Finding alternatives to dissolving a foundation and exploring potential restructuring options through foundation law is an important part of diligent foundation management.
Foundation law offers various courses of action to keep foundations alive in times of need. Restructuring, such as amending the foundation's charter, can unlock new opportunities and economic prospects while continuing to honor the founder's wishes.
Dissolution of a Foundation as a Last Resort
Traditional foundations generally have an indefinite lifespan and could pursue their charitable purpose in perpetuity (§80 (1) Sentence 2 of the German Civil Code; BGB). Spending foundations are an exception to this.
However, foundations can face economic burdens over time, for example, as a result of prolonged periods of low interest rates. Furthermore, the originally defined purpose of the foundation may become less feasible or relevant due to societal developments or changed circumstances, making dissolution a possibility.
Dissolution by the foundation's governing bodies occurs specifically according to §87 (1) Sentence 1 BGB if the "foundation can no longer permanently and sustainably fulfill its purpose." The foundation supervisory authority can also dissolve a foundation in the event of insolvency.
However, dissolution of a foundation always represents the last resort for its work and should be preceded by restructuring or realignment. Founders can utilize the flexible options available under foundation law to ensure the continued existence of their foundations in various ways.
Preserving Foundations Instead of Dissolving Them
Preserving a foundation is not only a matter close to the founder's heart. As social entrepreneurs, they pursue the goal of promoting charitable causes in art and culture, education, science, health and sports, and the environment through their foundation work, guided by their own values and visions for the future.
At the same time, founders of charitable foundations benefit from tax advantages (§§51 et seq. of the German Fiscal Code; AO). Thus, the work of founders has been recognized by the legislature as particularly worthy of support and is considered highly socially relevant.
It is also in the public interest that foundations are preserved and continue to make their long-term, charitable contribution to the common good. Founders address societal and social challenges through their foundation work and give something back to the community.
Former German President Joachim Gauck echoed this sentiment in his opening address at the 2025 German Foundation Day: “Foundations are a vibrant expression of civic responsibility: They strengthen social cohesion, promote knowledge, innovation, and culture.” He added that the special significance of foundations is “an expression of a sense of community that is needed today more than ever before.”
Identifying alternatives to dissolving a foundation is not only essential for its continued existence. It is also a crucial aspect of responsible foundation management, as it opens up new opportunities and avenues for action, unlocks economic returns, creates synergies, and allows the founder's wishes to be pursued more efficiently.
An Overview of Alternatives to Dissolving a Foundation
Alternatives to dissolving a foundation and creating new opportunities include transforming the foundation, amending its bylaws, merging or transferring foundations, restructuring its administration, and generating new income.
In this context, founders should also keep an eye on reforms to foundation law, as these offer new, flexible options for foundation organization, from which founders can benefit. This also prevents reforms from interfering with the day-to-day operations of foundations and restricting their freedom of action.
Most recently, the new foundation register was adopted as part of the 2023 foundation law reform, which aims to ensure more uniform foundation law standards and greater transparency and legal certainty in the foundation sector (as of January 2026).
Converting a Foundation into a Consumption Foundation as an Alternative
A significant and effective opportunity for maintaining a foundation is to convert the existing foundation into a different type of foundation. Since the reform of foundation law and its entry into force in 2023, founders have been able to convert a traditional foundation into a consumption foundation (§85 (1) Sentence 3 BGB).
Such a conversion is a viable alternative, particularly when the foundation's purpose can no longer be sustainably pursued with its assets.
This is the case when sufficient returns can no longer be generated. A traditional foundation relies on the income from its assets and depends on generating economic returns. This proves especially problematic during periods of low interest rates.
The legal prerequisite for this alternative solution is that the founder's intent and the foundation's articles of association permit such a conversion and that the articles of association are amended to include the additional provisions pursuant to §81 (2) BGB (reservation of the right to amend).
Furthermore, the foundation must no longer be able to fulfill its purpose permanently and sustainably, i.e., if a foundation does not have sufficient funds for the sustainable fulfillment of its purpose and this would change upon conversion into a consumption foundation (§ 85 (1) Number 1 BGB).
Unlike a traditional foundation, a consumption foundation allows the entire foundation assets to be gradually distributed and spent for its charitable purpose. It can also be organized as a charitable spending foundation under §§51 et seq. AO with full tax benefits (more on the advantages and special features of consumption foundations).
Conversion of a Foundation into a Partial Consumption Foundation as an Alternative
Another alternative is the conversion of a traditional foundation into a partial consumption foundation. This allows founders to benefit from the flexibility to combine and structure the advantages of a perpetual foundation with those of a spending foundation.
The partial consumption foundation gives the founder the option of using the remaining liquid assets to pursue the foundation's purpose and thus fulfilling their wishes. At the same time, the partial consumption foundation continues to exist indefinitely, just like a traditional foundation.
This allows the foundation's purpose to be pursued in the long term using the returns from the remaining foundation assets, thus overcoming financial difficulties. Founders can also use this conversion to allocate a portion of the assets to specific purposes while securing the remainder and dedicating it to generating income.
The various options for converting a foundation should always be thoroughly reviewed by foundation law experts, and a suitable model should be developed individually, taking into account the founder's wishes.
Amending the Foundation's Articles of Association as an Alternative
Another alternative to dissolving a foundation is amending its articles of association.
Not only the initial drafting of the articles of association, but also their careful maintenance, plays a crucial role. Amending the articles of association can efficiently fulfill the founder's wishes in the long term, create new opportunities for pursuing the foundation's purpose, and prevent dissolution.
Specifically, it must be examined whether an amendment to the articles of association can restore the struggling foundation's ability to function or whether it can be "restructured in such a way that it can once again permanently and sustainably fulfill its purpose" (§§85; 87 (1) Sentence 2 BGB).
To this end, founders can adjust the specific manner in which their foundation fulfills its purpose, for example, by loosening overly restrictive requirements, clarifying broad requirements, or adapting outdated foundation purposes. Founders could also amend the articles of association to reduce certain expenditures or use them to align the foundation's work with new societal challenges.
In this context, a fundamental change or restriction of the foundation's purpose is only possible if, among other things, the "original purpose of the foundation can no longer be permanently and sustainably fulfilled with the help of the foundation's assets" (§85 (1) Number 1 BGB).
Amendments to the articles of association that affect the manner in which the foundation's purpose is fulfilled and the management of its endowment require a significant change in circumstances after the foundation's establishment, and the foundation must be adapted accordingly (§80 (2) BGB).
Furthermore, in the case of a non-profit foundation, a beneficiary can be designated in the articles of association for the purpose of preserving the assets, if it is not desired that the assets be transferred to the public sector (§ 87c BGB).
Founders should always have their amendments to the articles of association reviewed to ensure they comply with new and updated regulations and reforms of foundation law.
Reducing Costs and Securing Foundation Income as an Alternative
If a foundation is in financial distress, joint administration is another alternative. This measure reduces potentially high and burdensome administrative costs for the foundation.
In this case, the board of a larger foundation generally assumes the administration of a smaller foundation, while the foundation's assets continue to be managed separately. It should be noted that this alternative also requires a review of the articles of association.
Foundations should also always be flexible and adaptable, keeping an eye on different sources of income such as sponsorships, donations, or endowments, and exploiting different revenue opportunities (More on financial income for foundations).
Merger of Foundations as an Alternative
Another alternative to dissolving a foundation is the merger or consolidation (merger) of foundations. This should generally be considered if the aforementioned operational options are insufficient.
In the merger alternative, an existing foundation is absorbed into another foundation by transferring its assets (§86 BGB).
In a consolidation, at least two transferring foundations can be merged "by establishing a new foundation and transferring their respective assets in their entirety to the new acquiring foundation" (§86a BGB).
In this alternative, foundation law experts must first examine whether the founder's intent permits it. Approval from the foundation supervisory authority must also be obtained, and the fulfillment of other legal requirements must be ensured.
Among other things, the foundation purposes must be compatible or comparable. In the case of a merger, the purpose of the transferring foundation must be able to be continued, which may again require an amendment to the articles of association pursuant to §85 BGB.
This compatibility of purpose and the tax requirements according to §§51 et seq. AO must be examined in particular when merging charitable foundations in order to maintain tax advantages and to be able to convert savings created into growth opportunities (More on charitable foundations and the tax advantages).
Résumé
Foundation law offers various options for keeping foundations alive and preventing their dissolution. A realignment can create new avenues of action and allow the founder's wishes to be flexibly addressed within a changing social environment.
"Founders should examine their options early on in the event of an impending crisis and have their foundation charter prepared accordingly with the help of experts. A potential realignment can simultaneously pursue charitable goals more effectively and generate new sources of income," says dtb-laywer and expert in foundation law and non profit-organizations Maximilian Brazel.
Status 14.01.2026