Afoundation (also referred to as acharitable foundation) is a type ofnonprofit organization orcharitable trust that usually provides funding and support to othercharitable organizations through grants, while also potentially participating directly in charitable activities. Foundations encompass public charitable foundations, likecommunity foundations, andprivate foundations, which are oftenendowed by an individual or family. Nevertheless, the term "foundation" might also be adopted by organizations not primarily engaged in public grantmaking.[1]
Legal entities existing under the status of "foundations" have a wide diversity of structures and purposes. Nevertheless, there are some common structural elements.
Chart of a foundation
Legal requirements followed for establishment
Purpose of the foundation
Economic activity
Supervision and management provisions
Accountability and auditing provisions
Provisions for the amendment of the statutes or articles of incorporation
Provisions for the dissolution of the entity
Tax status of corporate and private donors
Tax status of the foundation
Some of the above must be, in most jurisdictions, expressed in the document of establishment. Others may be provided by the supervising authority at each particular jurisdiction.[citation needed]
There is no commonly accepted legal definition acrossEurope for a foundation. There was a proposal for aEuropean Foundation Statute, a legal form that would create a legal definition recognised across allEU Member States. However, this proposal was withdrawn in 2015 following its failure to pass throughCOREPER 1.[2][3]
The term "foundation", in general, is used to describe a distinct legal entity. Foundations as legal structures (legal entities) and/or legal persons (legal personality) may have a diversity of forms and may follow varying regulations depending on the jurisdiction where they are created. Foundations are often set up forcharitable purposes, family patrimony and collective purposes which can include education or research.[4]
In some jurisdictions, a foundation may acquire its legal personality when it is entered in a public registry, while in other countries a foundation may acquire legal personality by the mere action of creation through a required document. Unlike a company, foundations have noshareholders, though they may have a board, an assembly and voting members. A foundation may hold assets in its own name for the purposes set out in its constitutive documents, and its administration and operation are carried out in accordance with its statutes or articles of association rather thanfiduciary principles. The foundation has a distinctpatrimony independent of itsfounder.
In Finland, foundations (Finnish:säätiö,Swedish:stiftelse) are regulated by the Finnish Patent and Registration Office and have the four following characteristics:[5]
They are set up to manage property donated for a particular purpose.
This purpose is determined when establishing the foundation.
Foundations have neither owners, shareholders, nor members.
A board of trustees ensures that the foundation operates appropriately, and is responsible for ensuring that the investments by the foundation are secure and profitable.
Foundations are considered legal persons in Finland. The Foundations Act in 2015 dramatically updated the laws regarding foundations.[6]
There are not many foundations in comparison to the rest of Europe. In practice public administration requires at least €1 million necessary. State representatives have a mandatory seat in the board.[7]
German regulations allow the creation of any foundation for public or private purposes in keeping with the concept of agemeinwohlkonforme Allzweckstiftung ("general-purpose foundation compatible with the common good"). A foundation should not have commercial activities as its main purpose, but they are permitted if they serve the main purpose of the foundation. There is no minimum starting capital, although in practice at least €50,000 is considered necessary.
A German foundation can either be charitable or serve a private interest. Charitable foundations enjoy tax exemptions. If they engage in commercial activities, only the commercially active part of the entity is taxed. A family foundation serving private interests is taxed like any other legal entity. There is no central register for German foundations.
Only charitable foundations are subject to supervision by state authorities. Family foundations are not supervised after establishment. All forms of foundations can be dissolved, however, if they pursue anti-constitutional aims. Foundations are supervised by local authorities within each state (Bundesland) because each state has exclusive legislative power over the laws governing foundations.
In contrast to many other countries, German law allows a tax-sheltered charitable foundation to distribute up to one-third of its profit to the founder and his next of kin, if they are needy, or to maintain the founder's grave. These benefits are subject to taxation.
As of 2008[update], there are about 15,000 foundations in Germany, about 85% of them charitable foundations. More than 250 charitable German foundations have existed for more than 500 years; the oldest dates back to 1509. There are also large German corporations owned by foundations, includingBertelsmann,Bosch,Carl Zeiss AG andLidl. Foundations are the main providers of privatescholarships to German students.
In Italy, a foundation is a private non-profit and autonomous organization, its assets must be dedicated to a purpose established by the founder. The founder cannot receive any benefits from the foundation or have reverted the initial assets. The private foundations or civil code foundations are under the section about non commercial entities of the first book of theCivil Code of Law of 1942. Article 16 CC establishes that the foundation's statutes must contain its name, purpose, assets, domicile, administrative organs and regulations, and how the grants will be distributed. The founder must write a declaration of intention including a purpose and endow assets for such purpose. This document can be in the form of a notarized deed or a will. To obtain legal personality, the foundation must enroll in the legal register of eachprefettura (local authority) or some cases the regional authority. There are several nuances in requirements according to each foundation's purpose and area of activity.
A foundation (Fundação) inPortugal is regulated by Law 150/2015,[8] with the exception of religious foundations, which are regulated by the Religious Freedom Law. Foundations may be private, wholly public (created and managed exclusively by public bodies), or public but with private management (created by public entities and optionally also private entities, but whose management is dominated by private entities). Foundations may only be operational after being recognized by thePrime Minister of Portugal.
Foundations must designate and pursue at least one of twenty-five public benefit goals defined by law. They must also have enough assets to pursue those goals. They may not benefit the founders or any other restricted group, but the general public.
Portuguese foundations may voluntarily associate themselves via the Portuguese Foundation Centre (CPF – Centro Português de Fundações), that was founded in 1993 by the Eng. António de Almeida Foundation, theCalouste Gulbenkian Foundation and the Oriente Foundation.[9]
Foundations in Spain are organizations founded with the purpose of not seeking profit and serving the general needs of the public. Such foundations may be founded by private individuals or by the public. These foundations have an independent legal personality separate from their founders. Foundations serve the general needs of the public with a patrimony that funds public services and may not be distributed to the founders' benefit.
A foundation in Sweden (Swedish:stiftelse) is a legal entity without an owner. It is formed by a letter of donation from a founder donating funds or assets to be administered for a specific purpose. When the purpose is for the public benefit, a foundation may enjoy favorable tax treatment. A foundation may have diverse purposes, including but not limited to public benefit, humanitarian or cultural purposes, religious, collective, familiar, or the simple passive administration of funds. Normally, the supervision of a foundation is done by the county government where the foundation has its domicile, however, large foundations must be registered by the county administrative board (CAB), which must also supervise the administration of the foundation. The main legal instruments governing foundations in Sweden are the Foundation Act (1994:1220) and the Regulation for Foundations (1995:1280).
UnderCanadian law, registered charities may be designated ascharitable organizations,public foundations, orprivate foundations. The designation depends on factors such as the charity's structure, funding sources, and mode of operation. Charities receive notification of their designation from theCanada Revenue Agency (CRA) upon registration. A charity with only one director or trustee is automatically designated as a private foundation. To be designated as a charitable organization or public foundation, more than half of the directors, trustees, or officials must be at arm's length. TheCRA applies specific criteria to determine the designation, including the charity's purposes, activities, income allocation, and relationships with officials and donors.[11]
The law does not prescribe any particular form for a foundation in Ireland. Most commonly, foundations are companies limited by guarantees or trusts. A foundation can obtain a charity registration number from the Revenue Commissioners for obtaining tax relief as far as they can be considered under the law on charity, however, charitable status does not exist in Ireland. The definition usually applied is that from the Pemsel Case of English jurisprudence (1891) and the Irish Income Tax Act 1967.Trusts have no legal personality and companies acquire their legal status through the Company law and the required documents of incorporation. Foundations are not required to register with any public authority.
In the UK, the word "foundation" is sometimes used in the title of a charity, as in theBritish Heart Foundation and theFairtrade Foundation. Despite this, the term is not generally used inEnglish law, and (unlike in civil law systems) the term has no precise meaning. Instead, the concept ofcharitable trust is in use (for example, theWellcome Trust).
TheStates of Jersey are considering introducing civil law type foundations into its law. A consultation paper presenting a general discussion on foundations was brought forth to the Jersey government concerning this possibility. It was adopted by the states of Jersey on 22 October 2008 through the Foundations (Jersey) Law 200.[12]
In the United States, many philanthropic and charitable organizations (such as theBill & Melinda Gates Foundation) are considered to be foundations. However, the Internal Revenue Code distinguishes between private foundations (usually endowed by an individual, family, or corporation) and public charities (community foundations or other nonprofit groups that raise money from the general public). While they offer donors more control over their charitable giving, private foundations have more restrictions and fewer tax benefits than public charities.
At an international level there are a series of networks and associations of foundations, among themCouncil on Foundations,[13] EFC (European Foundation Centre),[14] WINGS (Worldwide Initiatives for Grantmaker Support).[15][16] Those organization also have a role in supporting research on foundations.
^Indirizzario in Elisa Bortoluzzi Dubach,Lavorare con le fondazioni. Guida operativa, Franco Angeli editore 2009 (Italian translation ofStiftungen. Der Leitfaden für Gesuchsteller, 2007).
