breach of duty, inability to perform the role properly, and certain insolvency or enforcement events may justify judicial removal for cause.
A clear sequence connects employee data, court steps, composition and ongoing supervision.
Record domestic entities, direct holdings and any unified management structure.
An organisation chart, register extracts, participation percentages and management arrangements show which entities belong in the assessment.
Combine month end employee numbers and formally determine the average.
The board records the data sources, calculation, reference date and result in a traceable resolution.
Report the threshold, assess incompatibilities and account for employee participation.
Before appointment, organ mandates, beneficiary links, family relationships and the requirements of section 110 ArbVG are clarified.
Implement reporting, inspection, meetings and approval of reserved transactions.
Rules of procedure, a reporting calendar, financial limits and submission templates allow the supervisory board to perform its statutory tasks in practice.
Under section 25 PSG, the supervisory board monitors management and the financial affairs of the private foundation. Through the reference to section 95(2) and (3) AktG, it may request reports and inspect books, records and assets. Operational management nevertheless remains with the foundation board.
For certain transactions, section 25 PSG refers to section 95(5)(1), (2), (4), (5) and (6) AktG. These include acquisitions and disposals of holdings, businesses and operations, real estate transactions outside ordinary business, and certain investments, financing and lending. Financial thresholds and approval procedures must ensure that a transaction is submitted before the foundation becomes bound.
For transactions with foundation board members, the supervisory board represents the private foundation. This differs from a foundation without a supervisory board, where section 17(5) PSG requires additional approvals. Our article on self dealing transactions involving foundation board members explains that separate approval route.
The foundation deed may extend the statutory area of responsibility. Where the board was required because of unified management or direct control of entities, however, its statutory remit is generally limited to those management or control matters. Every allocation of powers must therefore combine the reason for appointment with the text of the foundation deed.
Section 22(4) PSG applies section 110 ArbVG by analogy as it applies to a limited liability company. Employee participation must therefore be included from the beginning of the composition process. A control body cannot be planned only around the family’s or owner group’s preferred candidates.
Unless the foundation deed provides otherwise, supervisory board members receive remuneration consistent with their duties and the position of the private foundation. On application by a foundation organ or organ member, the court determines the amount. The role profile, meeting workload, responsibility and financial position should be documented for that purpose.
Under section 29 PSG, members of foundation organs are liable to the foundation for losses caused by culpable breaches of duty. Missing reports, unexamined conflicts or approval without a sufficient decision basis are therefore not mere formal defects. The article on duties of care within the foundation explains the general standards.
Answer two short questions. The result identifies the data or organ decisions that should be organised first.
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Test the result against the threshold of more than 300 employees. If it is crossed, prepare the court notice, appointment, incompatibility review and employee participation in one coordinated organ file.
First record the employee number at each month end in the preceding calendar year. Without the full time series, the duty to establish a supervisory board cannot be safely excluded.
Allocate the data to unified management or direct majority control and determine whether the foundation performs more than passive share administration. Only then can the threshold and remit of the supervisory board be established.
Prepare a current organisation chart and obtain month end figures from the relevant domestic entities. Add management arrangements, participation percentages and the foundation’s actual activities.
How the advisory board, supervisory board and foundation auditor work together.
Appointment, independence and audit report under sections 20 and 21 PSG.
Court approval, arm’s length review and contract preparation.
In foundation law, structure, deadlines and evidence decide. Call us directly or write to us, callback within one business day.
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