Corporate Law and Private Foundations: Strategic Succession Planning

Sound succession planning for family businesses can rarely be solved by a will alone. To ensure the continued existence of the company and to avoid fragmentation, corporate agreements and inheritance law arrangements must be precisely coordinated.

Corporate Law as a Tool for Structuring

The articles of association (partnership agreement) are the central steering element. Tailor-made clauses (e.g., rights of first refusal, transfer restrictions) ensure that shares remain within the family and that successors are involved at an early stage. Syndicate agreements and comparable regulations safeguard the status as a family business and create appropriate access routes.

The FlexCo (Flexible Company) in Succession

Since the FlexKapGG came into force, the FlexCo offers modern possibilities for succession planning. Particularly attractive features include:

• Enterprise Value Shares: For the participation of key employees or family members without voting rights.
• Flexible Decision-Making: Circular resolutions are possible even without unanimity, which ensures the ability to act after a generational change.

The Private Foundation and Compulsory Portion Law

The Private Foundation remains an essential instrument for preserving wealth across generations.

Through careful structuring, assets can be preserved for decades. Foundation Governance and the establishment of independent control bodies are of particular importance in this context (see also www.stiftungsprotektor.com).

With regard to compulsory portion law, however, the current jurisdiction on asset sacrifice (Vermögensopfer) must be observed. A gift to a private foundation is only subject to the two-year period for the supplementation of the compulsory portion (§ 782 ABGB) if the founder has made an actual “asset sacrifice.”

If the founder reserves extensive rights of amendment or revocation or ensures access to the assets, the Supreme Court (OGH) holds that the period does not begin to run (cf. OGH 2 Ob 66/24f). In these cases, the assets are mathematically added to the estate. Private foundations may also be subject to extended obligations to provide information to persons entitled to a compulsory portion after the founder’s death (OGH March 26, 2026, 2 Ob 115/25p, Case Analysis here).

Basic information on private foundations can be found at www.privatstiftung.info. The article by N. Arnold, Private Foundation and the Compulsory Portion, GesRZ 2015, 346ff, deals fundamentally with the essential issues: Read PDF.

Safeguarding Transfers inter vivos

Anticipated succession through the gifting of shares or real estate should always be secured by flanking measures:

• Usufruct Rights (Fruchtgenuss): Secure the income (dividends/rents) for the transferor.
• Prohibitions of Encumbrance and Alienation: Prevent uncontrolled resale of assets.
• Waivers of Inheritance and Compulsory Portion: These are often a prerequisite for a conflict-free handover, making later compensation payments (“departing heirs”) calculable.

Power vs. Wealth

Through modern structures such as family holdings, GmbH & Co KG, or syndicate agreements, it is possible to differentiate precisely between rights of influence (voting rights) and financial security (dividends). In this way, operative management can be placed in expert hands while the provision for the family remains guaranteed.

Further information on the topic of private foundations can also be found at www.privatstiftung.info. Definitions of relevant legal terms are provided in our Legal Glossary.

Expertise through Scientific Publication

The legally secure design of foundation structures and corporate succession requires deep expertise that goes beyond mere consultation. As the author and editor of standard works in Austrian foundation and corporate law, we follow legal developments directly at the source.