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Foundations in the Czech Republic: Yesterday, Today and Tomorrow

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Developments in Foundation Law in Europe

Part of the book series: Ius Gentium: Comparative Perspectives on Law and Justice ((IUSGENT,volume 39))

Abstract

The contribution is focused on the historical development and also on contemporary issues and trends in the field of foundation law in the Czech Republic. The foundation sector is affected by the fact that shortly after it was ‘rediscovered’ at the beginning of the 1990s, it was abused due to an insufficient and incomplete legal regulation. The strict and mandatory nature of the Act on Foundations and Endowment Funds (1997) was a logical reaction and an attempt to introduce some order to this area. A significant difference between the Czech legal regulation and the conception in other countries was the limitation of the foundations’ purposes exclusively to public benefit, detailed regulation for asset management and the ban on entrepreneurial activities performed by foundations (except for statutory exceptions). However, the situation in the society has changed in the last years, and a partial liberalisation of the foundation law in the Czech Republic appears as suitable and socially acceptable. The New Civil Code (in force from 7th January 2014) can be considered – as regards its provisions concerning foundation law – as a step in the right direction since it could contribute towards the emancipation of the institute of foundation, a greater flexibility and perhaps even an increase in the number of foundations in the Czech Republic.

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Notes

  1. 1.

    Das Hofkanzleidekret vom 21. Mai 1841, politische Gesetzssammlung, Band 69, nr. 60. This decree was in effect in Austria until the adoption of the Bundesgesetz über Stiftungen und Fonds in 1974, with effect from 1.1. 1975.

  2. 2.

    For more details, see Stammer (1975, 280).

  3. 3.

    Article I of this agreement read as follows: ‘The Austrian Republic shall surrender to the Czechoslovak Republic as a whole all designated references, donations, stipends and foundations of all kinds, including family foundations, founded or established in the former Austro-Hungarian empire, (hereinafter referred to generally as designated foundations), as long as they are located within the territory of the Austrian Republic, where they are intended exclusively for persons who are currently Czechoslovak citizens and if they were founded or established before 28 July 1914, and in their state as of 28 July 1914. During the process, regard shall be paid to payments properly made for the purpose of foundations’.

  4. 4.

    A certain tendency in this respect can be detected, see, e.g. Hermann-Otavský (1938).

  5. 5.

    The only foundation that managed to survive, albeit deprived of the major part of its foundation property, was the Hlávka Foundation (i.e. Nadání Josefa, Marie a Zdenky Hlávkových, also known as Hlávkova nadace). Established in 1904 by the architect Josef Hlávka, it is still active in supporting the education of Czech citizens.

  6. 6.

    For more details, see Hondius (2001, 581).

  7. 7.

    There was interest to introduce the foundation institute into the then Czechoslovak legal system as early as the beginning of the 1990s.

  8. 8.

    While Poland adopted the foundation act in 1991, Hungary regulated foundations under Section 74A and subsequent sections of the (former) Civil Code of 1987. However, even these legal regulations had to be modified to the new situation in the society.

  9. 9.

    For more details, see Drobing (2001, 542).

  10. 10.

    The legal regulation of foundations was cancelled during the 1950s.

  11. 11.

    The Act No. 109/1964 Coll., Economical Code (hospodářský zákoník), as subsequently amended, was repealed as of 1.1. 1992, by the Act No. 513/1991 Coll., Commercial Code (obchodní zákoník), as subsequently amended.

  12. 12.

    Namely, the provisions of Sections 18, 20b to 20e and 477 (2) in the Act No. 509/1991 Coll., amended the Act No. 40/1964 Coll., Civil Code (občanský zákoník), in effect from 1.1. 1992.

  13. 13.

    It is true that during the interim period, the Act No. 248/1995 Coll., on Public Benefit Institutions (o obecně prospěšných společnostech), was adopted, setting the legal framework for a special type of legal persons of the foundation (germ. Anstalt) type – public benefit institutions, whose conception approximates, from a comparative European perspective, foundations that offer services of public benefit (so-called operating foundations). The law, however, led to the fragmentation of the understanding of the foundation institute and the confounding of terms rather than stabilising the foundation sector.

  14. 14.

    Apart from foundations regulation provided by civil law, there are also foundations regulated under canon law.

  15. 15.

    Since the present article focuses mostly on foundations, the specific nature of endowment funds will be backgrounded. The latter are discussed here only where absolutely necessary or suitable for clarifying the broader implications. The differences between foundations and endowment funds are treated in Ronovská (2009, 64–65) and Hurdík and Telec (1998, 36–38).

  16. 16.

    Act No. 513/1991 Coll., Commercial Code.

  17. 17.

    Act No. 99/1963 Coll., Civil Procedure Act (Rules of Civil Procedure).

  18. 18.

    Act No. 262/2006 Coll., Labour Code.

  19. 19.

    Act No. 337/1992 Coll. on the Administration of Taxes and Fees, sec. 6 (zákon o správě daní a poplatků), Act No. 586/1997 Coll., on income tax (income tax law) (zákon o dani z příjmů), Act No. 357/1992 Coll., on Gifts, Inheritance and Real property Tax (zákon o dani darovací, dědické a dani z převodu nemovitosti), Act No. 253/2004 Coll., on VAT (o dani z přidné hodnoty), Act No. 16/1993 Coll., on Road Tax (o dani silniční).

  20. 20.

    Act No. 563/1991 Coll., on accounting (zákon o účetnictví).

  21. 21.

    Act No. 40/1964 Coll., Civil Code, before revision No. 227/1997 Coll., cancelled by the New CC(/inforce 1.1.2014).

  22. 22.

    For more details, see Ronovská (2010, 409).

  23. 23.

    However, the bill of the Foundation Act of 1991, drafted on the model of the Austrian Foundation Act of 1974, originally included this two-layer approach, cf. Hurdík (1994, 42).

  24. 24.

    The public benefit institution, defined under the Act No. 248/1995 Coll. on Public Benefit Institution, was a special legal person obliged to provide public benefit services under conditions which have been set in advance and were the same for everybody. It could be involved in economic (commercial) activities (such activity may only be ancillary, i.e. the economic activities may not constitute the prevailing activity). However, its profit, if any (the generation of profits is not explicitly prohibited), was not distributed among founders, members of its bodies or its employees but is used for the financing of public benefit services (non-distributing constrain).

  25. 25.

    For more details, see Ronovská (2012, 18).

  26. 26.

    However, this possibility was still quite limited.

  27. 27.

    § 23 Act on Foundations and Endowment funds.

  28. 28.

    Costs pertaining to the administration of the foundation/endowment fund include, above all, the costs to achieve and valorise assets of the foundation/endowment fund; costs to promote the purpose of the foundation/endowment fund; and operating costs of the foundation/endowment fund, including emoluments for the board of directors, the supervisory board or the controller.

  29. 29.

    See Section 9a of ZNNF.

  30. 30.

    Act No. 89/2012 Coll., Civil Code, which came into force from 1st January 2014.

  31. 31.

    See explanatory memorandum to NOZ, pp. 17 and also 93, available online at http://obcanskyzakonik.justice.cz/tinymce-storage/files/DZ_NOZ_89_%202012_Sb.pdf. Accessed on 23.5.2012.

  32. 32.

    See Eliáš (2002, 35 et al.).

  33. 33.

    Section 402 and subsequent sections of the New Civil Code.

  34. 34.

    The Act No. 248/1995 Coll. should be repealed.

  35. 35.

    Foundation law is covered in almost 90 provisions, while the general regulation of legal persons is covered in almost 100 provisions.

  36. 36.

    See Section 307 of the New Civil Code.

  37. 37.

    Section 349 of the New Civil Code.

  38. 38.

    Section 377 of the New Civil Code.

  39. 39.

    Section 376 of the New Civil Code.

  40. 40.

    Section 172 (2) of the New Civil Code.

  41. 41.

    Section 391 of the New Civil Code.

  42. 42.

    Section 1448 and subsequent sections of the New Civil Code.

  43. 43.

    However, Slovakia saw the adoption of the new foundation law as late as in 2002, when the Act No. 34/2002 Z. z. on foundations, as subsequently amended, was passed.

  44. 44.

    For a discussion of the problematic nature of the differing approaches and divergent understandings of the foundation institute, see also Feasibility Study on European Statute, p. 13, available online at http://ec.europa.eu/internal_market/company/docs/eufoundation/feasibilitystudy_en.pdf. [Accessed on 23.5.2012]. See also Jakob (2006, 44–45).

  45. 45.

    Foundations in Poland, Romania, Slovakia, Slovenia and Latvia may be established only for publicly beneficial purposes. By contrast, foundations in Bulgaria, Estonia and Lithuania may exist for any propose that does not conflict with law (any lawful purpose); for more details, see the illustrative table in Feasibility Study on European Foundation Statute, pp. 52 and 53.

  46. 46.

    As a result, the traditional continental European understanding of legal persons was supplemented with a new element. With the passage of time, the resulting mix appears to be problematic. The Anglo-Saxon influence became evident mainly in connection with the preparation of the Act on public benefit institutions (Act No. 248/1995 Coll). The law regulates the position of special foundation-type of legal persons that provide services for public good, which replaces foundations in this area. Similar experience can be identified also in the case of the Slovak Act No. 213/1997 Coll. on Organizations Providing Services of Public Benefit and the Hungarian Act on Public Benefit Organizations of 1997 (now repealed). The legal forms that came into existence in this way are difficult to grasp from the point of view of the classic, i.e. European continental conception of legal persons. This problem became also evident during the work on the draft of the New Civil Code.

  47. 47.

    Further Schulze (2001, 64).

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Authors and Affiliations

  1. Department of Civil Law, Faculty of Law, Masaryk University, Veveri 70, 611 80, Brno, Czech Republic

    Kateřina Ronovská

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Correspondence to Kateřina Ronovská .

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  1. Independent legal scholar and consultant on foundation and non-profit organization, Turin, Italy

    Chiara Prele

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Ronovská, K. (2014). Foundations in the Czech Republic: Yesterday, Today and Tomorrow. In: Prele, C. (eds) Developments in Foundation Law in Europe. Ius Gentium: Comparative Perspectives on Law and Justice, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9069-7_3

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