FAQ: Answers to your questions

FAQ Answers to your questions

Umbrella foundation

What is an umbrella foundation?

An umbrella foundation provides dependent foundations and smaller endowments with the opportunity to pool administrative tasks, asset management, and certain aspects of project support. On the one hand there are umbrella foundations operated by banks, while on the other we find independent umbrella foundations managed by financial service providers. Umbrella foundations are ideally suited to accommodate 'sub-foundations' and legacies. They maintain a professional system of asset and donation management, and represent a particularly attractive alternative to an individual foundation, especially in the case of less substantial estates.

Your advantage with FdF

We enable founders to choose between two vehicles to execute their charitable foundation idea without any restriction whatsoever in terms of content or geographic location: a general foundation fund or a dedicated, restricted foundation fund.

Dedicated foundation funds / dependent foundations

What is a dedicated foundation fund?

Operationally, a dedicated foundation fund is managed precisely like an independent foundation, but remains legally and administratively embedded within the umbrella foundation. The purpose, objectives, activities of the fund and its capitalization are defined in a charter when setting up a dedicated foundation fund.

Your advantage with FdF

We ensure that you, as a founder, can flexibly and efficiently achieve the purpose of your foundation. The services provided by the umbrella foundation include administrative, tax, legal and organizational issues.

What is the difference between an independent foundation and a dependent foundation?

An independent foundation is tied to a certain purpose and is an independent legal entity. A dependent foundation is set up by means of a conditional endowment within an umbrella foundation, and is also bound to a certain purpose. However, it is not an independent legal person and therefore does not require entry in the trade register.

Your advantage with FdF

Essentially, you have the same rights as in an independent foundation.

Set up of a foundation

When is it sensible to set up a foundation?

Foundations are always sensible – however large or small the endowment may be. The challenge in respect to foundations is to find the most efficient form. Here, the spectrum extends from a personal, independent foundation, through to a one-time donation to an existing foundation.

Your advantage with FdF

As an umbrella foundation, Fondation des Fondateurs offers dependent foundations and smaller endowments a system of administrative pooling, asset management and project support.

How do I set up a foundation?

A foundation can be set up by one or more persons. It involves irrevocably donating assets to a particular purpose. It is at the discretion of the founders to select their purpose, provided it is charitable in nature and satisfies the statutory requirements. Furthermore, the foundation board and its domicile must be defined, and the regulatory authority selected according to the geographic focus. It is wise to submit the foundation deed to the regulatory and tax authorities prior to registration. Then it must be notarized, and tax exemption can be applied for after acceptance by the Supervisory Board for Foundations.

Your advantage with FdF

We handle all matters relating to the establishment of your foundation, in keeping with our motto: "You donate, we do the rest." You define the purpose, the amount of foundation capital, and appoint members to the foundation board. We deal with all administrative tasks involved in the establishment of your foundation. Your foundation is 'automatically' tax exempted through integration within the umbrella foundation.

What does it cost to set up a foundation?

The costs incurred when establishing an independent foundation can quickly add up to over CHF 10,000, especially the legal fees, consultancy fees, the entry in the trade register, notary costs, and acceptance by the Supervisory Board for Foundations.

Your advantage with FdF

Foundation pooling keeps the cost of setting up your foundation significantly lower, as you will no longer be required to pay for notarization or entry in the trade register, and in most cases you will not require legal advice.

Is there a minimum amount that I must deposit when setting up a foundation?

The seed capital to establish an independent foundation – as required by the Swiss Federal Supervisory Board for Foundations – is at least CHF 50,000.

Your advantage with FdF

There is no minimum amount required to set up your foundation.

What should the composition of the foundation board or board of trustees be?

The founder selects his or her foundation board members. The board should not be too large (at least three persons), and the members must have the time and expertise that they will need in order to fulfill their duties. One member of the foundation board must be a resident of Switzerland.

Your advantage with FdF

We would be happy to propose persons we know from our network on request.

Administration / Costs / Assets

What are the administrative overheads in running a foundation?

There are limits to the extent that these costs can be minimised in respect to an independent foundation: the expenses incurred merely for administrative management, accounting, auditing, the annual report and accountability to the Supervisory Board for Foundations, etc. can quickly add up to annual costs of up to CHF 50,000 and more.

As a matter of principle the administrative costs must not account for an excessively large proportion of the overall budget, as the foundation may otherwise, under certain circumstances, be unable to satisfy its purpose over the long term in respect to its profitability and its impact.

Your advantage with FdF

Fondation des Fondateurs operates an administrative pooling system to keep overheads lower than they would be in the case of an independent foundation. Nevertheless, certain basic costs are simply unavoidable.

How large must my assets be in order to fulfil the foundation purpose?

There should be a reasonable ratio between the foundation endowment and its administrative costs. A foundation will require an endowment of between CHF 1 and 2 million to satisfy its basic tasks, assuming that the foundation will generate returns of 5%. Moreover, there should be a favorable relationship between administrative costs and the grant-making amounts, and they should not account for more than 10–15% of the total budget. Therefore, under certain circumstances, charitable foundations with assets of CHF 10 million may find themselves unable to satisfy their long-term purpose in terms of economic efficiency and impact.

Your advantage with FdF

Fondation des Fondateurs does not require a minimum endowment: founders can endow efficiently, even with limited resources. The system of administrative pooling keeps the overheads substantially lower.

What must I take into account in asset management?

Liquidity, returns, security, risk diversification and the protection of assets are the primary concerns when investing foundation assets, insofar as the foundation deed or charter do not prescribe any specific investment regulations. The foundation assets must be managed in line with good business practice and in accordance with the principles set forth by the Federal Supervisory Board for Foundations (ESA). The risk is diversified. The investments do not have to be gilt-edged, but must not be placed at risk by speculative transactions.

Your advantage with FdF

The total assets handled by Fondation des Fondateurs are managed according to an investment strategy that is reviewed and optimized periodically. In the investment of assets, we cooperate with a partner that has many years of experience in the management of foundation endowments. Of course, it is at your discretion to choose an asset manager of your trust.

When must I submit accounts on the activities of the foundation?

An external auditing authority and the Supervisory Authority will audit the foundation annually. The tax authorities will conduct periodic audits.

Your advantage with FdF

We will handle all aspects of accountability in respect to your foundation.

Charitable cause, purpose and tax exemption

Do all foundations need a charitable purpose?

No. Foundations do not necessarily require a charitable cause. They must primarily fulfil their charter purpose. However, tax-exempted foundations must usually donate their proceeds to charitable concerns.

Am I permitted to change the purpose of a foundation?

Generally, foundations have a relatively rigid structure. It is not possible to simply change a previously defined purpose. This requires the foundation board or the founder to place an application with the supervisory authority. The purpose can be changed, subject to application by the founder, provided that at least ten years have passed since the foundation was set up or its purpose last changed. Charitable foundations will once more require a charitable purpose. The purpose of the foundation can otherwise only be changed if it becomes evident that the intentions of the founder are no longer fulfilled.

Your advantage with FdF

The purpose can be changed without involving the supervisory authorities, simply by the founder’s application to Fondation des Fondateurs foundation board. The new purpose must also be charitable.

What must I take into account when defining the foundation purpose?

The description of the purpose must be clear, but not overly extensive or detailed. Broadly paraphrasing the purpose allows the foundation's committees to exercise discretion in their decisions, and hence to adapt their practices to altered circumstances.

Your advantage with FdF

We are happy to help you define the foundation purpose.

How and under which circumstances will a foundation be tax exempted?

Preconditions for tax exemption on a national level are: charitable status, exclusiveness in the allocation of resources, and the irrevocable status of the foundation. Tax exemption on a cantonal level depends on the tax legislation in place in the individual Cantons. In most cases their requirements are similar to those imposed on a national level. If granted, tax exempt status does not apply forever and can be rescinded in the event that the conditions are no longer satisfied. Foundations must apply for tax exemption. It is advisable to make contact with the cantonal tax offices and to submit relevant documents for tax exemption before setting up the foundation. The tax authorities in the competent Canton are fundamentally responsible for the decision on tax exemption. The national tax authorities follow this decision.

Your advantage with FdF

Your foundation is 'automatically' tax exempted through integration within the umbrella foundation.

Dissolving a foundation

Can I dissolve a foundation?

Only the Supervisory Authorities can dissolve a foundation upon application by the foundation board. The Supervisory Authorities will dissolve it in the event that the realisation of the foundation purpose, viewed in all objectivity, has become unfeasible, or if the foundation no longer possesses sufficient assets in order to fulfil its purpose. The Supervisory Board for Foundations is also entitled to wind up foundations for other reasons, e.g. due to organizational deficits.

Your advantage with FdF

Your foundation can be dissolved without further complication by application to Fondation des Fondateurs foundation board. Any remaining assets must be transferred to a charitable organisation pursuing a similar purpose. The assets can also be transferred to a newly established, independent foundation.