Foundation of Business Foundations

What is a Business Foundation?

Unlike companies, commercial foundations are legal entities that have no shareholders, partners or owners of any kind. They are generally established to realize the goals of the founder (individual or company). When establishing Erhvervsdrivende Fonde, the fund’s assets are separated from the founder’s assets.

The very first foundation models were implemented during the Roman Empire following the edict of the Church, a period when foundations were formed to meet the needs of society, not individuals or families.

In modern times, the use of foundations has been demonstrated in Western Europe in the 1920s to manage the inheritance of properties in wealthy Lichtenstein. Thus, the royal families of this historically neutral state could protect their wealth in times of war. Since then foundations have become popular around the world and today there are numerous foundations spread from Austria to Holland, Panama, Seychelles, Isle of Man and many more.

The wishes of the foundation’s founders are dealt with in the foundation’s statutes or rules, which are submitted with the foundation registration documents. In general, these terms indicate basic purposes, provided that those purposes are reasonable and feasible, legal, and consistent with the ethical and legal mandates of public policy. Beneficiaries need not be mentioned directly in this document.

Funds can be established for a predetermined period or indefinitely; they are set up for charity, to realize family goals and in some cases for commercial reasons. Foundation goals can even be “mixed” – meaning for the benefit of an individual or group, for a single cause or a combination of several.

Trusts provide an important tool to consider when planning for the future ownership of family or business assets, and particularly when there is no option to establish a Trust.

Trusts are similar to companies in several respects, but also provide asset protection and the ability to continue ownership of assets normally provided by trusts.

Common reasons for establishing foundations:

Trusts can be tailored to meet the needs of individuals, groups or families (such as transferring assets from one generation to the next);

Foundations allow individuals to concentrate ownership of assets around the world in one location;
Mutual funds are an important tool for asset holders and for capital gain purposes in various countries across the globe;

Foundations provide wealth protection – whether commercial, political, financial or family-related;
Foundations help dictate inheritance terms in a way that reflects individual wishes and not according to local laws or relevant inheritance legislation in his/her place of birth ;
Foundations protect confidentiality of information – for example, names of founders or persons appearing in its registration documentation need not be submitted for documentation in public records;
Foundations help maintain control over companies and other legal entities;
Trusts separate the voting rights from the economic benefits produced by the asset;
Foundations are a way of realizing philanthropic and charitable goals;
Foundations are a way of maintaining art collections.

Type of assets protected by funds:

Type of assets protected by funds:
Shares and options in private and commercial companies
Investment portfolio
Tangible assets and intellectual property
Bank deposits
Life insurance
Additional assets
Foundation office holders:
Founder – as mentioned, the person who creates the foundation and dictates its goals;
Board – Similar to a corporate board, the foundation board manages the foundation’s assets and works to realize its goals. The council can be an individual or a group;
Protector / Enforcer – (in some foundations this appointment is not mandatory) – the protector to take reasonable steps to ensure that the council actually works for the benefit of the foundation and its cause(s)
Recipient – as mentioned, the recipient can be a person or group.