Legal Alert – The Reform of Legislation on Foundations is Proceeding
The Ministry of Justice set up a working group on 5 January 2012 to draft a proposal regarding the comprehensive reform of the Foundations Act. The working group for the new Foundations Act submitted its report to the Ministry of Justice on 15 May 2013. A wide-ranging consultation on the report was carried out between May and July 2013. A total of 93 statements were issued during the process of consultation and a summary of those statements was published on Friday 20 September 2013.
The issuers of statements supported the comprehensive reform of the Foundations Act in general and especially the increasing of transparency and improving the supervision of foundations. The more specific and extensive provisions regarding related-party transactions and the administration of foundations were also supported. Some of the issuers of statements commented on the competitive effects and tax implications, as well as on the increasing administrative burden in foundations. The majority of foundations took notice of the key characteristics relating to foundations such as the foundation’s purpose and the regulation regarding the foundation’s business or investment activities. Some of the issuers of statements were concerned about how the amendments will affect the foundations’ taxation.
In general, the issuers of statements were in favour of taking operating foundations better into account in the act but resisted removing the phrase “useful purpose”. Some of the issuers of statements supported maintaining the fixed minimum share capital in euros. Special attention was paid to the regulation regarding foundations’ investment plan, for which the issuers of statements made proposals for further drafting. In addition, the issuers of statements emphasised that the concepts of financial administration, investment activities and business should be kept separate.
An assessment of the key objectives of the reform, which will require further drafting, is expected to be finished during the autumn.