Foundations are entities with private legal personality created on a non-profit basis, whose assets are permanently allocated to the realisation of general interest purposes, according to the will of the founders, the established bylaws and the Law.
Setting up foundations: the 8 points you should bear in mind
To set up a foundation, the following steps must be taken into account:
Step 1: Develop the Foundation’s bylaws.
The drafting of the Bylaws is one of the key points in the incorporation process. Its text lays the foundations of the future Foundation and ensures its proper functioning. The content of the Statutes must contain the will of the founder and comply with the law, and must contain the provisions of article 11 of Law 50/2002, of 26th December, on Foundations.
The Protectorate of Foundations is empowered to provide guidance and advice to foundations that are in the process of being set up or that are already registered, with regard to their legal, economic-financial and accounting regime, which is why it will be of great help to submit the draft of the Bylaws in order to obtain a guiding opinion.
Step 2: Application for a negative denomination certificate
A certificate of denomination must be requested from the State Register of Foundations. The Law establishes that the bylaws of the foundation must state its name, which must comply with the content of Article 5 of Law 50/2002, of 26 December, on Foundations, and its compliance will be reflected in the certificate of name issued by the Register of Foundations.
This certificate must be issued no more than three months prior to the date on which the deed of incorporation is granted. The requested name will be reserved for six months, after which time it will expire.
Step 3: Bank and endowment
The endowment is a key element in the creation of a foundation and can be made up of assets and rights of any kind, as long as they are adequate and sufficient to fulfil the objectives of the foundation, as stated in article 12 of Law 50/2002, of 26th December, on Foundations. The deposit of the funds must be accredited before a notary by means of a bank certificate no older than three months from the date of the public deed of incorporation.
If the contribution to the endowment is in kind, the assets and rights must be detailed in the deed of incorporation, including registry information and a valuation report drawn up by an independent expert.
Step 4: Going public
The foundation is created through a public deed which must include the following elements:
- a negative certificate of denomination issued by the processor of the Registry will be needed, together with the statutes of the organisation.
- If the founder is an individual, an explicit foundation agreement adopted by the body competent to dispose of its assets free of charge or by the governing body in case of an institutional legal person is required.
- In addition, if non-monetary contributions are made, it will be necessary to have documents accrediting the reality of the endowment contribution and its valuation by an independent expert, as set out in Article 10 of Law 50/2002, of 26 December, on Foundations.
It is necessary to obtain an authorised copy and a simple copy of the deed in order to submit it to the Register of Foundations and request the registration of the foundation.
Step 5: Application for provisional NIF
The provisional NIF must be requested from the Tax Office by filling in form 036, attaching the deed of incorporation.
Step 6: Settling the Tax on Transfer of Assets and Documented Legal Acts
It should be borne in mind that Foundations are not subject to ITP and AJD, so the public deed must be presented to the corresponding Tax Office in order to pay the aforementioned tax with the box “no subjection” ticked.
Step 7: Registration of the foundation
You must go to the Register of Foundations to apply for registration of the foundation, providing:
- The negative certificate of denomination
- The document accrediting the foundation’s endowment.
- The deed of incorporation
- Proof of ITP and AJD
- Provisional NIF
- Acceptances of the patrons if they have been made after the incorporation before a notary public.
The Register of Foundations will make a request to the Protectorate to issue a mandatory report on the suitability of the purposes and sufficiency of the foundational endowment, which must be favourable in order to register the foundation in the Register of Foundations.
Step 8: Get the certification from the Protectorate and the Register of Foundations.
Finally, the Protectorate together with the Register of Foundations will issue a certificate classifying and registering the foundation, which will obtain legal personality and will be able to start operating.
Guillermo J. Urbez
Corporate and M&A lawyer