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(unofficial translation by Maria Bideke, Law Association Justice International)

Foundation Act (1994:1220)

(excerpts)

“shall” – instruction

“may” – optional

Chapter 1. Introductory provisions

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2 § A foundation is established when one or several of its founders direct assets to be separated and permanently administered as independent capital to pursue a specific purpose.

The foundation’s assets are considered separated when a third party manages them in accordance with the deed of the foundation.

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4 § A foundation can obtain rights, undertake obligations, and appear in court and before other authorities.

The assets of the foundation are liable for its debts.

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6 § A foundation shall have a name. The name shall include the word foundation. 

Only a foundation can include the word foundation or an abbreviation thereof in its name.

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Chapter 2. Governance

General provisions on governance

§ 1 A foundation shall be governed according to the provisions set forth in its deed, except when contrary to this law.

§ 2 If a natural person or persons have committed to administer the foundation according to the provisions in its deed, then the foundation is considered to be administered under its “own management”. If a legal person makes such a commitment, then the foundation is administered under “attached management”.

The natural person or persons that are committed to administering a foundation’s assets according to its deed shall constitute the foundation’s board. When the foundation’s assets are separated according to Chapter 1, Article 2, second paragraph, a board member may represent the foundation.

The administrator of a foundation is the legal person committed to administering the foundation’s assets in accordance with its deed. If the state has made this commitment, then the authority, which made this commitment on behalf of the state, shall act as the administrator.

§ 3 The board or the administrator is responsible for ensuring that the provisions of the foundation’s deed are followed.

The first paragraph of this article does not hold the board or the administrator accountable for the appointment or dismissal of board members or the board chairman when these actions are taken by others besides the board in accordance with the deed, nor does it hold the board or administrator accountable for the appointment or dismissal of the auditor or for decisions concerning the remuneration of the board, administrator or auditors when these actions are taken by others than the board or administrator.

The first paragraph also does not hold the board or administrator accountable for the auditor’s actions according to the foundation’s deed. 

4 Unless otherwise stated in the foundation’s deed, the board or the administrator is responsible for the appropriate investment of the foundation’s assets.

§ 5 Unless otherwise stated in the foundation’s deed, a foundation may invest its assets together with other foundations.

§ 6 A foundation cannot grant loans or loan guarantees to:

1. the founder or the administrator;

2. the person or persons that represent the foundation according to Article 16 or 23 or that represent the administrator or the partner, if the foundation is administered by a trading company;

3. the person or persons that have the right to represent a subsidiary of the foundation or the partner when the subsidiary is a trading company;

4. the person that is married to, sibling to or descendant or ascendant of a person referred to in items 1-3 of this article;

5. the person that is related by marriage to a descendant or ascendant of a person referred to in items 1-3, or the person that through siblings is or has been related by marriage to a person referred to in items 1-3; or

6. a legal person administered by a person referred to in items 1- 5 of this article.

Items 4 and 5 of this article shall also apply to persons that are living together in a common law marriage with a person referred to in items 1-3.

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Chapter 3. Bookkeeping and annual report etc.

Bookkeeping

§ 1 The Bookkeeping Act (1999:1078) regulates whether or not a foundation is required to keep books, provide an annual bookkeeping report or close its books at the end of the year.

If the foundation is no longer required to keep books then it shall report this to the supervisory authority. Act (1999:1106)

Accounts

§ 2 Foundations that are not required to keep books under the Bookkeeping Act (1999:1078) shall maintain continuing accounts over the amounts received and paid by the foundation. Payments shall be verified. A foundation that has invested its assets together with another foundation’s assets may keep joint accounts over these assets with the other foundation.

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Chapter 4. Auditing

§ 1 /Enters into force 2003-07-01/ A foundation shall have at least one auditor.

Unless otherwise stated in the foundation’s deed, the auditor shall be appointed and dismissed by the board of a foundation under its “own management”.

Unless otherwise stated in the foundation’s deed, the auditor of a foundation operating under “attached management” shall be appointed and dismissed by:

1. the administrator’s highest governing body;

2. the national government or the authority appointed by the national government when the administrator is a governmental authority; or

3. all partners together when the administrator is a trading company.

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§ 8 The supervisory authority can appoint an auditor for a foundation if:

1. no auditor is appointed;

2. an authorized and approved auditor is not appointed as is required under Articles 4-5;

3. an appointed auditor is unqualified to be an auditor according to Article 3, first paragraph or Article 6; or

4. a provision in the deed regulating the number of auditors or the authority of the auditor has been violated.

If the person or persons responsible for appointing the auditor does not immediately correct the problems referred to in items 1-4, then the board or the administrator is obliged to file a report with the supervisory authority.

According to the first paragraph of this article, an appointment shall be announced after consulting with the foundation and shall last until a new auditor has been appointed. After an auditor has been appointed according to the first paragraph, items 2-4 the supervisory authority shall dismiss the earlier appointed auditor.

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Chapter 5. Damages

§ 1 A board member or the administrator shall provide compensation for damage caused intentionally or carelessly while fulfilling his or her duty. A board member or the administrator shall also provide compensation for damage he or she intentionally or carelessly caused a third party while ignoring provisions in the foundation’s deed or in this law.

§ 2 An auditor is responsible for paying compensation in the cases referred to in Article 1. The auditor is also responsible for damage intentionally or carelessly caused by his or her co-workers.

If an audit company is functioning as the auditor, then the company and the person responsible for the audit are responsible for paying compensation.

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Chapter 6. Alteration etc. of provisions in a foundation’s deed

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Dissolution of a foundation under certain circumstances

§ 5 The board or the administrator may decide to spend all of the foundation’s assets according to the foundation’s purpose or on a similar purpose if:

1. the foundation was established more than 50 years ago;

2. the foundation has not been able to pursue its purpose in the last five years;

3. the foundation’s assets, calculated according to Chapter 3, Article 3, have been less than the ”basic price amount” according to the Law on Common Insurance at the end of the last three financial years; and

4. the foundation is without debts.

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Chapter 7.  Liquidation and Dissolution

Prerequisites for liquidation etc.

§ 1 The board or the administrator of a foundation that performs economic activities shall immediately prepare a special profit and loss account as soon as there is reason to assume that the foundation’s assets are less than its debts or if the foundation is lacking assets that can be repossessed according to Chapter 4 of the Enforcement Code (1981:774). If the profit and loss account shows that the assets are less than the debts, then the board or the administrator shall file a petition for liquidation with the municipal court. A board member or the auditor may also file this petition.

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§ 4 The municipal court shall liquidate a foundation if, during the litigation, no profit and loss account examined by an auditor and approved by the supervisory authority can prove that the foundation’s assets exceeds its debts.

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Chapter 9. Supervision etc.

Introductory provisions

§ 1 The county government where the foundation has its domicile, or, if a domicile is not established, where the foundation’s main executive body is headquartered, shall be the supervisory authority for a foundation under its “own management”. A foundation with ”attached management” shall be supervised by the county government where the administrator’s domicile is located, or if a domicile is not established, then where the administrator is headquartered or, if a trading company is the administrator, where the trading company is headquartered.

The national government or the authority appointed by the national government may appoint an authority to be the supervisory authority of a foundation that is different than the one referred to in the first paragraph of this article.

Special rules regarding supervision apply to selected foundations under Articles 10 and 10 a. Act (2001:305)

§ 2 Under this law, the national government or the authority that the national government appoints may issue rules charging fees for administering the supervision over foundations.

The meaning of supervision etc.

§ 3 The supervisory authority shall intervene when there is reason to believe that the foundation’s administration or auditing is not performed in accordance with the deed of the foundation or with the provisions of this law or that a board member or administrator is mismanaging his or her tasks.

The supervisory authority shall give the foundation advice and information. 

§ 4 The supervisory authority may:

1. demand documents or information from the foundation;

2. call and participate in meetings with the foundation’s board or administrator; and

3. if special reasons exist, perform an inspection of the foundation and decide the time and manner of the inspection.

In the cases referred to in the first paragraph, item 3 of this article, the foundation’s board or administrator is obliged to make the foundation’s money, valuable documents and other assets, as well as the account materials and protocols, available for those who execute the inspection.

§ 5 The supervisory authority may:

1. remove a board member from his or her assignment if he or she is not meeting the necessary requirements according to Chapter 2, Article 10 or the Trading Prohibition Act (1986:436), and remove an administrator from its assignment if the administrator is not meeting the necessary requirements according to Chapter 2, Article 19;

1. order one or several board members or the administrator to perform his or her duties;

2. forbid one or several board members or the administrator from executing a decision or, if the decision has already been executed, to instruct one or several board members or the administrator to make a correction if possible.

The supervisory authority also has additional areas of authority according to Chapter 4, Articles 5 and 8 and Chapter 5, Article 4.

An injunction or prohibition according to paragraph 1, items 2 and 3 of this article, may be combined with a fine. If one or several documents have not been submitted to the supervisory authority, then it shall issue fines according to the cases outlined in paragraph 1, item 2. Other cases shall be prosecuted by the county court according to the Act on Fines (1985:206).

§ 6 A public court can dismiss a board member or the administrator when he or she mismanages his or her duty. The dismissal can be for a limited period of time.

The right to a legal defense in dismissal cases is regulated under Chapter 5, Article 4, items 1 and 4.

If the supervisory authority has brought a legal action of dismissal against a board member or the administrator, the supervisory authority may dismiss this person for the period of time until the court has made its final decision or otherwise reached a decision.

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Chapter 10. Registration

General rules for registration

§ 1 A foundation shall be registered if:

1. it is obliged to maintain annual accounting records according to the Bookkeeping Act (1999:1078); or

2. one or several of its founders declare in the deed that the foundation shall register.

The registration authority for a foundation is the county government, which shall also be the supervisory authority for the foundation according to Chapter 9, Article 1, first paragraph.

The registration authority shall maintain a record of foundation registrations according to this law.

The national government or an authority appointed by the national government may issue rules that charge fees for registering foundations.

§ 2 Unless stated to the contrary in Chapter 10, Article 6, second paragraph, the foundation’s board or administrator shall submit the registration:

1. within six months of the foundation’s establishment as referred to in Article 1, first paragraph; or

2. within six months from when the foundation was obliged to begin keeping books according to the Bookkeeping Act (1999:1078).

The submission referred to in the first paragraph shall include the foundation’s address and telephone number. It shall also include the board members’ names, personal identification numbers, home addresses, postal addresses and telephone numbers or the administrator’s name or company name, organization number, postal address and telephone number. If the foundation is administrated under its “own management” then the submission shall state where the board has its domicile, or if its domicile is not determined, where the main administration is headquartered. If the foundation is administrated under “attached management” then the submission shall instead state where the administrator has its domicile, or if a domicile has not been determined, then where the administrator is headquartered or, if the administrator is a trading company, then where the company is headquartered.

A copy of the foundation’s deed shall, if possible, be included with the submission. If the board or the administrator has decided on a name for the foundation, according to Chapter 2, Article 7, then the submission shall state the name of the foundation. Act (1999:1106)

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Special provisions for foundations that intend to perform or are currently performing economic activities

§ 6 Before a foundation can engage in economic activities the board or the administrator shall submit a registration to the foundation record, which shall include:

1. the name under which the economic activities will be performed; and

2. the nature of the economic activities.

If the foundation is not already registered in the foundation record, then the foundation is obliged to register according to Article 2 before it can begin its economic activities.

The foundation may be registered in the foundation record of another county where it performs economic activities.

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