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Lichtenstein Foundation

The Principality of Liechtenstein is located in Western Europe and shares boundaries with Switzerland to the west and Austria to the east. Liechtenstein has amazing mountain ranges which attract large numbers of winter sports lovers. Liechtenstein has few natural resources but has successfully built a financial services sector which contributes about 30% of GDP. The currency used is the Swiss franc and language spoken is German.

The formation of foundations as legal entities structured to protect personal and corporate wealth first began in Liechtenstein during the early 20th century. The use of foundations both as domestic and offshore entities spread to various parts of the world where the practical uses of offshore foundations became more evident. The Private Law (Privatrechlichte) and Public Law (Offentrechtliche) Foundations are the two types of foundations that can be formed under the Liechtenstein Foundation Law. Unlike the Private Law Foundation, the Public Law Foundation is subject to state scrutiny for specific reasons.

Lichtenstein foundations are versatile and can be used for managing family, personal or corporate wealth. Although Liechtenstein foundations that are used for family and mixed purposes are not entered in the Public Register, the statutes, which do not include subsidiary provisions or by-laws, are required to be filed with the Court of Justice of the Principality of Liechtenstein, which is the supervisory authority. The foundation’s documents that are filed using this method are not subject to public inspection.

Liechtenstein Foundations are called Stiftung (name with German origin) and are hybrid corporate structures which are formed by combining the characteristics of two specific corporate vehicles, namely the Company limited by guarantee and the Trust. Although activities such as opening bank accounts, entering into agreements and contracts or investing in stock markets can be done by the Liechtenstein foundation, which is considered an independent body, Liechtenstein foundations cannot be formed for commercial objectives and whatever proceeds are obtained from any investment made with the foundation’s wealth should go towards the foundation. The proceeds of such investments should not be used for the personal gain of any of the officers or institution involved in managing the foundation’s assets. This restriction posed by Lichtenstein foundations ensures that the foundation serves its basic purpose of protecting its assets for the benefit and best interests of the foundation’s beneficiaries, whilst being a protected, trusted and safe means of holding and transferring assets.

Additional security of assets held by a Liechtenstein foundation is also ensured by the fact that those assets are automatically transformed into a separate and independent entity of the founder’s personally owned assets and become the sole property and assets of the foundation. Private or corporate assets acquired by a Lichtenstein foundation are only reclaimed by the original owner (can be a physical person or organization) if appointed as the Beneficiary of the foundation’s assets. This makes Liechtenstein Foundations effective and versatile vehicles for safeguarding family wealth, tax planning, transferring assets, removing substantial amounts of assets from a person or corporation’s net worth and shielding assets from segregation (creditors’ claims) and litigation.

A fundamental feature of a Liechtenstein Foundation includes the allocation or endowment of funds or assets, which is necessary for the formation of a foundation. A foundation deed also has to be written and is required to contain essential details and provisions such as the name, purpose or objective and duration of the foundation, including the procedures and guidelines for nominating the foundation’s board (council), provisions with regards to the beneficiaries and the way in which the foundation’s assets are to be distributed in case of liquidation. While these basic provisions are catered for in the foundation deed, matters involving the nature and extent of the beneficial interest are dealt with in the foundation’s by-laws.

In the event that the founder of a Liechtenstein Foundation wishes for the foundation to become effective after his or her death, then the foundation can be formed by a legally valid last will and testament, or by means of a contract of succession. If so desired, a Liechtenstein Foundation can also be formed by a Trustee serving as a nominee donor or founder so that the individual or founding organization’s real name is not implicated in any way.

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