Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 1 The legal position of beneficiaries The Austrian experience Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 2 Survey of contents I.Introduction II.Beneficiaries in general III.Monetary and non-monetary rights of beneficiaries IV.Right to information V.Right to request the removal of a board member VI. Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 3 I. Introduction ̶Private foundations are laid down in a special law (Private Foundation Act) of 1993 ̶Characteristic features: ̶legal persons ̶any purpose possible (which is not illegal) private, public benefits, charitable purposes ̶any activity possible except for operating a business and directing companies the shares of which it holds (comparable to § 307 czOZ) ̶private foundations may serve as a functional equivalent to a trust ̶could be the reason why there has never been a discussion on introducing trust in Austrian law ̶ Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 4 I. Introduction ̶Basic elements of foundation governance ̶foundation board must have at least three members (natural persons) (comparable to § 362 czOZ) ̶annual auditing by professional appointed by court ̶beneficiaries‘ right to information ̶members of the foundation board or other organs of the foundation may be removed by court for severe reasons (e.g. breach of duties) ̶foundation may a supervisory board (mandatory only in rare cases) ̶other organs such as advisory board may be implemented in the foundation documents Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 5 II. Beneficiaries in general ̶no definition of beneficaries in the Private Foundation Act ̶beneficiary is anybody who shall receive benefits from the foundation ̶beneficiaries may be designated in the foundation documents or chosen by a foundation organ (e.g. foundation board) within the purpose of the foundation or within the guidelines as laid down in the foundation documents Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 6 II. Beneficiaries in general ̶legal position of a beneficiary begins ̶when designated in the foundation documents (by name or in a similar way) by entry of the foundation ̶if designation depends on a condition, only when the condition has been met ̶when appointment by foundation organ is required only after appointment („discretionary beneficiaries“) ̶beneficiaries are only those persons whose current beneficiary status is directly established without any intervening act (e.g. Austrian Supreme Court 6 Ob 24/21d; 6 Ob 179/21y). ̶The same applies if the determination of the beneficiary still depends on a resolution of the governing body or the decision of a body appointed by the founder for this purpose, even if the person has already been specified in the declaration of foundation (Austrian Supreme Court 6 Ob 24/21d). ̶ Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 7 III. Monetary and non-monetary rights ̶monetary rights: as provided in the foundation documents ̶in general dependent on a board resolution ̶as a general rule monetary claims cannot be enforced before courts ̶if not provided otherwise in the foundation documents ̶or if board resolution on the distribution of benefits to a beneficiary has been made ̶non-monetary rights: ̶right to information ̶right to request the removal of a board member ̶right to apply for the dissolution of the foundation if the foundation did not pass a resolution although a reason for dissolution has occurred ̶legal nature of beneficiaries‘ rights? ̶no in-depth discussion in Austrian law: similar to membership rights of shareholder? Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 8 IV. Right to information ̶fundamental element of foundation governance ̶every beneficiary whose legal position has begun ̶and potential beneficiaries if they belong to a group of beneficiaries which is largly determined by the foundation documents so that there is more or less no discretionary power left to the foundation board ̶circle of persons entitled to claim information should not be interpreted too narrowly in order to avoid a lack of control within the foundation ̶no right to information if there is a wide range of potential beneficiaries (e.g. law students at Masaryk University) ̶no right to information if the foundation‘s purpose is to promote the welfare of the general public ̶ Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 9 IV. Right to information ̶may request ̶information on the fulfilment of the foundation's purpose ̶inspect the annual financial statements, the management report, the audit report, the books of account, the foundation deed and the supplementary foundation deed ̶no original documents have to be provided to the beneficiary ̶but beneficiary may produce copies on his own expenses ̶extension to inspect documents of companies the shares of which are held by the foundation? ̶ Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 10 IV. Right to information ̶right to information is an individual right which cannot be taken or restricted in the foundation documents ̶right to information can be claimed without a given reason any time without restrictions ̶limited only by abuse of law (e.g. risk of passing on the information to a competitor) ̶enforcement in a non-contentious procedure (Verfahren außer Streitsachen, freiwillige Gerichtsbarkeit) ̶liability of the foundation if information is incorrect or access to information is denied Adobe Systems Prof. Dr. Martin Schauer Department of Civil Law Masaryk University Brno 11 V. Right to request removal of board member ̶beneficiaries may request removal of a board member if there a severe reason, such as: ̶gross breach of duty ̶lack of ability to proper performance of duties ̶Bankruptcy ̶right to information may serve as an instrument to prepare a request for removal from office