C2 Liability of the Liechtenstein foundation vis-à-vis corporate and private creditors
In Liechtenstein, a transfer of assets to a Liechtenstein private-benefit foundation (foundation transaction and dedication) can only be contested within a period of one year in the case of asset liability situations at the founder level.
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The contestation period begins to run upon the founder’s final detachment from the donated assets. After expiry of the contestation period for the donation, the donated assets no longer form part of the personal liability of the former owner of the assets (founder).
The challenge of the transfer of assets of a German founder can be pursued before a German or Liechtenstein court.
In Germany, a creditor may challenge the original foundation transaction and dedications within a four-year period. In the case of additional or subsequent foundations, freedom of choice of law applies in both Germany and Liechtenstein, i.e. the donation agreement can be subject to Liechtenstein law or German law.
A challenge in Germany is lengthy for procedural reasons and in practice has little chance of success.
In the case of a challenge in Liechtenstein, in addition to the short challenge period of one year, the rule applies that dispositions in accordance with moral obligations cannot be challenged. Accordingly, reasonable benefits paid by the foundation to the family are not subject to avoidance. The same applies in principle to dispositions in favour of charitable foundations.
Finally, foreign plaintiffs for avoidance in Liechtenstein must furnish substantial legal costs deposits.
A court judgment obtained in Germany is only enforceable in respect of property located in Germany. Enforcement of a German judgment in Liechtenstein is not possible.
As a rule, in practice the conclusion of multi-instance court proceedings both in Germany and in Liechtenstein will not be possible within the short preclusion period of one year and will thus be doomed to failure.
Asset protection in case of entrepreneurial liability risks in DE, AT
DE: Challenge in Germany Foundation transaction: four-year period
Upon dedication: four-year period, unrestricted choice of law
Enforceability of challenge pursued in Germany: unrestricted
Enforceability of challenge pursued in Germany in the foundation’s country of domicile: given
Enforceability in the foundation’s country of domicile: given
AT: Contestability in Germany Foundation transaction: two-year period
In case of dedication: two-year period, unrestricted choice of law
Enforceability of avoidance pursued in Germany: unrestricted
Enforceability of avoidance pursued in Germany in the country of domicile of the foundation: given
Enforceability in the country of domicile of the foundation: given