Company forms

A foundation is a legal entity. It is the most frequently used legal form in Liechtenstein, and is deployed for asset and succession planning.

By contrast, a trust is not a legal entity. Instead, it is a legal form based largely on the trust pursuant to Anglo-Saxon law. While it tends to be used for the same purpose as the foundation, its legal structure is different.

A relationship based upon trust

A foundation or trust constitutes above all a relationship of trust between persons. In practice, the founder authorizes one or more trustees to administer his entire personal assets, or a part thereof, in the interest of one or more beneficiaries. This is done either by means of an independent legal entity, the foundation, or by means of a series of contractual provisions within the framework of a trust. As this represents a private legal relationship, foundations or trusts do not have to be registered with a public authority. This secures the maximum degree of confidentiality required by the client.

Asset protection

For many of our clients, merely having a bank account at their disposal at a secure banking centre is not sufficient. They might wish to realise other goals, such as e.g. ensuring that the administration of their assets is not interrupted in the event of their death by the process of devolving property to their heirs or other formalities, making sure that their assets are protected against the depredations of spendthrift family members or heirs, or that parts of their assets are protected from future creditors. A foundation or trust can protect assets against statutory changes in a country (such as for example the introduction of foreign exchange controls or expropriation) as well as against general political or judicial risks. Due to their personal nature, these objectives require particular discretion. As professional consultants in Liechtenstein, we do everything in our power to ensure that this discretion is preserved.

Successor planning

A foundation or trust enables founders to distribute their estate in accordance with their wishes, for example to prevent family disputes relating to the distribution of an estate, in order to protect beneficiaries from their lack of experience, or to make provision for fundamental needs such as living expenses, education or the care of particular family members.

The various forms

Liechtenstein law has a deservedly liberal reputation. This makes it possible to tailor structures optimally in accordance with the personal requirements of the client in respect of successor planning, asset preservation and tax planning. Foundations and trusts may be established with or without the trustee having discretionary powers. They may be revocable or irrevocable. Trust law permits the establishment of a wholly confidential family trust, as well as a trust for commercial activities.

The parties

Foundation and trusts are established by the following parties:

The founder: The founder establishes the foundation or trust, and may be either a natural person or a legal entity. The founder transfers assets to the foundation or to the trustee of a trust in the interest of specific beneficiaries.

The trustee or trustees: The function of the trustee is normally exercised by one or more natural persons or legal entities. Trustees are obliged to adhere to the wishes of the founder pursuant to the articles and regulations of the foundation, or as recorded in the trust deed. Liechtenstein trust law stipulates that assets which have been transferred to a trust do not become part of the assets of the trustee, and that the trustee may act only in the interests of the beneficiaries.

Articles and trust deeds

The articles or the trust deed are the documents which the founder uses to stipulate the duties of the trustees in respect of the administration, management and utilization of the entrusted assets.

Special trust provisions in Liechtenstein

In contrast to countries which are governed by Anglo-American legal principles, a Liechtenstein foundation or trust is not subject to limits on the accrual of earnings or in terms of duration. In addition, the foundation or trust deeds may either be recorded in the Public Register or simply deposited with the Court of Justice. The founder may also stipulate in the articles or trust deed that creditors may not seize the benefits either by means of a court order or bankruptcy proceedings. This has proven to be a useful means of safeguarding the interests of beneficiaries.

Beneficiaries

The beneficiaries are named either directly by the founder in the foundation or trust deeds, or by the trustee in a supplementary agreement in accordance with the wishes of the founder. Beneficiaries may be natural persons or legal entities, charitable organizations or other institutions. The founder may also be a beneficiary.

Letter of wishes

If the beneficiaries are to be designated at the discretion of the trustee, the founder may articulate his wishes in a “letter of wishes” in respect of the administration, the management and the distribution of the assets. In practice, trustees adhere to the provisions of such “letters of wishes” even though they are not under a legal obligation to do so. This “letter of wishes” may be amended, supplemented or rescinded by the founder at any time.

Foundation assets or trust fund

These terms refer to the assets which have been transferred to the foundation or trust by the founder. This may constitute immovable or moveable property located at any possible location around the world. Income from these assets may augment the capital if it does not have to be distributed to the beneficiaries.

Appointment of a protector

A protector may be named in the articles of the foundation or in the trust deed. In general terms, the duties of a protector entail supervising the management exercised by the trustee as well as designating or excluding the beneficiaries. In order to prevent conflicts of interest, the protector should preferably not be a beneficiary. Both natural persons as well as legal entities may be named as protectors.

The Corporation is a legal form which is recognised around the world. It is particularly suitable for international commercial activities.

The characteristics and the organization of a Liechtenstein Corporation are essentially the same as those which are normal for legal entities of this nature anywhere else in the world.

This company form is chosen above all if the purpose of the company is the execution of international trading activities. It may also be organized as a holding company, in particular if it is considered advantageous to use an internationally recognized legal form.

The Establishment is a legal form that exists only in Liechtenstein as a legal entity under private law. It is suitable both for commercial as well as for non-commercial purposes. While the Establishment is not so well-known internationally, it continues to be used for the purpose of asset management.

In contrast to the situation under other legal systems, the Liechtenstein Establishment is not an institution under public law. Instead, it is a legal entity under private law with independent legal personality. Its assets represent independent assets which are available solely to cover the liabilities of the Establishment. The Establishment recognizes only beneficiaries which benefit economically from it and which are named in bylaws. There are no members, partners or shareholders, and the capital is not normally divided into shares. The Establishment may engage in commercial transactions of all kinds, it may administer its own assets, or may pursue any other objective permitted by law.

The trust enterprise, often called a “trust reg.”, is an Anglo-American corporate form which has found its way into Liechtenstein law.

It may be deployed for commercial or asset management purposes. The structure used in Liechtenstein brings together elements of the Corporation with those of the foundation.

The trust company is a legally independent company run by a board under a dedicated company name, with its own dedicated assets. The supreme organ is the settlor or his legal successor, whereby their rights are inheritable and transferable, or can be assigned. The business activities are run by the board.