To abolish cross-border barriers encountered in the EU by public benefit foundations, the European Commission proposed, on 8 February, a regulation establishing a legal statute for such bodies. Only foundations having a public benefit purpose (the only type of foundation recognised in all the member states) are covered by the proposal. This new legal form – the ‘European foundation’ (FE) – will co-exist with foundations formed under national law.

The Council will have to adopt the regulation unanimously after consulting the European Parliament (Article 352 TFEU).

“We need to support and encourage the valuable work that foundations do for European citizens. The introduction of a European statute will reduce costs and uncertainty. It will also allow foundations to benefit from more visibility to promote their activity and attract more funding thanks to a European label,” explained Internal Market Commissioner Michel Barnier. He stressed the importance of allowing the development of these key players in the social economy which, beyond their human and moral potential, represent considerable economic potential.

The 110,000 public benefit foundations in the EU account for 15% of European GDP, invest €83 billion per year in the Union (more than in the United States) and have between 750,000 and one million paid employees plus some one million volunteers. They are active in a range of sectors: social services, education, research, health, culture, environmental protection, human rights, etc. Although foundations generally carry out their activities at regional or national level, they are increasingly developing their activity in other member states. In doing so, they find themselves confronted with very different legal or taxation situations, which can give rise to conformity costs that jeopardise their effectiveness and limit possibilities of accepting donations from another EU state. A 2008 study carried out for the Commission by the Max Planck Institute for Comparative and International Private Law and the University of Heidelberg estimated the cost for foundations of such cross-border activities at between €90 million and €101.7 million a year.

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The new statute lays down the main requirements for establishing a European foundation: proving its public benefit purpose, having a cross-border activity in at least two member states and being in possession of assets of at least €25,000 at the time of its founding. Private and political foundations are therefore excluded. The objective is to create legal conditions that would be fundamentally the same in all member states. The European foundation would exist in parallel with national foundations. Use of this legal form will be totally voluntary.

An FE may be set up either ex nihilo, by converting a national foundation, or by merging national foundations. It will acquire legal personality upon registration in a member state. The FE will be governed by strict provisions concerning the organisation of its board of directors, supervision and accounting rules, as well as transparency obligations to prevent conflicts of interest. It must also respect strict conditions relating to informing and consulting employees and volunteers.

Member state authorities will supervise European foundations and will have to exchange information with their counterparts in other member states with regard to registration and tax information. On the taxation component, the regulation states that the FE and its fund donors must be given the same advantages as those granted to foundations created under national law.

The sector would like to see this regulation adopted as soon as possible, before 2014. The European Foundation Centre, which represents more than 230 foundations and fund donors active in the philanthropic sector, welcomed this major step forward that will allow foundations to develop over the long term and on a cross-border basis. Gerry Salole, its chief executive, commented that “a European foundation statute will help public benefit foundations to do what they do best – improve the lives of millions of citizens around Europe”.

Rosa Gallego, president of DAFNE, a network of 6,000 foundations across 22 European countries, urged the Council not to complicate the draft regulation. “This is not about initiating long and complex reform; it’s about creating a simple but robust and trusted new tool to allow public benefit foundations to maximise their potential,” she declared.

The regulation is available at  www.europolitics.info > Search = 308594

The FE will be governed by strict provisions concerning the organisation of its board of directors, supervision and accounting rules