Print DRAFT LAW ON ASSOCIATION AND FOUNDATION (unofficial translation)
PART A. GENERAL PROVISIONS
CHAPTER I. Basic Provisions
Section 1. Concept of Association and Foundation
(1) An association is a voluntary organisation of persons, established in order to achieve the goal set in the articles of association, which is of non-profit making nature.
(2) A foundation is an aggregate of property, specified for the acquisition of a goal set by the founder, which is of non-profit making nature.
Section 2. Legal Status of Association and Foundation
An association and a foundation shall obtain the status of a legal person from the moment it is entered in the Association and Foundation Register.
Section 3. Distribution of Liability of Association and Foundation
(1) An association and a foundation shall be liable for its obligations with its whole property.
(2) An association shall not be liable for the obligations of a member. The founder shall not be liable for the obligations of a foundation.
(3) A member shall not be liable for the obligations of an association. A foundation shall not be liable for the obligations of the founder.
Section 4. Legal Address of an Association and a Foundation
(1) The legal address of an association and a foundation shall be the address which is entered in the Association and Foundation Register. A change of the legal address shall be notified to the Association and Foundation Register.
(2) If information, documents or other correspondence is sent to an association or a foundation by the legal address entered in the Association and Foundation Register, the association or the foundation shall be deemed to have received such documents, information or other correspondence, if the sender proves that the sending has been performed.
Section 5. Name of Association and Foundation
(1) The name of an association and a foundation shall not be contrary to the law and morality.
(2) The name of a foundation shall include the word "foundation" or "fund".
(3) The name shall be distinctly and expressly different from the names of other associations and foundations already registered in, or submitted for registration to the Association and Foundation Register.
(4) The name shall not contain misleading information regarding the goal, type of activity and legal form of the association or the foundation.
(5) An association or a foundation whose rights have been infringed by unlawful use of its name may claim that the infringer discontinue the use of the name and compensate the association or the foundation for the damages inflicted by the unlawful use of its name.
Section 6. The Right of Associations and Foundations to Perform Economic Activity
(1) Associations and foundations have the right to perform economic activity as additional activity
1) for the purpose of maintenance and use of their property; or
2) other economic activity directly related to implementation of the goals of the association and the foundation.
(2) The income of an association and a foundation may be used only for the acquisition of goals set out in the articles of association. Profit gained from the economic activity of an association and a foundation shall not be distributed among the members of the association or the founders of the foundation.
Section 7. Voluntary Work
(1) Associations and foundations have the right to involve persons in voluntary work. Voluntary work shall be work or provision of services performed by a natural person without entering into contractual relationship with the association or the foundation, directed towards acquisition of the goals set out in the articles of association.
(2) A person performing voluntary work may request reimbursement of such expenditures as have arisen in the course of voluntary work, unless otherwise specified in the articles of association of the foundation or the association.
Section 8. Restrictions on the Activities of Associations and Foundations
(1) A foundation shall be prohibited from rendering financial resources, providing guarantees, issuing bills or otherwise financing the founders, members of boards and other institutions (if such have been formed), as well as other persons with similar material interest, particularly spouses, relatives and in-laws, involving kinship to the second degree and affinity to the first degree.
(2) If a person receives remuneration (salary) for his or her activities at an association or a foundation, such remuneration (salary) shall be specified in accordance with the scope of duties of such person, and the financial situation of the association or the foundation.
Section 9. Public Activities
(1) In order to attain the goals set out in the articles of association, associations and foundations have the right to perform public activities that are not in conflict with law, particularly with respect to free spreading of information about their activities, creating their own press publications and other mass media, organising meetings, demonstrations, street processions and meetings in public places, as well as performing other public activities.
(2) Regarding issues related to the goal of the relevant association or foundation, an association and a foundation may apply to State and local government institutions, as well as to the court, and defend the rights and legally protected interests of their members.
Section 10. Prohibition to Form Armed or Military Units
It is prohibited for an association to arm its members or other persons, to organise military training for them or to form military units.
Section 11. Laws Regulating Activities of Other Non-profit Organisations and Foundations
The activities of political parties, religious organisations, trade unions, as well as public foundations (funds) shall be regulated by other laws.
CHAPTER II. Association and Foundation Register
Section 12. Keeping of the Association and Foundation Register
(1) The information regarding associations and foundations shall be entered in the Association and Foundation Register (hereinafter – Association Register).
(2) The Association Register shall be kept by a State institution authorised by law (hereinafter – Association Register institution).
Section 13. Transparency of the Association Register
(1) Everyone shall have the right to become acquainted with the entries of the Association Register and the documents submitted to the Association Register institution.
(2) Everyone shall have the right, after submission of a relevant written request and payment of the State fee, to receive a certificate from the entries of the Association Register, as well as an excerpt or a copy of a document included in the files of the Association Register. At the request of the recipient, the accuracy of an excerpt or a copy shall be confirmed by the signature of an official of the Association Register institution and a seal, indicating the date of the issuance.
(3) At the request of the recipient, an official of the Association Register institution shall issue a certificate confirming that a certain entry in the Association Register has not been altered, or that a certain entry has not been made in the Association Register.
Section 14. Information to Be Entered in the Association Register
The following information shall be entered in the Association Register:
1) the name of the association or the foundation;
2) the legal address of the association or the foundation;
3) the goal of activity of the association or the foundation;
4) the date of the decision on founding and signing of the articles of association;
5) the name, surname, personal identification number, place of residence and position at the association or the foundation of Board members;
6) the name, surname, personal identification number and place of residence of such Board members who are specially authorised, in accordance with the articles of association, to represent the association or the foundation, indicating whether they have the right to represent the association or the foundation separately or jointly;
7) the time period of activity of the association or the foundation, if the association or the foundation is founded for a definite time period;
8) information regarding termination of the activity, insolvency, liquidation and reorganisation of the association or the foundation;
9) information regarding appointment of a liquidator, indicating the name, surname, personal identification number and place of residence of the liquidator;
10) information regarding appointment of an administrator in the case of insolvency, indicating the name, surname, personal identification number and place of residence of the administrator;
11) the date of entry; and
12) other information, if directly provided for by law.
Section 15. Documents to Be Submitted to the Association Register Institution and Their Keeping
(1) Documents that substantiate making of an entry in the Association Register, and other documents prescribed by law shall be submitted to the Association Register institution. The original or a certified copy shall be submitted to the Association Register institution. Public documents issued in other states shall be legalised in accordance with procedures set out in international agreements, and they shall be accompanied by a notarised translation in the Latvian language.
(2) The documents submitted to the Association Register institution shall be kept in the registration file of the relevant association or foundation.
Section 16. Making of Entry in the Association Register
(1) An entry shall be made in the Association Register on the basis of an application of the interested person or a court order. The printed forms of applications shall be approved by the Cabinet.
(2) Signatures of at least two persons on an application, regarding the entry of an association in the Association Register, shall be notarised. In the application regarding the entry of a foundation in the Association Register, the signatures of all persons shall be notarised. A special authorisation for another person to sign such application shall also be notarised
(3) A decision on making an entry in the Association Register, refusal to make an entry, or postponement of making an entry shall be taken by an official of the Association Register institution within three days from the day of receipt of the application. Within an equal time period, an official of the Association Register institution shall take a decision on making an entry in the Association Register on the basis of a court order.
(4) An official of the Association Register institution shall take a decision on postponement of entry in the Association Register if:
1) the articles of association do not comply with the requirements of this Law and other laws; or
2) all documents determined by this Law have not been submitted.
(5) An official of the Association Register institution shall take a decision on refusal of entry in the Association Register if:
1) the articles of association indicate that the goal or activity of the association or the foundation are in conflict with the Constitution, law or international treaties binding on Latvia;
2) the procedures for the founding of the association or the foundation set out in this Law have been violated; or
3) deficiencies in the articles of association or the name of the association or the foundation have not been eliminated within the specified time period after the decision on postponement of entry (Paragraph six of this Section).
(6) A decision on refusal of entry, or on postponement of an entry, in the Association Register shall be substantiated. A decision on postponement of entry shall specify the time period for eliminating the deficiencies.
(7) An official of the Association Register institution shall send the decision referred to in Paragraph three of this Section to the submitter of the application within three days from the moment of taking the decision.
(8) The submitter of an application shall have the right to appeal against the decision of the official of the Association Register institution in accordance with the procedures set out in regulatory enactments.
(9) An entry in the Association Register shall be made on the same day as the decision on making the entry was taken.
Section 17. Announcement and Publicity of Entries of the Association Register
(1) All entries of the Association Register shall be announced in the newspaper Latvijas Vēstnesis. Information regarding the documents of founding, and their amendments, shall be announced in a similar way, indicating the registration date and the number of the Association Register file in which the documents are kept.
(2) Association entries and information for publication shall be submitted by an official of the Association Registration institution within three days from the day of making the entry.
(3) Entries in the Association Register shall be valid with respect to third persons from the day of their announcement.
(4) If the information to be entered in the Association Register has not been entered, the person in whose interests such information was to be entered may not use it against a third person, except if the third person was aware of the information referred to.
Section 18. Registration Certificate
(1) After entry of an association or a foundation in the Association Register, a registration certificate shall be issued to the association or the foundation, signed and confirmed with a seal by an official of the Association Register institution.
(2) The registration certificate shall include:
1) the name;
2) the uniform eleven-digit registration code;
3) the place of registration;
4) the date of registration.
Section 19. Removal of an Association or a Foundation from the Association Register
An association or a foundation shall be removed from the Association Register on the basis of:
1) an application by the liquidator of an association or a foundation;
2) an application by the administrator in an insolvency case;
3) an application of an association or a foundation for making a reorganisation entry; or
4) a court order.
Section 20. State Fees
(1) For making of an entry in the Association Register, a State fee shall be paid, the amount of which shall be specified by the Cabinet.
(2) For issuance of an excerpt from the Association Register and an excerpt or a copy of a document from a file of the Association Register, as well as for issuance of a certificate, a State fee shall be paid in the amount specified by the Cabinet.
Section 21. Time Period for Submission of Information
Information on the basis of which new entries are to be made in the Association Register, as well as the documents prescribed by law, shall be submitted to the Association Register institution within 14 days from the day of taking the relevant decision.
PART B. ASSOCIATIONS
CHAPTER III. Founding of Associations
Section 22. Founders
(1) Founders of an association may be natural or legal persons, as well as legally capable partnerships.
(2) The number of founders shall not be less than two.
Section 23. Decision on Founding of an Association
(1) In order to found an association, the founders shall take a decision on founding the association.
(2) The decision on founding an association shall include:
1) the name of the association;
2) the goals of activity of the association;
3) the name, surname, personal identification number and place of residence of the founders, but for a legal person - the name, registration number and legal address; and
4) the rights and obligations of the founders, if such have been have agreed upon by the founders.
(3) Concurrently with taking a decision on founding of the association, the founders shall approve the statutes of the association (articles of association) and elect (appoint) the Board and other institutions (if such are provided for in the articles of association).
(4) The decision to found an association shall be drawn in writing and shall be signed by all founders of the association. The decision may be signed by a representative of a founder, if the founder has given him or her written authorisation to do so. The authorisation document shall be attached to the decision.
Section 24. Articles of Association
(1) Articles of association shall be drawn in writing.
(2) Articles of association shall include:
1) the name of the association;
2) the goals of activity of the association;
3) the time period of activity of the association (if the association is founded for a definite time period);
4) conditions for admission and withdrawal of members;
5) rights and obligations of members;
6) rights and obligations of territorial units of associations, if such have been formed;
7) procedures for convening meetings of members and taking decisions;
8) the number of Board members of the association, determining the right of the Board members to represent the association separately or jointly; and
9) structure of the economic and financial audit institution, procedures for election, competence, procedures for taking decisions, and time periods for authorisation, or procedures for the appointment of a sworn auditor and time periods for authorisation.
(3) Articles of association may provide for other regulations that are not in conflict with law. If the articles of association are in conflict with law, the provisions of law shall apply.
(4) The articles of association shall be signed by all founders. The application may be signed by a representative of the founders, if the founders have authorised him or her to do so. The document confirming authorisation shall be attached to the decision.
Section 25. Application Regarding Entry of an Association in the Association Register
(1) The founders shall submit an application to the Association Register institution regarding entry of the association in the Association Register. An application shall include the information set out in Section 14, Clauses 1 – 7, of this Law.
(2) An application shall be accompanied by:
1) the decision on founding of the association;
2) the articles of association; and
3) the announcement of the Board regarding the legal address of the association.
(3) The application shall be signed by all the founders. The application may be signed by a representative of the founders, if the founders have authorised him or her to do so. The authorisation document shall be attached to the decision.
Section 26. Liability for the Obligations Having Arisen Prior to Entry of an Association in the Association Register
(1) A founder who has acted, prior to the entry of the association in the Association Register, in the name of the association to be founded, shall be liable for the obligations resulting from such action. In the case of several founders, such founders shall be jointly liable, unless they have agreed otherwise.
(2) The obligations referred to in Paragraph one of this Section shall pass to the association from the moment it is entered in the Association Register, if the founder had the right to act in the name of the association to be founded.
(3) If the founder did not have the right to act in the name of the association, the obligations resulting from such action shall pass to the association, if a meeting of members expressly approves of such obligations.
CHAPTER IV. Members
Section 27. The Minimum Number of Members
(1) An association shall consist of at least two members, unless the articles of association specify a greater number of members. After the association has been entered in the Association Register the founders of the association shall acquire the status of members of the association.
(2) It is an obligation of the Board of an association to submit, at the request of the Association Register institution, written information regarding the number of members of the association, including the number of members entitled to vote.
Section 28. Participation of a Member in the Association
(1) The Board shall take a decision regarding admission of a member to the association, unless the articles of association prescribe that taking of such decision is within the competence of a meeting of members or another institution.
(2) If the Board or another institution within the competence of which is admission of members, except a meeting of members, takes a decision not to admit a member, the person who wishes to become a member has the right to request examination of the issue at a meeting of members.
(3) Obligations for the members shall be determined only in accordance with the procedures set out in the articles of association.
(4) Participation of a member in an association shall not be transferred to third persons or inherited, unless otherwise determined by law. Participation of a member shall terminate upon withdrawal or expulsion from the association, or the death of the member – a natural person, or upon termination of the member – a legal person.
(5) Participation of a member – a legal person – shall be retained, if the legal person is reorganised, by transforming it in accordance with the procedures determined by law. If a legal person is reorganised by joining another subject or by dividing, the participation of such person in the association shall terminate.
(6) If a member – a legal person – is reorganised by dividing, the participation of the dividing legal person in the association shall be continued.
(7) Within the meaning of Paragraphs four, five and six of this Section, a legally capable partnership shall also be deemed a legal person.
Section 29. Withdrawal from an Association
A member may withdraw from an association on the basis of a submission (application) to the Board of the association, unless the articles of association determine other procedures for withdrawal.
Section 30. Expulsion from an Association
(1) A member may be expelled from the association on the basis of a decision taken by the Board or another institution in cases and in accordance with procedures set out in the articles of association. Articles of association may specify that a member may be expelled from the association on the basis of the decision of a meeting of members.
(2) Regardless of the provisions of the articles of association, a member may be expelled from the association for an important reason. An important reason shall be, in any case, a serious violation of the articles of association, or causing of substantial damage to the association.
(3) It is an obligation of the Board of an association to notify the member, in writing, of the decision on his or her expulsion from the association and of substantiation of such decision.
(4) If the decision regarding expulsion of a member is taken by the Board or another institution, the member has the right to request examination of the issue at a meeting of members.
Section 31. Consequences of Termination of Participation of a Member
(1) If participation of a member in an association terminates, the membership fee provided for in the articles of association shall not be repaid to him or her.
(2) A person whose participation in the association has terminated does not have the right to the property of the association.
CHAPTER V. Organisational Structure of an Association
Section 32. Administrative Bodies of Associations
(1) Administrative bodies of associations shall be the meeting of members and the Board.
(2) Articles of association may also provide for formation of other administrative bodies, specifying the procedures for their formation and their scope of competence.
Section 33. Meeting of Members
(1) A meeting of members shall be the highest administrative body of the association.
(2) All members of an association have the right to participate in meetings of members, unless otherwise specified by law. A member may participate in the meetings of members in person or through a representative. Authorisation to participate and vote in meetings of members shall be issued in writing.
Section 34. Competence of a Meeting of Members
(1) The competence of a member of meetings shall include:
1) making amendments to the articles of association;
2) election and dismissal of members of the Board, audit institutions and other institutions specified by the articles of association, unless otherwise determined by the articles of association;
3) taking a decision on raising a claim against a member of the Board or another institution, the founder or a member, and on authorising of a representative of the association for the court proceedings;
4) taking decisions on entering into, or confirming of, transactions between the association and a member of the Board or another institution, and on authorising of a representative of the association for entering into such transaction;
5) taking decisions on termination, continuation or reorganisation of the activity of the association; and
6) other issues that are within the scope of competence of the meeting of members in accordance with law or the articles of association.
(2) The meeting of members shall have the right to take also such decisions as are within the competence of the Board and other institutions specified in the articles of association, unless otherwise determined in the articles of association.
Section 35. Convening of a Meeting of Members
(1) The Board shall convene a meeting of members in accordance with the procedures set out in law or in the articles of association, or in cases determined in the articles of associations, or if the convening of a meeting is in necessary for the association.
(2) The Board shall convene a meeting of members immediately (without unfounded delay), if it is requested, in writing, by at least one tenth of the members and if the articles of association do not specify a smaller number of members.
(3) If the Board does not convene a meeting of members on the basis of Paragraph two of this Section, the members who request convening of a meeting may convene a meeting of members independently, in compliance with the determined procedures for convening of a meeting.
(4) The Board shall make an announcement of convening a meeting of members not later than fourteen days prior to the convening of the meeting, unless the articles of association specify a longer time period.
Section 36. Procedure of a Meeting of Members
(1) A meeting of members shall have the right to take decisions if more than half of the members participate and if the articles of association do not specify a larger quorum.
(2) If a meeting of members does not have the right to take decisions in accordance with Paragraph one of this Section, the Board shall convene, not later than after three weeks, a new meeting of members with the same agenda. The convened meeting of members shall have the right to take decisions regardless of the number of members, but only if at least two members participate in the meeting of members.
(3) If, upon convening of a meeting, provisions of law or the articles of association have been violated, the meeting of members shall not have the right to take decisions, except in cases when all members participate in the meeting of members.
(4) A meeting of members shall be chaired by the chairperson of the Board, if the members do not elect another head of the meeting. Minutes shall be taken of a meeting of members. The minutes shall be signed by the chairperson of the Board and the person who recorded the minutes.
Section 37. Decisions of a Meeting of Members
(1) A decision of a meeting of members shall be regarded as adopted if more than half of the members present have voted in favour of it, unless the articles of association specify a greater number of votes.
(2) Each member shall have one vote in a meeting of members, unless otherwise specified in the articles of association. A member shall not be entitled to vote, if the meeting of members decides on entering into transaction with this member, or on raising or terminating a claim against this member.
(3) In order to alter or terminate such rights of a member as differ from the rights of other members, or to assign obligations to a member that differ from the obligations of other members, consent of such member shall be necessary.
Section 38. Taking Decision on Making Amendments to Articles of Association
(1) A decision on making amendments to the articles of association shall be taken if at least two thirds of the participating members have voted in favour of it, unless the articles of association specify a greater majority of votes.
(2) Amendments to the articles of association shall become effective at the moment of their adoption, unless the articles of association or a decision specify otherwise.
(3) Amendments to the articles of association shall be submitted to the Association Register institution, attaching an excerpt from the minutes of the meeting of members, or an excerpt from the voting minutes, with a decision regarding amendments to the articles of association and a complete revised text of the articles of association.
Section 39. Invalidation of a Decision of a Meeting of Members
(1) On the basis of an application of a member of an association or a Board member, the court may invalidate a decision of the meeting of members, if such decision, or the procedures for its adoption, is in conflict with law or the articles of association, or substantial violations have been committed in the convening of the meeting or taking of the decision. Such claim may be made within three months from the day when the member of the Board member learned, or ought to have learned, about the decision of the meeting of members, but not later than a year from the day of taking the decision.
(2) In accordance with the provisions of Paragraph one of this Section, the court may repeal the decisions of other institutions of the association.
Section 40. Meeting of Representatives
(1) The articles of association may determine that the duties of a meeting of members shall be performed, to the extent (amount) specified by the articles of association, by a meeting of representatives elected from among the total number of members. The number of representatives and the procedures for their election shall be specified in the articles of association. All members of an association shall have the right to participate in the election of representatives.
(2) The provisions of this Law regarding a meeting of members shall apply with respect to a meeting of representatives, unless otherwise provided by law or the articles of association.
Section 41. The Board
(1) The Board shall be an executive body of the association that guides and represents the association.
(2) The Board may consist of one or more members. The articles of association may specify the minimum number of the Board members. A meeting of members shall elect the chairperson of the Board from among the Board members, unless otherwise specified in the articles of association.
(3) The Board members must be natural persons with the capacity to act.
(4) Not less than half of the Board members must be persons with a permanent place of residence in Latvia.
Section 42. Competence of the Board
(1) The Board shall supervise and manage the matters of the association. It shall manage the property of the association and use its resources in compliance with law, the articles of association, and decisions of meetings of members or other institutions.
(2) The Board shall organise accounting records of the association in compliance with the provisions of the Law, and perform other duties within the competence specified in the articles of association.
Section 43. Representation Rights of the Board
(1) All Board members shall have representation rights. The Board members shall represent the association jointly, unless otherwise determined in the articles of association.
(2) Representation rights of the Board with respect to third persons may not be restricted. The rights of the Board members determined in the articles of association to represent the association jointly or separately shall not be regarded as a restriction of representation rights of the Board within the meaning of this Section.
(3) In respect of the association, the Board shall comply with representation restrictions determined in the articles of association and the decisions of a meeting of members and other institutions specified in the articles of association.
Section 44. Appointment, Removal and Right to Leave the Position of Board Members
(1) The Board members shall be appointed by a meeting of members, unless otherwise determined in the articles of association.
(2) A Board member may be removed at any time by the institution that has appointed the Board member.
(3) The articles of association may provide that a Board member may be removed only for an important reason. Such reason shall be, in any case, failure to perform his or her duties, or inadequate performance of his or her duties, lack of capability to manage the association, harming the interests of the association, as well as loss of loyalty.
(4) A Board member shall not have the right to transfer his or her powers to third persons.
(5) A Board member may submit, at any time, a notification to the association regarding leaving the position of the Board member.
(6) A notification of the appointment of a Board member, or termination of his or her powers, shall be submitted for entry in the Association Register, attaching to the notification an excerpt from the minutes of the meeting of members or another institution specified in the articles of association with a decision on the election or removal of Board members.
Section 45. Taking of Board Decisions
(1) The Board shall be entitled to take decisions if more than half of the Board members participate in the Board meetings, and the articles of association do not specify a greater quorum.
(2) If the Board consists of several members, the decision shall be taken by simple majority of votes of the participating Board members, unless the articles of association specify a greater majority.
(3) Regardless of the provisions of Paragraph one and two of this Section, the Board is entitled to take decisions without convening a meeting, if all the Board members vote, in writing, in favour of the decision and if the articles of association do not provide otherwise.
Section 46. Remuneration and Reimbursement of Expenditures
(1) A Board member shall not have the right to receive remuneration for the performance of his or her duties, unless the articles of association provide otherwise.
(2) If the articles of association provide for the right of a Board member to receive remuneration, the amount of remuneration and the procedures for payment shall be determined by a decision of a meeting of members, unless the articles of association provide otherwise.
(3) A Board member may request reimbursement of expenditures caused by the performance of his or her duties, unless the articles of association provide otherwise.
Section 47. Other Institutions of an Association
The articles of association may provide that, apart from the Board, other institution is to be formed for performance of special legal actions with the procedures for appointment (election) and the competence specified in the articles of association.
Section 48. Liability of Members of the Board and Other Institutions
(1) Members of the Board and other institutions shall be jointly liable for damages caused to the association as a result of their unlawful activities.
(2) An association may make a claim against a member of the Board or another institution within five years from the day of the violation of rights, or from the day when committing of the violation of rights became known.
Section 49. Units of an Association
(1) An association may have its territorial units, if so provided for in the articles of association. Territorial units shall not be legal persons.
(2) Institutions of units and their competence shall be specified in the articles of association. If a unit of an association has its own meeting of members and Board, the provisions of Sections 32 - 37, 39 - 42, 44 - 46 and 48 of this Law shall apply.
Section 50. The Right to Control a Meeting of Members
(1) The Board shall provide the members of the association with the necessary information with respect to the management of the association, and shall prepare a relevant report at their request, unless otherwise determined in the articles of association.
(2) A meeting of members shall control the activities of other administrative institutions. For such purpose the meeting of members shall have the right to appoint internal audit of the association.
(3) It is an obligation of the Board members to provide the auditor with all the necessary information and documents that are necessary for conducting an audit.
(4) The auditor shall prepare an opinion regarding the results of the audit, which shall be submitted to the meeting of members.
Section 51. Annual Account of an Association
(1) At the end of the accounting year, the Board shall prepare an annual account of the association. The annual account shall be prepared in accordance with the Law on Accounting and other regulatory enactments.
(2) The annual account of an association shall be examined by the audit institution of the economic and financial activity or a sworn auditor.
(3) Each year, not later than by 31 March, an association shall submit the annual account to the State Revenue Service and the Association Register institution, in accordance with the procedures set out in regulatory enactments.
CHAPTER VI. Termination of Operation and Liquidation of an Association
Section 52. Basis for Termination of Operation of an Association
Operation of an association shall be terminated:
1) upon a decision of a member of meetings;
2) upon initiation of bankruptcy proceedings of the association;
3) if the number of members is reduced to one, or to another number specified in the articles of association;
4) upon expiration of the time period specified in the articles of association (if the association was founded for a definite time period);
5) by a court order; or
6) on other basis determined in law or the articles of association.
Section 53. Termination of Operation of an Association upon a Decision of a Meeting of Members
A decision of a meeting of members regarding termination of the association shall be adopted if two thirds of the participating members vote in favour of it, unless a greater majority of votes is specified in the articles of association.
Section 54. Termination of Operation of an Association upon Initiation of Bankruptcy Proceedings
The procedures by which operation of an association is terminated in the case of bankruptcy proceedings shall be regulated by the Law on Insolvency.
Section 55. Termination of Operation of an Association by a Court Order
(1) Operation of an association may be terminated on the basis of a court order, if:
1) the goal of activity of the association is in conflict with law or morality;
2) the activity of the association does not conform to the goals set out in the articles of association;
3) economic activity of a profit-making nature has become the basic activity of the association;
4) the Board has not submitted an application regarding termination of operation of the association in accordance with law;
5) the association has not submitted an annual account in accordance with the provisions of Section 51 of this Law; or
6) in other cases provided for by law.
(2) A claim to the court may be raised by the Prosecutor General or the State Revenue Service. A claim may be raised only if the association has not eliminated the violations indicated within three months from the receipt of a written notification.
(3) Until the moment when a court order is taken regarding termination of operation of an association, the court may specify a time period within which the association must eliminate the deficiencies that are the basis for termination of its operation.
Section 56. Suspension of Operation of Association by Court Proceedings
(1) The court may suspend operation of an association for a time up to six months on the basis of an application by the Prosecutor General or the State Revenue Service, if the association:
1) continues illegal activity after receipt of a warning to discontinue such activity; or
2) performs repeated violation of law within a year from the day when it received a warning to discontinue illegal activities.
(2) When the court order comes into legal effect it shall be sent to the Association Register institution.
(3) If the court suspends operation of an association, the association shall discontinue its public activity within the time period specified in the court order for suspension of operation.
Section 57. Liquidation of an Association
(1) In the case of termination of an association, its liquidation shall take place, unless otherwise provided by law.
(2) The words "to be liquidated" shall be added to the name of the association.
Section 58. Liquidators of an Association
(1) Liquidation shall be performed by Board members, unless otherwise specified in the articles of association or the court order.
(2) If the liquidator is appointed by a meeting of members, it shall specify the amount of remuneration and the procedures for payment.
(3) If operation of an association is terminated on the basis of a court order the liquidator shall be appointed and the amount and procedures of his or her remuneration shall be specified by court.
(4) A liquidator may be a natural or legal person with the capacity to act, having a permanent place of residence in Latvia.
Section 59. Application Regarding Termination of Operation of an Association and its Liquidation
(1) If the operation of an association is terminated due to the circumstances referred to in Section 52, Clauses 1, 3 and 4 of this Law, the Board shall submit an application to the Association Register institution regarding termination of operation of an association. An application shall be accompanied by:
1) excerpt from the minutes of the meeting of members with the decision on termination of operation of the association, if the operation of the association was terminated by a decision of a meeting of members; and
2) the name, surname, personal identity number and place of residence of the liquidator.
(2) If operation of an association is terminated on the basis of a court order, the court shall send the relevant order for making entry in the Association Register. The liquidator shall submit to the Association Register institution, within three days after coming into force of the order, the information and documents indicated in Paragraph one, Clause 2, of this Section.
(3) If liquidation is performed by Board members, such fact shall be indicated in the application or court order, and the information and documents referred to in Paragraph one, Clause 2, of this Section need not be attached.
Section 60. Removal of a Liquidator
(1) A liquidator may be removed upon a decision of a meeting of members, concurrently appointing a new liquidator.
(2) A liquidator may be removed by a court order, on the basis of an application by a member or a third party, if there are important reasons for such action.
(3) A liquidator appointed by court may be removed only by a court order, on the basis of an application by a member or a third party, if there are important reasons for such action, concurrently appointing a new liquidator.
(4) The decision on removal of a liquidator shall be submitted to the Association Register institution by the new liquidator within three months from the day of taking the decision.
Section 61. Rights and Obligations of a Liquidator
(1) A liquidator shall have all the rights and obligations of the Board and other institutions (if such are provided for in the articles of association), except of the meeting of members, which are not in conflict with the goal of liquidation.
(2) A liquidator shall collect debts, sell the property of the association, satisfy the claims of creditors and distribute such property of the association as remains after the satisfaction of the claims of creditors, among persons who are entitled to this property.
(3) A liquidator may enter only into such transactions, which are necessary for the liquidation of the association.
Section 62. Representation Rights of a Liquidator
(1) If liquidation of an association is performed by several liquidators, they shall have the right to represent the association only jointly, unless otherwise provided by the articles of association, the decisions of a meeting of members, or the court order. Such provision is valid with respect to third persons, if it is entered in the Association Register.
(2) Liquidators may authorise one or several persons from among themselves for the performance of separate lawful actions.
Section 63. Submission of Insolvency Applications
If it is established during the liquidation that the property of the association to be liquidated is not sufficient to satisfy all substantiated claims of creditors, the liquidator shall have an obligation to submit an insolvency application in accordance with the procedures determined by law.
Section 64. Notification of Creditors and Submission of Claims
(1) The Association Register institution shall make an announcement regarding termination of operation of the association and initiation of liquidation in accordance with the procedures set out in Section 17 of this Law.
(2) The liquidator shall send a notification of initiation of liquidation to all known creditors of the association.
(3) In the announcement and notification referred to in Paragraphs one and two of this Section, creditors of the association shall be invited to submit their claims within three months from the day of publication of the announcement, unless a longer time period for submission of claims has been specified in the decision of the meeting of members or in the court order regarding termination of operation of the association.
(4) The creditors shall submit their claims against the association within the specified term. A claim shall include the content, substantiation and amount of the claim, and it shall be accompanied by documents substantiating the claim.
Section 65. Initial Financial Account of Liquidation
At the end of the time period for submission of creditors’ claims the liquidator shall prepare a financial account of the beginning of liquidation.
Section 66. Protection of Creditors
(1) If a known creditor does not submit his or her claim, does not accept the performance, or an obligation is not yet to be fulfilled, the amounts due to him or her shall be deposited by the court.
(2) In case of a disputable claim of a creditor, the property of the association may be distributed only if collateral security is provided to the relevant creditor.
Section 67. Closing Financial Account of an Association and Distribution of Property
(1) After satisfaction of the claims of creditors, or depositing of the money due to them, and reimbursement of the liquidation expenditures, the liquidator shall prepare a closing financial account in accordance with the regulatory enactments in force and perform distribution of the remaining property among the persons who are entitled to such property in compliance with the articles of association or law.
(2) The articles of association may determine that a meeting of members shall specify, prior to distribution of the property of the association, the persons who are entitled to such property, unless otherwise determined by law. Such persons may not be the founders, members, members of the Board or other institutions of the association.
(3) If the articles of association or decisions of a meeting of members do not provide for persons which have the right to the remaining property, the property shall be distributed in equal shares among the persons who were members at the moment of termination of operation of the association, unless otherwise determined by law.
(4) If the property of an association cannot be distributed in accordance with the procedures set out in Paragraphs one, two and three of this Section, the property of the association shall be transferred to the State.
(5) If operation of an association is terminated in accordance with the provisions of Section 55, Paragraph one, of this Law, the property of the association that remains after satisfaction of the claims of creditors, shall be transferred to the State.
(6) The property of an association may be distributed not earlier than six months after the day when the announcement regarding termination of operation of the association was published. The court may allow to perform distribution of the remaining property prior to the specified term, if no damages are thereby inflicted upon the creditors.
Section 68. Keeping of Documents of an Association
The liquidator shall perform the necessary actions in order to arrange the documents of the association and transfer them to State archives. Expenditures related to the arrangement of documents and their transfer to archives shall be covered from the property of the association to be liquidated.
Section 69. Continuation of Operation of an Association
(1) If termination of operation of an association is provided for in the articles of association, or if the decision regarding termination of operation of the association is taken by a meeting of members, the members may take a decision, prior to beginning of distribution of the property, on continuation of operation or reorganisation of the association. The decision shall be regarded as taken if more than two thirds of the participating members vote in favour of it.
(2) Taking a decision on continuation of operation of the association, the Board and other institutions provided for in the articles of association shall be concurrently formed.
(3) The liquidator shall submit an application to the Association Register institution regarding continuation of operation of the association. A decision on continuation of operation shall become effective after its entry in the Association Register.
Section 70. Removal from the Association Register
(1) After distribution of the remaining property of the association, the liquidator shall submit an application to the Association Register institution regarding completion of the liquidation. The application shall be accompanied by a closing financial account.
(2) The liquidator shall confirm in the application that:
1) the closing financial account has not been disputed in court or that such claim has been rejected;
2) all claims of creditors have been satisfied, or the money due to them has been deposited; and
3) the documents of the association have been transferred for keeping in the State archives.
Section 71. Liability of Liquidators
(1) A liquidator shall be liable for damages caused through his or her fault.
(2) If there are several liquidators, they shall be held jointly liable for damages caused through their fault.
CHAPTER VII. Reorganisation of Associations
Section 72. Reorganisation
(1) An association may be reorganised by joining or dividing.
(2) Only associations may participate in the reorganisation process, unless otherwise provided by law.
(3) Articles of association may provide that reorganisation shall be or shall not be permitted upon certain preconditions.
Section 73. Joining
(1) An association may be joined to another association by accession or merging.
(2) Accession is a process whereby an association (acquired association) transfers all its property to another association (acquiring company).
(3) Merging is a process in which two or more associations (acquired associations) transfer all their property to a newly founded association (acquiring association).
(4) In case of joining, the acquired association shall cease to exist without a liquidation process.
(5) In case of joining, the rights and obligations of the acquired association shall pass to the acquiring association. The members of the acquired association shall become members of the acquiring association.
(6) To a newly founded association the provisions of this Law regarding founding of an association shall apply, insofar as this Chapter does not specify otherwise. The acquired associations shall be regarded as the founders of the newly founded association.
Section 74. Dividing
(1) Dividing is a process in which an association (dividing association) transfers its property to another association or several other associations (acquiring associations) by way of splitting or separation.
(2) In case of splitting, the dividing association shall transfer all its property to two or more acquiring associations and shall cease to exist without a liquidation process.
(3) In case of splitting, the members of the dividing association shall become members of the acquiring associations in compliance with a reorganisation agreement or a decision on reorganisation.
(4) In case of separation, the dividing association shall transfer part of its property to one acquiring association or several such associations In case of separation, the dividing association shall continue to exist.
(5) In case of separation, all members of the dividing association, or part of them, shall become members of the acquiring associations in compliance with the decision on reorganisation or a reorganisation agreement.
(6) The acquiring association may be an existing association or a newly founded association. To a newly founded association the provisions of this Law regarding founding of an association shall apply, insofar as this chapter does not specify otherwise.
Section 75. Reorganisation Agreement
(1) If two or more already existing associations participate in the reorganisation process, they shall enter into a reorganisation agreement. The agreement shall be entered into in writing.
(2) The agreement shall indicate:
1) the names, legal addresses and registration numbers of the associations involved in reorganisation;
2) the rights which the acquiring association grants to the members of the acquired or dividing association;
3) the consequences of reorganisation for the employees of the associations involved in the reorganisation process; and
4) in case of division – a list of the property to be transferred to each acquiring association.
(3) In case of merging of associations, the reorganisation agreement shall indicate, in addition to the information referred to in Paragraph two of this Section, the name and legal address of the acquiring (newly founded) association.
(4) If no other existing association is involved in the process of division, the dividing association shall take a decision regarding division, which shall substitute for the agreement referred to in this Section. The decision regarding division shall indicate, in addition to the information referred to in Paragraph two of this Section, the name and legal address of the acquiring association and distribution of property of the dividing association. The act of property distribution may be attached to the decision as a separate document.
Section 76. Decision on Reorganisation
(1) The draft agreement shall be examined and a decision or reorganisation shall be taken by a meeting of members of each association involved in the reorganisation process.
(2) Not less than a month prior to the date of the planned meeting of members on approval of the agreement, all members of the association shall be given an opportunity to become acquainted with the draft agreement at the legal address of the association.
(3) A decision on reorganisation shall be regarded as taken if more than two thirds of the participating members vote in favour of it, unless the articles of association provide for a greater majority.
(4) A decision on reorganisation shall be drawn as a separate document.
(5) If the acquiring association is a newly founded association, a meeting of members of each association involved in the reorganisation process shall examine the draft articles of association of the newly founded association. Concurrently with taking of a decision on reorganisation, the articles of association of the newly founded association shall be approved.
(6) On the basis of the decision on reorganisation the relevant association shall enter into agreement.
Section 77. Protection of Interests of Creditors
(1) Within fifteen days from the day when the decision on reorganisation was taken, each association involved in the reorganisation process shall notify of the re-organisation, in writing, all known creditors who had rights of claim against the association until taking of the decision on reorganisation.
(2) It is an obligation of each association involved in the reorganisation process to publish an announcement in the newspaper Latvijas Vēstnesis that a decision on reorganisation has been taken. The notice shall include:
1) the name, registration number and legal address of the association;
2) the names, registration numbers and legal addresses of other association involved in reorganisation;
3) the fact that a decision on reorganisation has been taken, indicating its type; and
4) the place and time period for submission of creditors’ claims; the time period shall be not less than one month from the day of publication of the announcement.
(3) The acquired or the dividing association shall secure a creditor’s claim if the creditor requests it and if it has been submitted within the time period specified in the announcement referred to in Paragraph two of this Section. A creditor of an acquiring association may request security of his or her claim only if it can be proved that the joining threatens the satisfaction of his or her claim.
(4) A secured creditor may request security only to the extent of the unsecured part of the debt.
Section 78. Disputing of Decisions on Reorganisation
(1) On the basis of a claim of a member of an association involved in the reorganisation process, or of a claim of a Board member, the court may recognise a decision on reorganisation as invalid, if it has been taken by violating law or articles of association, and such violations cannot be eliminated, or they are not eliminated within the time period specified by the court.
(2) The time period for making a claim shall be three months from the day of publication of the announcement referred to in Section 77 of this Law.
(3) An association whose decision of the meeting of members on reorganisation is recognised as invalid has an obligation to publish an announcement in the newspaper Latvijas Vēstnesis within fifteen days from the day of coming into force of the court order.
(4) Invalidation of a decision on reorganisation shall not affect the obligations which an association has undertaken during the reorganisation process with respect to third persons.
Section 79. Application to the Association Register Institution
(1) Each association involved in the process of reorganisation shall submit to the Association Register institution, not earlier than three months from the day of publication of the announcement, an application for making an entry in the Association Register regarding reorganisation. An application shall be accompanied by:
1) the reorganisation agreement or an appropriately certified copy;
2) an excerpt from the minutes and the decision on reorganisation;
3) the articles of association of the acquiring association (if a new association is formed as a result of reorganisation); and
4) a list of Board members of the acquiring association (if a new association is formed as a result of reorganisation).
(2) The association shall state in the application that the claims of such creditors who have submitted their claims within the specified term have been secured or satisfied, and that the decision on reorganisation has not been disputed in court, or the relevant claim has not been satisfied.
(3) In case of merging of associations, the acquired associations shall submit to the Association Register institution a joint application regarding making of an entry of the newly founded association in the Association Register.
Section 80. Name of the Acquiring Association
The acquiring association may continue its activity, using the name of the acquired association.
Section 81. Entry Regarding Reorganisation in the Association Register
(1) An entry regarding the acquired association shall be made in the Association Register after entries regarding all the acquiring associations have been made.
(2) After making an entry regarding acquisition of an association, the file of the acquired association shall be attached to the file of the acquiring association, and the acquired association shall be removed from the Association Register.
(3) After making of an entry regarding reorganisation of a dividing association, the files of acquiring association shall be supplemented by relevant excerpts from the file of the dividing association, and in cases when division takes place by splitting, the dividing association shall be removed from the Association Register.
Section 82. Legal Meaning of an Association Register Entry Regarding Reorganisation
(1) Reorganisation shall be regarded as effective from the moment when entries have been made in the Association Register regarding all the associations involved in the reorganisation process, including newly founded associations.
(2) From the moment when reorganisation is regarded as effective:
1) the property of the acquired association shall be considered as transferred to the ownership of the acquiring association; and
2) the property of the dividing association shall be considered as transferred to the ownership of the acquiring associations in accordance with the agreement.
(3) Upon removal of an association from the Association Register such association shall be regarded as liquidated.
Section 83. Liability of Associations Involved in the Reorganisation Process
(1) An acquiring association shall be liable for all the obligations of the acquired association.
(2) All the associations involved in the reorganisation process, including newly founded associations, shall be jointly liable for the obligations of a dividing association, which have arisen prior to the moment when the reorganisation became effective. In the mutual relations of joint debtors, only such person shall be regarded obliged, whose obligations are provided in the agreement.
(3) If the obligations of an association involved in division are not specified in the agreement, it shall be jointly liable, together with other associations involved in the division, for the obligations of the dividing association, which have arisen prior to the moment when the reorganisation became effective and whose term of fulfillment sets in within five years from the moment when the reorganisation became effective.
Section 84. Liability of Board Members
(1) Board members of the associations involved in reorganisation shall be jointly liable for damages that have been inflicted upon the association during the reorganisation process through their fault.
(2) The claim referred to in Paragraph one this Section shall be subject to a limitation period of five years from the moment when reorganisation became effective.
PART C. FOUNDATIONS
CHAPTER VIII. Founding of a Foundation
Section 85. Founders
(1) A foundation may be founded by one or more founders.
(2) If a foundation has several founders, they shall exercise their founders’ rights only jointly.
(3) Persons who have contributed their property to a foundation after it has been entered in the Association register shall not be regarded as founders.
(4) The status of a founder shall not be inherited and cannot be transferred to third persons.
Section 86. Basis of Founding
A foundation shall be founded on the basis of a person’s decision on founding of a foundation, or on the basis of a testament.
Section 87. Decision on Founding of a Foundation
A decision on founding of a foundation shall be subject to the provisions of Section 23 of this Law.
Section 88. Founding of a Testamentary Foundation
(1) When founding a foundation for generally beneficial and charitable purposes on the basis of a testament (testamentary foundation), the provisions of the Civil Law shall apply, insofar as this Law does not specify otherwise.
(2) If the testament does not contain the information referred to in Sections 23 of this Law, the articles of association have not been prepared or Board members have not been elected, the executor, an heir or a trustee (Section 496 of the Civil Law) shall perform the relevant actions (preparation of articles of association, appointment of Board members). When performing the actions referred to in this Section, the executor or the trustee shall comply, as much as possible, with the wishes of the testator.
(3) Until appointment of Board members, the executor, the heir or the trustee shall exercise the rights of a founder, manage the property transferred to the foundation to be founded, as well as perform other actions prescribed by law.
(4) The powers of the executor, the heir and the trustee shall terminate on the day when the foundation is entered in the Association Register.
Section 89. Articles of Association of a Foundation
(1) The articles of association of a foundation shall provide:
1) the name of the foundation;
2) the goals of activity of the foundation;
3) procedures for transfer of property to the foundation;
4) procedures for the use of resources of the foundation;
5) term of operation of the foundation, if the foundation is founded for a definite time period;
6) procedures for distribution of the property of the foundation in case of liquidation;
7) procedures for appointment and release of Board members and time periods for their activity;
8) procedures for appointment and release of members of other administrative bodies (if such are provided for) and time periods for their activity;
9) structure of the economic and financial audit institution, procedures for its election, competence, procedures for taking decisions and term of powers, or procedures for appointment of a sworn auditor and term or powers; and
10) procedures for making amendments to the articles of association.
(2) Articles of association may prescribe other provisions that are not in conflict with law. If the provisions of the articles of association are in conflict with law, the provisions of the law shall apply.
Section 90. Beneficiaries
The articles of association may specify beneficiaries. In cases of dispute, beneficiary shall be a person to whom money can be paid from the property of the foundation in compliance with the articles of association of the foundation.
Section 91. Application Regarding Making of Entry in the Association Register
(1) The founder shall submit to the Association Register institution an application regarding making of an entry in the Association Register. An application shall include the information referred to in Section 14, Clauses 1 – 7, of this Law.
(2) An application shall be signed by the founder, but upon founding of a testamentary foundation – the executor, an heir or a trustee.
(3) An application shall be accompanied by:
1) the decision on founding of the foundation;
2) the articles of association;
3) the notification of the Board regarding the legal address; and
4) a written consent of each Board member to act as a Board member.
(4) When founding a testamentary foundation, instead of the decision on founding, a copy of an adequately certified testament shall be attached, as well as documents attesting to the powers of the trustee (Section 496 of the Civil Law).
CHAPTER IX. Organisational Structure of a Foundation
Section 92. Administrative Bodies of Foundations
(1) The administrative body of a foundation shall be the Board.
(2) Articles of association may also provide for formation of other administrative bodies, determining the procedures for their formation and their competence, as well as assigning of administrative competence to other subjects or their institutions (hereinafter – other administrative bodies).
Section 93. The Board
(1) The provisions of this Law regarding the Board of an association shall apply to the Board of a foundation, insofar as this Chapter does not specify otherwise.
(2) The articles of association may determine other restrictions with respect to Board members. The persons referred to in Paragraph two, Section 88, of this Law, may not be Board members, unless otherwise specified in the testament.
(3) The Board shall consist of at least three Board members. Unless otherwise specified in the articles of association, the Board members shall elect the chairperson of the Board from among themselves, who shall organise the work of the Board.
(4) The Board shall comply, in its activity, with the goals of the foundation determined in the decision of the founder and the articles of association, the wish of the testator, instructions or other administrative bodies (if the articles of association provide for giving such instructions), as well as the competence determined by law and the articles of association.
Section 94. Appointment, Removal, and the Right to Leave the Position of the Board members
(1) If a foundation is founded during the lifetime of the founder, Board members shall be appointed by the founder, but in case of a testamentary foundation they shall be appointed by the persons referred to in Section 88, Paragraph two, of this Law, except in case when Board members are appointed by a testament.
(2) A decision regarding further changes in the composition of the Board, as well as removal of the Board members, shall be taken in accordance with the procedures set out in the articles of association.
(3) A Board member may submit a notice to the foundation regarding leaving the position of the Board member at any time.
(4) Appointment of a Board member or termination of his or her powers shall be submitted for entry in the Association Register. If a decision on appointment of a Board member is taken, in accordance with the articles of association, by other administrative body, an application shall be accompanied by the relevant decision of the administrative body, as well as a written consent of the Board member to act as a Board member. If a Board member leaves the position in accordance with Paragraph three of this Section, an application shall be accompanied by the relevant notification of the Board member.
Section 95. Remuneration and Reimbursement of Expenditures
(1) A Board member shall not have the right to receive remuneration, unless otherwise determined in the articles of association.
(2) If the articles of association provide for the right of a Board member to receive remuneration, the amount of remuneration and the payment procedures shall be determined by the person or the institution that has the right to appoint Board members in accordance with the articles of association.
(3) A Board member may request reimbursement of such expenditures as have arisen in the course of performing his or her duties, unless otherwise determined in the articles of association.
Section 96. Taking Decisions of the Board
(1) The Board in entitled to take decisions if more than one half of the Board members participate in its meeting.
(2) The Board shall take decisions by simple majority of votes of the participating members, unless the articles of association specify a greater majority of votes.
(3) Minutes shall be taken of Board meetings. The minutes shall include:
1) the name of the foundation;
2) the place and time of the Board meeting;
3) the participants of the meeting;
4) the agenda of the meeting;
5) the procedure of discussion of the issues of the agenda;
6) the results of the voting, indicating the vote of each Board member for each decision with an entry "for" or "against"; and
7) the decisions taken.
(4) If a Board member does not agree to a Board decision and votes against it, his or her dissenting opinion shall be entered, at his or her request, in the minutes of the Board meeting.
(5) Minutes of Board meetings shall be signed by the chairperson of the Board and the person who recorded the minutes.
Section 97. Other Administrative Bodies
(1) If the articles of association provide for the formation of other administrative body, or assigning of administrative competence to other subject or its institution, such subject or institution may take decisions only on questions that are not within the scope of the competence of the Board in accordance with law or the articles of association.
(2) With respect to collegiate administrative body, the provisions of Section 96 of this Law shall apply.
Section 98. Restrictions on Board Members and Members of Other Administrative Bodies
(1) If the interests of a foundation are in conflict with the interests of a Board member of a member of other administrative body, of his or her spouse or in-law, including kinship relations to the second degree or affinity relations to the first degree, the question shall be examined at the meeting of the administrative body, in which the interested member of the administrative body shall not have the right to participate in the discussion of the relevant question, and shall not have the right to vote, and it shall be recorded in the minutes of the meeting of the administrative body. It is an obligation of the member of the administrative body to declare such interests prior to the beginning of the relevant meeting. It is an obligation of the member of the administrative body to declare such interests to the administrative body also after the meeting of the administrative body.
(2) A member of an administrative body who has violated the provisions of Paragraph one of this Section shall have an obligation to compensate for the damages caused to the foundation.
CHAPTER X. Revocation and Amending of a Decision on Founding and Articles of Association
Section 99. Revocation or Amending of a Decision on Foundation or Articles of Association Prior to Making an Entry in the Association Register
(1) The founder may revoke or amend a decision on founding or articles of association.
(2) In case of the death of a founder – a natural person, or termination of a founder – a legal person, the other founders shall not have the right to revoke a decision on founding, unless the decision of founding, or other agreement of the founders, does not provide otherwise.
Section 100. Amending of Articles of Association after Making an Entry in the Association Register
(1) After making an entry in the Association Register, amendments to the articles of association may be made only by the Board. The Board may make amendments to the articles of association only in cases provided in the articles of association, or if the necessity to make amendments is based on changes of such circumstances as have determined the goals of activity of the foundation.
(2) The articles of association may provide that the consent of other administrative body is necessary to make amendments to the articles of association.
(3) Amendments to the articles of association shall come into force at the moment of their adoption, unless otherwise specified by the decision.
(4) When submitting amendments to the articles of association to the Association Register institution, they shall be accompanied by the minutes of the Board meeting with the decision on making the amendments, the document confirming the consent of other administrative body to making the amendments (if provided so by the articles of association) and by the complete new text of the articles of association.
CHAPTER XI. Annual Account and Control of a Foundation
Section 101. Annual Account of a Foundation
(1) At the end of the accounting year the Board shall prepare an annual account of the foundation. An annual account shall be prepared in accordance with the Law on Accounting and other regulatory enactments.
(2) Each year, not later than by 31 March, a foundation shall submit an annual account, in accordance with the procedures set out in regulatory enactments, to the State Revenue Service and to the Association Register institution.
Section 102. Right of Control of Donors
Persons who give donations to a foundation may check, at any time, the activities of the foundation, as well as examine all documents, except the accounting records and information regarding other persons who have given donations to the foundation.
CHAPTER XII. Termination of Operation, Liquidation and Reorganisation of a Foundation
Section 103. Basis for Termination of Operation of a Foundation
Operation of a foundation shall terminate:
1) by a court order;
2) upon termination of the specified time period (if the foundation was founded for a definite time period);
3) upon initiation of bankruptcy procedures of the foundation; or
4) on other basis provided by law or the articles of association.
Section 104. Termination of Operation of a Foundation on the Basis of Court Order
(1) Operation of a foundation may be terminated on the basis of a court order, if:
1) the goal of the foundation has been achieved, or its achievement has become impossible, and if the articles of association do not provide for the right of the Board to change the goal of the foundation, or if the Board has not received the consent of other administrative bodies to change the goal (if provided so by the articles of association);
2) the goal of activity of the foundation is in conflict with law or morality;
3) the activities of the foundation do not conform to the goal set in the articles of association;
4) economic activity of a profit-making nature has become the basic activity of the foundation;
5) [not included in translation]
6) the foundation has not submitted an annual account in accordance with the provisions of Section 101 of this Law; and
7) in other cases provided for by law.
(2) The Board of the foundation shall submit an application regarding termination of operation of the foundation in the cases specified in Paragraph one, Clause 1, of this Section. A claim shall be made by the Prosecutor General or the State Revenue Service in the cases specified in Paragraph one, Clauses 2–7, of this Section.
(3) In the cases specified in Paragraph one, Clauses 2–7, of this Section, a claim may be raised only if the foundation has not eliminated the violations indicated within three months from the receipt of a written notification. Until the moment when a court order is taken regarding termination of operation of a foundation, the court may specify a time period within which the association must eliminate the deficiencies that are the basis for termination of its operation.
Section 105. Suspension of Operation of a Foundation by Court Proceedings
With respect to suspension of operation of a foundation by court proceedings, the provisions of Section 56 of this Law shall apply.
Section 106. Termination of Operation of a Foundation upon Initiation of Bankruptcy Proceedings
The procedures by which operation of a foundation shall be terminated in the case of bankruptcy proceedings shall be regulated by a separate law.
Section 107. Liquidation of a Foundation
(1) The provisions of this Law regarding liquidation of an association shall apply respectively to foundations, insofar as this Chapter does not specify otherwise.
(2) Liquidation shall be performed by the Board members, unless otherwise determined in the articles of association. If liquidation is performed by other persons who are not Board members, the articles of association shall determine the procedures for appointment of such liquidators.
(3) If operation of a foundation terminates due to the circumstances referred to in Section 103, Clauses 2 and 4, of this Law, the Board shall submit an application to the Association Register institution regarding termination of operation of the foundation. The application shall be attached by information including the name, surname, personal identification number and place of residence of the liquidator.
(4) If operation of a foundation is terminated on the basis of a court order, the court shall send the relevant order for making an entry in the Association Register. The liquidator shall submit, within three days from coming into effect of the court order, to the Association Register institution the information referred to in Paragraph three, sentence two, of this Section.
(5) If liquidation is performed by Board members, such fact shall be indicated in the application or the court order, and the information referred to in Paragraph three, sentence two, of this Section need not be attached.
(6) A liquidator may be removed only by a court order, on the basis of an application by an interested person if there are substantiated reasons, concurrently appointing another liquidator.
(7) A decision on continuation of operation of a foundation shall be taken by the Board or other administrative bodies specified in the articles of association.
Section 108. Closing Financial Account of a Foundation and Distribution of Property
(1) After satisfaction of the claims of creditors, or depositing of the money due to them, and reimbursement of the expenditures of liquidation, the liquidator shall prepare a financial account of liquidation and perform distribution of the remaining property of the foundation among the persons who are entitled to such property in compliance with the articles of association, unless otherwise determined by law. The property shall be distributed among such persons in equal shares, unless the articles of association specify otherwise.
(2) If operation of a foundation is terminated in accordance with Section 104, Paragraph one, Clauses 2–7, of this Law, the property of the foundation remaining after satisfaction of the creditors’ claims, shall be transferred to the State.
(3) The property of a foundation may be distributed not earlier than six months from the day when an announcement is published regarding termination of operation of the foundation. The court may allow distribution of the remaining property prior to the specified term, if no damages are thereby inflicted upon the creditors.
Section 109. Reorganisation of a Foundation
(1) The provisions of this Law regarding reorganisation of associations shall apply respectively to foundations, insofar as this Section does not specify otherwise.
(2) Reorganisation may be performed only in cases determined in articles of association. Reorganisation of a testamentary foundation shall not be permitted.
(3) A decision on reorganisation shall be taken by the Board of each foundation involved in reorganisation process. The articles of association may provide that the consent of other administrative body is necessary to take a decision on reorganisation. A decision on reorganisation shall be regarded as adopted if more than two thirds of Board members vote for it, unless the articles of association provide for a greater majority of votes. The decision shall be prepared in the form of a separate document.
(4) A reorganisation agreement shall include:
1) the names, legal addresses and registration numbers of the foundations involved in reorganisation;
2) the consequences of reorganisation for the employees of the foundations involved in the reorganisation process; and
3) in case of division – a list of property to be transferred to each foundation.
(5) If no other existing foundation is involved in the division process, the dividing foundation shall take a decision on division, which shall substitute for the agreement referred to in this Section. The decision regarding division shall indicate, in addition to the information referred to in Paragraph three of this Section, the name and legal address of the acquiring foundation and distribution of property of the dividing foundation. The act of property distribution may be attached to the decision as a separate document.
(6) An application for making an entry regarding reorganisation shall be attached by a document confirming the consent of other administrative body to perform reorganisation (if such consent is provided for in the articles of association).
Transitional Provisions
1. The procedures for coming into force of this Law shall be set out in a separate law.
2. Clause 10 of Section 14, Clause 2 of Section 19, Clause 2 of Section 52, Section 54, Section 63, Clause 3 of Section 103, and Section 106, shall come into force on 1 January 2004.
This Law shall come into force on [ ].