The new Act establishes centralised Foundation Registers, which are maintained by the Regional Commercial Courts. Previously, foundations were registered with local municipal authorities, resulting in a very decentralised system and variable registration requirements. According to this new Act, a foundation or charitable fund must now be founded on the basis of a memorandum of association in case of two or more founders or on the basis of a notarial deed in case of a single founder. The new Act also enables the establishment of a foundation or a charitable fund on the basis of a last will and testament.
As compared to the old regulations, the new Act sets out numerous additional requirements and conditions for establishment of a foundation or charitable fund. These include the following:
- Founding capital of at least 500.000,- CZK;
- If non-monetary capital is contributed, an expert valuation must be submitted;
- A Board of Directors consisting of at least three persons, together with a Supervisory board or an Inspector;
- The foundation or charitable fund is obliged to prepare Articles of Association.
The new Act also contains some restrictions concerning use of the property of a foundation or a charitable fund. These include a ban on participation in financing of political parties. Furthermore, foundations are not allowed to carry out business activity, with exception of certain activities such as leasing of real estate, organising lotteries, cultural, sport and educational activities.
The property of a foundation or charitable fund may not be used to secure any obligations. Accounting requirements for foundations are more thorough as a result of the new Act; for example audited annual reports must now be prepared. The annual report is open to the public, as it is required to be filed with the Commercial Register.
Foreign foundations are allowed to carry out activities on the territory of the Czech Republic after registration of a branch office in the Foundation Register. The Commercial Court will record the branch office of a foreign foundation provided that the purpose of such a foundation is in accordance with purpose of a foundation mentioned in the new Act. The purpose of a foundation must be generally beneficial (e.g. protection of human rights or other human values, protection of the environment, development of education and science, etc.).
All foundations established before the effective date of the new Act are obliged to bring their accord their legal position with Act by the end of year 1998, as latest, otherwise they will be dissolved.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
