When does a private foundation distribution remain discretionary, and when can a beneficiary examine a fixed payment entitlement? The decisive documents explained.
BRANDAUER Rechtsanwälte
Foundation law team, Salzburg and throughout Austria
Your matter is handled by a team combining corporate law, asset succession, real estate law and dispute resolution. We review the foundation declaration, board resolutions, information rights and liability issues and set out clear next steps. Mag. Bernhard Brandauer is responsible for the legal advice, supported by further specialised lawyers of the firm where the matter requires it.
A person may be named as a beneficiary in a private foundation deed and still not be able to demand a specific payment immediately. The key question is whether the applicable deed provides for a defined distribution or leaves the competent body a further decision-making discretion. Beneficiary status, purpose, discretion, resolution, amount and due date must be examined separately.
In family foundations, expectations, earlier payments and informal promises often sit alongside one another. That does not automatically create an enforceable payment claim. Conversely, a valid resolution with a clear legal basis should not simply be treated as a voluntary payment.
This article explains the distinction between a discretionary distribution and a fixed distribution entitlement under Austrian private foundation law. The general information right under section 30 PSG, attachment of an existing claim and tax treatment are addressed only to the extent relevant to this distinction.
Section 5 PSG first answers who is a beneficiary of the private foundation. Generally, this is the person named as such in the foundation deed. If no beneficiary is named in the deed, the relevant person is determined by the body appointed by the founder or, failing that, by the foundation board. This status decision does not by itself say that the foundation must pay a specific amount.
The concrete distribution depends on the foundation deed and its valid supplements. A provision may set objective conditions and a defined scope of payment. It may also allow the board to decide among several permitted options concerning the occasion, amount or timing of a distribution.
The distinction matters for recurring payments as well. A previous payment may show how the foundation has understood a clause in the past. It does not replace the question whether the next payment is owed under the deed, merely possible, or again dependent on a resolution. The existing overview of beneficiary information rights addresses the information side, not an automatic payment entitlement.
Before making a demand, identify the legal basis of the expected distribution.
| Position | What does it mean? | Which document matters? |
|---|---|---|
| Beneficiary status The person is named or determined as a beneficiary under section 5 PSG. | No specific payment at a specific time yet | Foundation deed, supplementary deed and determination resolution |
| Discretionary distribution The competent body must decide on the reason, amount or timing of the payment. | Payment may be possible, but is not automatically owed before the decision | Distribution clause, criteria and documented discretion |
| Accrued entitlement Basis, beneficiary, scope and due date are sufficiently defined. | Concrete enforcement may be examined | Valid resolution and applicable deed version |
A legal review must also consider conditions, competence, creditor protection and the current version of the documents.
A discretionary distribution is likely where the foundation deed leaves the competent body a choice. The choice may concern whether a payment is made on a particular occasion, which amount within a range is appropriate, or whether the foundation’s financial position permits a payment at the proposed time. The scope of discretion must be determined from the actual wording, not from a heading or a family expectation.
A fixed entitlement may arise where the deed defines the payment by objective criteria so that no free initial decision by the body is required. A valid resolution may also make an existing basis more concrete. Competence, compliance with the deed, conditions and the date from which payment may be demanded must still be checked.
In 2 Ob 115/25p, the Austrian Supreme Court described the legal separation of foundation assets and their use on the basis of the foundation purpose and at the discretion of the foundation board. That case primarily concerned information in a forced-heirship dispute. It therefore does not mean that every distribution is discretionary. It does show why proximity to the foundation or a beneficiary’s expectation cannot replace the wording of the deed.
Discretion does not mean that the board may act arbitrarily. Section 17 PSG requires compliance with the foundation deed and careful performance of board duties. The decision must therefore be assessed against the purpose, applicable criteria, equal treatment of comparable beneficiaries and the claims of the foundation’s creditors.
Section 9 PSG lists mandatory contents of the foundation deed and permits further rules. These include more detailed provisions on beneficiaries, a minimum asset level and the internal order of foundation bodies. For an entitlement analysis, the entire structure must therefore be read together: who may be a beneficiary, who decides on the payment and which limits apply?
A supplementary deed may add detailed provisions on beneficiaries or the conditions of a distribution. Earlier versions, drafts or incomplete copies must not replace the applicable deed. Amendments should be ordered chronologically and checked for effectiveness.
Start by marking every provision concerning beneficiaries, distributions, bodies, conditions and purpose. Then ask whether the text provides for an automatic payment, a payment based on objective criteria, or a new board decision. The article on the foundation deed and court clarification shows why the exact document wording matters in a dispute.
This sequence keeps status, discretion and concrete payment data separate.
Order the foundation deed, supplementary deed, amendments and relevant court decisions.
Mark the provisions on beneficiaries, distributions, bodies, conditions and purpose. Clearly separate drafts from effective documents.
Legal basis: Section 9 PSG
Establish the designation or effective determination of the beneficiary.
Status under section 5 PSG is the starting point, but it does not replace the payment analysis.
Legal basis: Section 5 PSG
Check whether the board still decides on the reason, amount or timing.
A clause with objective conditions differs from a rule that requires a new selection decision.
Record competence, beneficiary, amount, conditions and payment date.
The resolution must come from the competent body and remain within the foundation deed.
Legal basis: Section 17 PSG
Assess timing, liquidity and creditor claims before enforcement.
Even a concrete resolution does not answer every question about due date and implementation.
Legal basis: Section 17(2) PSG
A resolution is particularly useful for an entitlement assessment if it identifies the relevant clause in the foundation deed, the beneficiary status and the competent body. It should also state the recipient, amount or calculation method, purpose, conditions and payment date. If an element is missing, determine whether it follows clearly from the deed or whether another decision is still required.
The resolution must fit the foundation’s internal rules. Section 17(1) PSG requires the foundation board to manage and represent the foundation and to comply with the foundation deed. A board resolution cannot create a payment contrary to the deed. It can, however, make an existing distribution rule concrete if it is formally and substantively valid.
For due date, the date of a transfer is not the only relevant fact. The deed or resolution may require conditions, documents or a later payment date. The financial position of the foundation and creditor protection under section 17(2) PSG must also be considered. The existing article on distribution, resolution and records addresses implementation in more detail.
Section 30 PSG gives a beneficiary a right to information about the fulfilment of the foundation purpose and inspection of specified documents. These include the annual accounts, management report, audit report, books, foundation deed and supplementary deed. This right can help clarify the basis of a distribution and the foundation’s decision practice.
Information and inspection are not the same as a claim for a specific payment. A person asking which resolutions were passed or which clause was applied is pursuing a different right from a person demanding a defined amount on a defined date. The requests should therefore be kept separate.
In 2 Ob 115/25p, the Supreme Court distinguished information about contributions from broader requests that were not sufficiently justified in the particular dispute. The practical lesson is that the legal question and the document sought determine which information route or payment claim can be examined. An information right is not proof of an accrued distribution entitlement.
If the foundation does not comply with a section 30 PSG request within a reasonable period, the court may order inspection on application. That clarifies the information position. Whether a specific distribution is owed still depends on the deed, resolution and due date.
First error: Treating beneficiary status as an automatic distribution. Section 5 PSG establishes status. The concrete payment still requires a suitable basis and a review of the specific distribution.
Second error: Treating an earlier payment as a permanent promise. It may be relevant to interpretation, but does not by itself prove an obligation for later periods or different amounts.
Third error: Reading a board resolution without the foundation deed and competence rules. A resolution must remain within the deed and statutory limits.
Fourth error: Treating section 30 PSG information as a payment decision. Documents can prepare an entitlement assessment, but do not replace it.
Fifth error: Inferring due date from an invoice, email or prepared transfer where the deed still requires conditions or another resolution.
Sixth error: Ignoring creditor protection. Section 17(2) PSG requires a separate review even if the beneficiary considers the entitlement settled.
Four questions help separate discretion, information and an accrued entitlement.
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Order the foundation deed, supplementary deed, amendments and relevant court decisions. Only then can you determine whether the distribution is based on objective criteria or discretion.
Check the designation in the foundation deed or the effective determination under section 5 PSG. The further entitlement assessment starts with that status.
Identify the discretion, criteria and competent body. A distribution may be possible, but before the specific decision it is not automatically owed as a fixed amount.
Compare the deed and resolution. Also check conditions, due date, creditor protection and implementation before taking further steps.
Determine whether the missing information follows clearly from the deed or whether another resolution is required. A prepared transfer does not replace that clarification.
What beneficiaries may request under section 30 PSG.
Which documents make a distribution decision traceable.
Why a fixed payment claim must be separated from beneficiary status.
Why the exact wording and effective version of the deed matter.
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