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(unofficial translation)

DRAFT LAW ON FOUNDATIONS

I. GENERAL PROVISIONS

Scope of the Law

Article 1

(1) This Law governs the establishment, entering into the registry, internal organisation, operations and dissolution of foundations, entering into the registry and dissolution of branch offices of foreign foundations, as well as supervision of operations of foundations and branch offices of foreign foundations.

(2) Activities related to entering into the Registry of Foundations (hereinafter referred to as: the Registry) and the Registry of Branch Offices of Foreign Foundations in the Republic of Croatia (hereinafter referred to as: the Registry of Branch Offices), as well as other issues set forth by this Law, shall be carried out by the government body in charge of administrative issues (hereinafter referred to as: the Competent Body).

Definition of a foundation

Article 2

(1) The Foundation is a legal person, established with the purpose of engaging in legitimate activities of public benefit or of another non-pecuniary nature.

(2) For the purpose of this Law, activities deemed for public benefit shall include: protection and promotion of human rights, development of democratic institutions, development of civil society, promotion of sustainable development, cultural, educational, scientific, religious, ethical, sport, health, humanitarian, charity or any other activities that promote public benefit.

(3) A foundation shall be deemed for public benefit even if its activities are restricted only to individuals of a certain profession or those that belong to a certain national, language, cultural, scientific, religious or similar group, or those living in a particular area.

Scope of prohibition of a foundation’s political activities

Article 3

A foundation may not engage in the election or campaign for a political party, coalition or candidate; nor may it raise money for a political party, coalition or candidate.

 Foreign foundation

Article 4

(1) For the purpose of this Law, a foreign foundation is one that has been validly established under the legal regime of another state.

(2) A foreign foundation may operate in the Republic of Croatia through its branch office. A branch office shall not have the status of legal person.

(3) A foreign foundation's branch office shall operate in accordance with this Law and other regulations.

(4) A foreign foundation may operate in the Republic of Croatia after its branch office is entered into the Registry of Branch Offices.

II. ESTABLISHMENT

 Establishment of a foundation

Article 5

(1) A foundation may be established by a natural or legal person (hereinafter referred to as: the founder).

(2) A founder establishes a foundation by virtue of a founding act (decision, declaration, will, agreement, or similar).

(3) If a foundation is established inter vivos, the founder's signature on the founding act shall be certified by the court or public notary.

(4) If a foundation is established mortis causa, the declaration of establishment shall be given in a form of last will (will, legatum).

 (5) A foundation may be established for an unlimited or for limited period of time - until the fulfilment of the foundation's purpose. If the founding act or the statute does not determine the period for which the foundation is established, it shall be deemed that the foundation is established for an unlimited period of time.

ALTERNATIVE to Paragraph 3: In case of a foundation inter vivos, the founding act shall be in the form of a public document drawn up by a public notary.

Founding act

Article 6

(1) A foundation shall be deemed established by virtue of the founding act or by proclaiming the will by which it is being established.

(2) The founding act shall include:

1.      the name or the firm of the founder, the place of residence or the seat of the founder;

2.      the name and the seat of the foundation, along with the words "foundation" in its name;

3.      the purpose of the foundation;

4.      provisions on the foundation’s assets, in case the founder has designated assets to be used for the fulfilment of the foundation purpose.

(3) If the foundation is established mortis causa a declaration of the last will shall include: provisions on the purpose of the foundation and the statement on designation of certain assets for the fulfilment of the foundation purpose.

(4) The founding act may contain other provisions pertinent to the establishment and operations of the foundation.

Declaration of last will

Article 7

 (1) If a declaration of the last will does not contain information about the person who is entrusted the execution of the last will with respect to the registration of a mortis causa foundation, such a person will be appointed by a competent court.

(2) Provisions of the Law on Inheritance shall accordingly apply to a person entrusted with registration of mortis causa foundation. 

Co-founders of foundation

Article 8

With consent of a founder, other natural or legal persons can join the foundation as co-founders, unless the founding act provides otherwise.

Liability for obligations assumed in the course of the foundation’s establishment

Article 9

A founder, who assumes obligations in the name of the foundation before it is entered into the Registry, shall be held liable for such obligations. If several founders assume obligations, they shall be held jointly liable for those obligations.

Anulment of the founding act

Article 10

If several founders establish a foundation, a founder may contest the founding act as null and void pursuant to general provisions of the Law on Obligations.

Transfer of management rights to successors

Article 11

Unless the founding act or the statute of the foundation provides otherwise, the rights of the founder to participate in the management of the foundation are not transferable to his successors.

Establishment of foreign foundation branch offices

Article 12

(1) A branch office of a foreign foundation is established by a decision of the authorised body of the foreign foundation.

(2) A decision on establishment shall include:

- the name and the seat of a foreign foundation establishing a branch office,

- the name and the seat of the branch office,

- the purpose of a foreign foundation,

- the name of the person authorised to represent a foreign foundation in the Republic of Croatia.

III. REGISTRATION OF THE FOUNDATION

Entering of a foundation into the Registry

Article 13

(1) An authorized representative of a foundation shall file a request for entering the foundation into the Registry on a proscribed application form.

(2) The following documents should be attached to the form:

- the founding act of the foundation,

- the decision on appointment of a person authorised to represent the foundation (administrator, president, director, etc) and appointment of members of the management body of the foundation (management board, executive board, council, etc)

- a certified consent of persons appointed to serve in the management of the foundation,

- the statute of the foundation,

- an excerpt from a registry in which the legal person – the founder is entered into.

Proceedings following the registration application

Article 14

(1) The authorised body will decide on the foundation's application to be entered into the Registry within 30 days following the day of filing the application.

(2) If the authorised body determines that the founding act or the statute of the foundation does not conform with Article 5, Paragraph 1 of this Law, or if the application is not supported by evidence as requested by Article 11, Paragraph 2 of this Law, it shall pass a conclusion for the application to be rectified within a deadline hereto which may not be shorter than 15 or longer than 30 days. The conclusion may not be subject of a separate appealing procedure.

(3) A decision to enter the foundation into the Registry shall include:

- the name and the seat of the foundation,

- the purpose of the foundation

- the name of the person authorized to represent the foundation,

- the date of entering of the foundation into the Registry,

- the registration number.

(4) The foundation acquires legal personality on the day of entering into the Registry.

(5) The foundation may engage in its operations after it is entered into the Registry. 

Presumption of registration

Article 15

(1) If the authorised body does not render a decision on registration within 30 days of the application filing, the foundation shall be deemed registered on the next day following the expiration of that deadline.

(2) In the case of Paragraph 1 of this Article, the authorised body will, following a request of the foundation’s authorized person, render a decision on entering the foundation into the Registry, within 8 additional days.

Grounds for denial of registration

Article 16

A request for entering into the Registry shall be denied:

- if the provisions of the founding act or the statute of the foundation violate the Constitution or law,

- if the applicant does not act in accordance with the conclusion referred to in Article 14, Paragraph 2 of this Law.

Entering of changes into the Registry

Article 17

 Provisions of Article 13, Article 14, Paragraph 1, 2, 3, and 5, Article 15, and Article 16 of this Law on entering of changes into the Registry shall apply accordingly.

Registration of the branch office of a foreign foundation

Article 18

(1) A person authorized to represent a branch office of a foreign foundation in the Republic of Croatia shall file a request for entering into the Registry of Branch Office on a proscribed application form.

(2) The following documents should be submitted along with the application form:

- an excerpt from a foundation’s registry, not older than six months, containing information about the purpose of a foundation and the person authorized to represent the foundation,

- a certified founding act, the statute or document containing information about the purpose of the foundation and a person authorized to represent the foundation, if domestic law does not require that the foundation is entered into the registry,

- a decision on the establishment of the branch office,

- a decision on the appointment of a person authorized to represent the branch office in the Republic of Croatia,

- a copy of an identification document of a person authorized to represent the branch office,

- other evidence to support additional conditions for entering into the Registry of Branch Offices, which may be prescribed by a separate law.

(3) Documents as referred to in Paragraph 2 of this Article shall be submitted in a certified translation in Croatian language and Latin script.

Decision on entering a branch office into the Registry of Branch Offices

Article 19

(1) A decision on entering a branch office into the Registry of Branch Offices shall include:

- the name and the seat of the branch office of the foreign foundation,

- the purpose of the foreign foundation,

- the name of the person authorized to represent the branch office,

- the date of registration and the registration number.

(2) Article 14, Paragraph 1 and 2, Article 15, and Article 16 of this Law shall apply on branch offices of foreign foundations accordingly.

The public nature of the Registry and prescribed application forms

Article 20

(1) The Registry and the Registry of Branch Offices shall be open to the public.

(2) The application forms and manner of conducting procedure for entering into the Registry and the Registry of Branch Offices shall be prescribed by the Head of the Authorised Body.

IV. INTERNAL GOVERNANCE OF FOUNDATION

The statute of a foundation

Article 21

(1) The statute shall be deemed the primary general act of the foundation. The foundation may use a different term for the primary general act. The foundation’s statute shall, in particular, contain provisions on:

-  the name and the seat of the foundation,

-  the purpose of the foundation,

- the foundation’s bodies, their composition, appointment, dismissal, rights and duties, decision-making rules and procedures and terms of office,

- the representation and agency,

- the foundation’s assets, if the foundation disposes with the property,

- rules on statutory transformation or dissolution of the foundation,

- the disposition of assets in the case of the foundation’s dissolution in accordance with provisions of this Law,

- changes and amendments to the foundation's statute and methods of passing other foundation’s acts.

(2) The statute of the foundation may also contain provisions on the right of the founder in the decision making process relating to the change of the foundation’s purpose, the name of the foundation, amendments to the statute and the dissolution of the foundation.

(3) The statute may contain other provisions pertinent to the internal governance and activities of the foundation.

(4) Other general acts of the foundation must be in accordance with the provisions of this Law and other regulations, as well as its statute.

A person authorised to enact the statute

Article 22

(1) The foundation’s statute shall be drawn up by the founder, unless the founding act provides otherwise.

(2) If the foundation is being established by virtue of last will, the statute shall be created by the estate administrator, unless the last will provides otherwise.

The name of the foundation

Article 23

(1) The name of the foundation shall be accordingly governed by the provisions on the name of a company, as provided in the Law on Companies, unless this Law provides otherwise.

(2) The word "Croatia" in any language or its derivatives, parts of the coat of arms and the flag of the Republic of Croatia, as well as names of other states and names of municipalities, or parts of their coats of arms or flags, may be contained in the name and the symbol of the foundation in a manner which emphasizes their dignity and rank.

The foundation bodies

Article 24

The foundation shall have the Management Board and the Manager. The foundation’s statute may provide for other bodies of the foundation. The foundation may use other names for its bodies.

Management Board

Article 25

(1) The foundation is governed by the Management Board, which shall consist of at least three members. The founder shall appoint the first members of the Management Board, unless the founding act or the statute provides otherwise.

(2) The Management Board appoints and dismisses of duty the Manager, amends the statute, approves the financial plan and annual balance, and carries out other tasks in accordance with law and the foundation’s statute.

Manager

Article 26

The Manager represents the foundation, accounts for the legality of the foundation’s activities, manages the foundation in accordance with decisions of the Management Board, proposes the financial plan and annual balance sheet to the Management Board and carries out other duties which are not expressly entrusted to other Foundation’s bodies, in accordance with this Law, other regulations and the statute of the foundation.

Transformation of a foundation

Article 27

(1) A foundation that is established to pursue activities deemed for public benefit may only transform, merge or separate into two or more foundations that pursue activities deemed for public benefit, in accordance with the foundation’s statute.

(2) A foundation that is established for other non-pecuniary purposes may transform, merge or separate into two or more foundations that pursue public benefit or other non-pecuniary purposes, in accordance with the foundation’s statute.

(3) A decision on the transformation of a foundation that is contrary to Paragraph 1 and 2 of this Article shall be null and void.

V. A FOUNDATION’S ASSETS

Sources of foundation’s assets

Article 28

(1) The assets of the foundation consist of property designated by the founder in the act of establishment or which the foundation acquires from other legitimate sources (contributions, donations, public funds and similar).

(2) The assets of the foundation also consist of passive income (lease fees, bank’s interests, dividends, income from copyright, patents and licences or similar, income from agricultural land, woodland or other land).

(3) A foundation that pursues activities deemed for public benefit may also generate income from economic activities, pursuant to the Corporate Income Tax Law.

(4) A foundation that pursues activities deemed for public benefit may also generate income by organizing charity and similar events (charity dinner, special lottery, manufacturing and sales of emblems, insignia and similar).

(5) The foundation’s assets may only be used to support the foundation’s statutory purpose, in accordance with the founding act and the statute of the foundation.

Foundation liability for obligations in legal transactions

Article 29

The foundation shall be liable for its obligations with its entire assets.

Prohibition of conflict of interests

Article 30

If a foundation is established to pursue activities deemed for public benefit, a member of the foundation’s Management Board or other bodies of the foundation may not vote on issues in which he/she, his/her spouse, foster parent or foster child, or relative by blood up to a first degree in direct line and up to a fourth degree in indirect line, as well as his/her in-law relative up to the second degree has pecuniary interests, or on issues which concern a legal person of which he is a member, in whose management he takes part, or in which he has pecuniary interest.

Bookkeeping

Article 31

The foundation will keep business books and draw up financial reports in accordance with regulations on bookkeeping for not-for-profit organisations.

The State’s support

Article 32

The government shall support and facilitate activities of public benefit foundations, in particular.

VI. SUPERVISION OVER A FOUNDATION’S OPERATIONS

Authority to conduct supervision

Article 33

(1) The supervision over a foundation’s operations, within the meaning of this Law, shall be carried out by the Competent Body.

(2) Within the scope of their authority, supervision over foundation operations is also carried out by other branches of the state administration.

Inspection Proceedings

Article 34

Inspection proceedings with respect to the foundation’s operations shall be carried out in accordance with provisions of the Law on the Organization of State’s Administration.

VII. A FOUNDATION’S DISSOLUTION

Grounds for a foundation’s dissolution

Article 35

(1) The foundation shall cease to exist:

1. upon expiration of the period determined in the founding act of the foundation,

2. should the qualified body of the foundation  decide that the foundation shall cease to exist, in accordance with the founding act and the foundation’s statute,

3. should the founder decide that the foundation shall cease to exist, if that possibility is provided in the founding act or the foundation’s statute,

4. should it be transformed or merged with another foundation or separated into two or more foundations, in accordance with the provisions of this Law,

5. should the decision that establishes that the foundation’s entry into the Registry is null and void become final,

6. should a court’s decision prohibiting the foundation from operating become final,

7. should a decision on opening the bankruptcy or liquidation proceedings in respect to the foundation become final,

8. in other cases proscribed by law, the founding act or the foundation’s statute.

(2) Apart from the cases in points 4 and 7 of Paragraph 1, a foundation shall be subject to liquidation proceedings.

(3) The liquidation proceedings shall be accordingly governed by the provisions on liquidation of limited liability companies in the Law on Companies.

Distribution of remaining foundation assets

Article 36

The remaining assets of a foundation established for public benefit purposes may only be allocated to another foundation or not-for-profit organisation which carries out the same or similar statutory goals, in accordance with the provision of the foundation’s statute.

Abolishment from the Registry

Article 37

The Competent Body shall render a decision on termination and abolishment of the foundation from the Registry.

Termination of the branch office of a foreign foundation

Article 38

Provisions of Article 35, Paragraph 2, 5, 6, 8 and Article 37 of this Law, shall govern the termination of a branch office of a foreign foundation accordingly.

VIII. PUNITIVE PROVISIONS

Penalties for misdemeanour

Article 39

(1) A fine in the range of _____ to _____ shall be levied on a foundation which:

1. participates in the election or any other campaign of a political party, coalition or candidate or raises money in order to finance political parties, coalitions or political candidates (Article 3 of this Law),

2. engages in statutory activities prior to entering into the Registry (Article 14, Paragraph 5 of this Law),

3. uses its name or abbreviated name in a form or content contrary to the one entered into the Registry (Article 14, Paragraph 3 of this Law),

4. uses in legal transactions amended data or act in accordance to amended data before they are entered into the Registry (Article 14, Paragraph 3 of this Law),

5. manages its assets contrary to provisions of this Law and the foundation’s statute (Article 28, Paragraph 5 of this Law),

6. engages in commercial activities and generate income contrary to the provisions of this Law (Article 28, Paragraph 3 and 4 of this Law).

(2) A fine in the range of _____ to _____ shall be levied on a responsible person in the foundation and the branch office of a foreign foundation.

IX. TRANSITORY AND CLOSING PROVISIONS

Registry of foundations in the Republic of Croatia

Article 40

(1) The Foundations Registry shall become the Registry of Foundations of the Republic of Croatia on the day this Law comes into force.

(2) The Foreign Foundations Branch Offices Registry shall become the Registry of Branch Offices of Foreign Foundations in the Republic of Croatia on the day this Law comes into force.

Pending proceedings

Article 41

Applications for registration applications initiated under the Law on Foundations and Funds (Official Gazette, 39/95 and 64/01) that have not been processed until the day this Law comes into force, shall be completed in accordance of the provisions of this Law.

Effect of the Law on the foundations and endowments registered in the Foundation registry

Article 42

(1) Foundations and funds that are entered into the Foundations Registry shall continue to operate in accordance with the provisions of this Law.

(2) After this Law comes into effect, funds entered into the Foundations Registry shall continue to operate until the deadline for which they are established expires. By virtue of a decision of an authorised body of the funds, a fund may continue to operate as a foundation, in accordance with the provisions of this Law.

Tax Benefits

Article 43

Tax laws providing benefits for the foundation’s income shall only apply to foundations that pursue activities deemed for public benefit.

Entering into force of this Law

Article 44

(1) This Law shall entry into force within 8 days from the day of publishing in the “Official Gazette”.

(2) On the day of coming into effect of this Law the Law on Foundations and Funds (Official Gazette, 36/95 and 64/01) shall cease to be valid.

(3) Implementing regulations enacted pursuant to the Law on Foundations and Funds shall remain in effect until new implementing regulations are enacted in accordance with Article 20, Paragraph 2 of this Law.