The fund owns transferred assets
Neither the founder nor a beneficiary retains ownership after a valid transfer.
Asset protection is not absolute
The Civil Code expressly creates mutual subsidiary liability.
A beneficiary is not automatically a creditor
Rights follow the charter, management terms and legislation.
Can a personal fund become insolvent?
Civil Code Article 65 permits legal-entity insolvency unless an express exclusion applies. Personal funds are not generally excluded. The arbitration court may therefore open proceedings where the Bankruptcy Law tests are met. A lifetime personal fund, inheritance fund and later public-benefit fund must not be treated as identical.
Assets and liability
| Issue | General treatment | Review |
|---|---|---|
| Transferred assets | Owned by the fund | Transfer instruments and title |
| Fund debts | Paid from fund assets | Asset and liability schedule |
| Founder liability | Subsidiary where fund assets are insufficient | Shortfall and debt amount |
| Fund liability for founder debts | Statutory period for a lifetime fund | Creation date and obligation |
| Beneficiary rights | Follow governing documents | Content and accrual of rights |
Article 123.20-4 does not simply merge the two estates. The principal debt, asset shortfall and subsidiary-liability conditions must be proved. Fund liability for founder debts ordinarily applies for three years from creation; a court may extend the period in statutory circumstances, but not beyond five years.
What the administrator examines
The administrator reviews assets, management terms, related-party transfers, beneficiary payments, encumbrances and income sources. Beneficiary distributions do not automatically rank ahead of creditors. Transactions remain subject to general avoidance rules.
After the founder’s death, inheritance rules and the current governing documents also matter. Lifetime-fund liability rules should not be copied to an inheritance fund without checking the statute.
Practical steps
- Obtain the charter, management terms and register history.
- List fund assets and transfer grounds.
- Separate fund debts, founder debts and beneficiary rights.
- Check the creation date and liability period.
- Review related-party transactions and distributions.
- Identify the principal and subsidiary debtor for each claim.
See non-profit insolvency, the creditor petition and the debtor petition.
Frequently asked questions
Can a personal fund be declared insolvent?
Generally yes where the legal-entity insolvency tests are met and no special exclusion applies.
Does the founder still own transferred assets?
No. Validly transferred assets belong to the fund.
Is the fund always liable for every founder debt?
No. Fund type, creation date, statutory period and subsidiary-liability conditions must be checked.
Can a beneficiary take fund property?
Not as an owner. Rights derive from the governing documents and law.
Are beneficiary distributions immune from challenge?
No. Their basis, timing and effect on creditors may be reviewed.
Official sources
Need to assess personal fund risks?
We can review assets and liability of the fund, founder and beneficiaries without guaranteeing an outcome.
Initial consultation