In the sixth episode, Senior Associate Celia Titouni and Managing Partner Yann Mrazek discuss the roles of the Beneficiaries and Guardian
A beneficiary is a person (individual or corporate) who benefits from the Foundation, e.g. its assets, proceeds generated therefrom. The Founder decides on the designation and hierarchy of beneficiary/ies, his/her/their rights and entitlements.
Can the founder be a beneficiary?
Yes, the Founder can be the (only) beneficiary during his lifetime – i.e. where a Foundation is being created for succession purpose –; after his passing, he is usually substituted by previously defined secondary beneficiary/ies. Alternatively, the Founder may outline only certain features in respect of how the family members shall benefit.
Who can appoint, add and remove beneficiaries?
The Founder has wide discretion towards the appointment of beneficiary(ies) – the only statutory requirement is that such appointment must be specified in a defined or definable manner.
If included in its list of so-called ‘reserved powers’, the Guardian can also validate or refuse the Council’s request to add or remove beneficiaries as well as amend their distribution entitlements.
What are their rights?
Beneficiaries have no rights or interest to any or all of the foundation’s assets, which belong to the Foundation. They do however have proprietary rights including the receipt of benefits and information about the economic status of the Foundation. Beneficiaries also have the rights of an administrative nature such as to take action against and hold the Foundation Council liable in case their interest and rights are infringed (i.e., when given a right to a fixed periodic distribution).
The rights arising from the beneficiary status are specified in the constitution documents of a Foundation. They can, at the Founder‘s discretion, be very limited or deliberately extensive. A beneficiary may, by way of writing request, seek (limited) information regarding the Foundation.
The appointment of a guardian is voluntary as long as there is a surviving founder, and the foundation does not strictly have a charitable object. If there is no surviving founder or if the foundation has one or a specified non-charitable object, it must appoint a Guardian in relation to that object.
What is the Guardian’s role in the Foundation?
The role of a Guardian is generally to oversee the conduct of the Foundation’s Council with respect to the management of the Foundation. A Guardian is a person whom the Founder trusts to monitor the proper fulfillment of the objectives and to protect the interest of the Beneficiary(ies) – typically a family member, a friend, or a professional advisor. The Guardian can be one/several individual(s) or a body corporate.
Who can be appointed as Guardian?
Anyone can be appointed as a Guardian, including the Founder. However, a Guardian cannot simultaneously be a member of a Foundation’s Council to ensure the separation of powers. Engaging professionals to act as Guardian is a good option to guarantee separation of power and a high-level quality of Council supervision to view the professional’s expertise and knowledge on succession planning strategies and asset management and protection.