When establishing a non-transparent foundation, the founder must relinquish control over the founded assets. Consequently, the founder loses influence over the assets that have been transferred from his private estate, which are then managed by the foundation board (trustee).
If a sufficient level of trust has not yet been established between the founder and the trustee, the loss of control over the founded assets may deter the potential founder from creating the foundation.
This tension between effective asset protection and the founder’s interests can be resolved by appointing a protector for the foundation.
This blog post provides an overview of the various configurations and rights of a protector in a Liechtenstein foundation:
1. What is a protector?
A protector is an organ of the foundation endowed with certain rights. Founders often appoint a person of trust as protector and endow them with control and/or monitoring rights.
Typically, a protector does not influence the day-to-day management of the foundation but acts in a supervisory capacity and addresses issues in line with the founder’s intentions.
2. What are the duties/rights of a protector?
According to Art. 552 § 28 PGR, a protector may have the following rights:
- Designation of a beneficiary: The protector determines who within the circle of beneficiaries is granted actual beneficiary status.
- Determination of distributions: The protector decides the timing, amount, and conditions for distributions.
- Asset management: The protector oversees the management of the foundation’s assets.
- Advice and support: The protector provides advisory support to the foundation board and assists in the management.
- Supervision of foundation management: The protector ensures compliance with the foundation’s purpose and proper administration.
- Right of consent and instruction: The protector can issue instructions to the foundation board to safeguard the interests of the foundation’s stakeholders.
As this list is not exhaustive, other rights of the protector may also be considered, such as the appointment or dismissal of the foundation board or veto rights in relation to certain decisions of the foundation board.
3. How is a protector appointed?
The founder has the authority to appoint the protector during the creation of the foundation. This authority can also be transferred to other stakeholders in the foundation.
The succession in the protectorate can be determined by the founder or through provisions in the foundation documents.
4. Who can be appointed as a protector?
Anyone can be appointed as a protector. This means that, in principle, the founder or a beneficiary could also serve as a protector.
However, if the founder or a beneficiary acts as a protector, there is a risk that the tax, inheritance, and civil law shielding effects of a Liechtenstein foundation could be compromised. For this reason, independent trusted persons of the founder are often appointed as protectors in practice.
As an independent boutique law firm specializing in business law with a particular focus on trust and foundation law, we are available to serve as a protector to best protect your interests.
Our independence allows us to focus exclusively on your interests.
5. Conclusion
The implementation of a protector in a Liechtenstein foundation offers an effective solution to the tension between the necessary loss of control by the founders and the safeguarding of their interests. A protector can oversee the management of the foundation’s assets through the rights conferred upon them and ensure that the interests of the foundation’s stakeholders are preserved.
Get started with us right now and contact us at office@isp.law or use our fully automated booking tool to make an appointment directly for an initial consultation at www.isp.law/termin-buchen/. We will advise you on the possible appointment of a protector in your foundation and will also be happy to take over the protector function for you.
