New Foundations Act and Amendment to the Civil Code

Act No. 34/2002 Coll. on Foundations and amending the Civil Code as amended

The new Foundations Act has cancelled the previous Act No. 207/1996 Coll. as well as the provisions of the Civil Code on foundations (Sections 20b - 20e and 477 (2)). By cancellation of Section 477 (2), the possibility to establish foundations by a testament has been cancelled.

Foundation is a corporation consisting of assets collected for a specific purpose. Foundation's assets are used in public interest, examples of which are listed in the Act. Foundation provides financial and non-financial resources from its assets to persons not connected with the foundation and administers its assets, including special funds.

The assets of a foundation consist of foundation's registered capital, special funds and other assets.

The registered capital is created by contributions of individual founders. A minimum contribution of a founder is SKK 20,000 and the minimum registered capital is SKK 200,000. The amount of minimum registered capital should be made up only by financial contributions and real estate. The amount exceeding the minimum amount can be made up also by movable property, securities and proprietary rights valuable by money. The foundation's registered capital may not be decreased.

Foundation may create a special fund for the purpose of support of public services and public interest. A decision of the Administrative Board (the ``AdB'') or a written agreement with another entity is required for establishment of a special fund. Special funds do not have a legal capacity.

Property of a foundation other than the property included in the registered capital or special funds, consists of financial resources, securities, and proprietary rights valuable by money.

A foundation is established by a foundation charter signed by all the founders, or in case of a single founder, by this founder. All signatures must be verified. Before incorporation of a foundation, the persons entitled to act on its behalf are the founders acting jointly or the foundation administrator.

A foundation acquires real estate property based on a verified written declaration of its previous owner and consequent registration of ownership in the Land Book Registry. Within 15 days after the incorporation, the foundation administrator shall submit the application for registration in the Land Book Registry and send a copy of this application to the Ministry of Culture of the Slovak Republic (the ``MC'').

The foundation charter serves both as a document establishing the foundation and a basic organisational document. It replaces the previously required deed of establishment and statute. Section 5 of the Act contains an enumerative list of the required contents of the foundation charter.

Obligations undertaken by the founders before the day of incorporation, jointly and severally bind all the founders. These obligations are transmitted to the foundation by the day of its incorporation, unless it refuses to accept them within 3 months, for the reason of conflict with the public purpose the foundation was established for.

Incorporation of the foundation occurs by its registration in the registry of foundations, administered by the MC. The application shall be submitted by the foundation administrator and shall include, in addition to the foundation charter, the following annexes:

• written declaration of the foundation administrator on repayment of financial contributions of founders to the registered capital;
• written declaration of a founder on provision of real estate to the registered capital;
• foundation administrator's extract from the Criminal Registry;
• Extract from the Commercial Registry or other registry of a founder, who is a legal entity.

The MC shall register the foundation within 30 days after the beginning of the registration procedure and shall send the foundation administrator a copy of the foundation charter with the date of registration imprinted on it. The MC is not obliged to register the foundation if it finds a legal reason for the denial of registration.

The following information is entered into the registry of foundations:

a)

name, seat, identification number (assigned by the MC);

b)

the public interest supported by the foundation;

c)

name, birth number/identification number, permanent residence/ registered seat and permanent residence/registered seat of the founders;

d)

the amount and composition of the registered capital, including

1.

financial resources,

2.

real estate, with its expert evaluation;

3.

movable property, with its expert evaluation;

4.

securities and their market value;

5.

other proprietary rights, their values with the expert evaluation;

e)

name, permanent residence and birth number of the foundation administrator;

f)

commencement of liquidation, commencement of bankruptcy proceeding and legal reason of foundation's deletion from the registry of foundations.

The collection of deeds, a new integral part of the registry of foundations has been introduced. The collection of deeds contains the foundation charters, agreements on creation of a special fund or decisions of the AdB on creation of special funds and annual reports on administration and management of the property of the foundations.

A foundation is winded-up:

a)

by expiration of the period for which it was established;

b)

by achieving the aim of its establishment;

c)

by a decision of the AdB;

d)

by a court decision,

e)

by commencement of bankruptcy proceeding or

g)

by refusal of the relevant court to conduct the bankruptcy proceeding due to lack of sufficient funds;

g)

by a decision or agreement of founders, if the AdB is non-functional for at least one year.

Based on a proposal of a founder, the MC or other person proving a legal interest, the Court shall wind-up a foundation and order its liquidation if:

a)

its registered capital has decreased;

b)

the foundation has failed to deliver its annual report to the MC in an additional term given by the MC;

c)

foundation uses its assets for the benefit of a political party or candidate;

d)

bodies of the foundation were not elected or supplemented by new members for 6 months after the end of previous term of these bodies or members;

e)

the foundation does not conduct any foundation activity for at least 1 year;

f)

the foundation uses its assets in contrary to law or its foundation charter.

Based on a proposal of a founder, the MC or other person proving a legal interest, the court may dissolve a foundation and order its liquidation if it has seriously or repeatedly violated the Foundations Act.

Liquidation of the foundation's property is not required if it transferred to another foundation or if after completion of the bankruptcy proceedings there is no property.

The new act introduces certain new methods of dissolution without liquidation. Foundations may merge, amalgamate or be transformed into a non-investment fund. A merger means, that one of the foundations being merged is dissolved and its assets are transferred to the remaining foundation. In case of amalgamation, the assets of the dissolved foundations are transferred to a new foundation.

If a foundation is transformed into a non-investment fund, its registered capital has to be transferred to another foundation or the municipality in the territory of which it had its seat. The reason for this provision is to protect the foundation's registered capital as a permanent property of the foundation, having certain taxation advantages and securing a permanent revenue for the foundation.

In course of a liquidation, the liquidator is obliged to offer the liquidation balance to another foundation or to a municipality of the foundation's seat. If the municipality accepts the liquidation balance, it may use it only for a public benefit. However, property forming the registered capital of the foundation may be offered only to another foundation.

The supreme body of foundation is the AdB. It decides on fundamental issues of foundation, e.g. it elects new members of the AdB, members of the Supervisory Board and the foundation administrator. It consists of three members at minimum.

The foundation administrator is the statutory body of foundation. He/she decides on all the issues that are not in the competence of other bodies of the foundation.

The Supervisory Board is a body, that can be replaced by a supervisor provided that the foundation's registered capital is below SKK 5,000,000. Its task is, inter alia supervision of foundation's accounts, approval of the balance sheet and the obligatory annual report.

The property of a foundation may be used only in accordance with conditions set in the foundation charter, for public benefit and for coverage of administrative expenses. A foundation may not conduct business activities, with the exception of lease of real estate and organisation of cultural, educational, social and sports events.

The foundation's property forming its registered capital cannot be gifted, provided as a contribution to a business corporation, charged by a lien or used for securing obligations of the foundation or third persons. Financial funds of a foundation may be used only for purchase of:

a)

state bonds and treasury bonds;

b)

securities listed on a stock exchange and units of open-ended unit funds,

c)

mortgage bonds,

d)

certificates of deposit,

e)

real estate.

Foundation guarantees its obligations by all its property, excluding assets of a special fund created for the purpose of humanitarian aid to an individual or a group of people.

Foundation is an obliged person as defined in the Act No. 211/2000 Coll. on Free Access to Information and therefore it is obliged to provide information to the public or requesting individuals. The MC supervises the fulfilment of the stated public interest in activities of foundations.

The Foundations Act specifies the conditions of operation of foreign foundations in the territory of the Slovak Republic. They are allowed the full range of activities of domestic foundations, however, only through a registered organisational unit.

An organisational unit is registered in the registry of foundations. A proof of legal capacity of the foreign foundation, decision of the foreign foundation on establishment of an organisational unit, designation of its administrator, statute of the foreign foundation and a proof of minimum contribution equal to the minimum registered capital need to be submitted with the application for registration.

This Act is effective as of 1 March 2002.

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