Abstract
Foundations or similar bodies have existed in Portugal almost since the birth of nationality (in the twelfth century), having their first apogee during the fifteenth and sixteenth centuries and the second in the last quarter of the twentieth century when the majority of the almost 500 foundations operating in Portugal were incorporated. Despite their social impact, they lack public appraisal of their economic and social significance which somehow resonated in the inadequacy of the former legal regime, which was commonly considered as outdated, state driven, and not properly translating neither the foundation’s private nature nor their contribution to the public good. In July 9, 2012, the Portuguese Parliament approved, with minor amendments, the Law 24/2012, which was submitted by the Portuguese Government and comprised both a new framework-law (“lei-quadro”) on foundations and modifications to the chapter on legal persons of the Civil Code, more specifically to the articles relating to private foundations. Considering this reform, which just increased the traditional mistrust towards foundations, this chapter is going to be exclusively or mainly focused on private foundations and how the new Portuguese law affects their formation, governance structure, activities, reporting, and supervision.
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Notes
- 1.
The Portuguese law separates or distinguishes between the legal personality of a foundation and its eventual public utility status which can be granted only in certain conditions to a foundation which is considered to cooperate closely with the state in addressing pressing social needs. Only foundations with public utility status are eligible for tax privileges.
- 2.
The first version of the Memorandum of Understanding on Specific Economic Policy Conditionality, of 17 of May 2011, can be accessed here http://www.portugal.gov.pt/media/371369/mou_20110517.pdf
- 3.
The number comes form the recent inquiry conducted under the mentioned Law 1/2012 of 3rd of January.
- 4.
For a general view about the evolution of foundations in Portugal, see Themudo (2003). In a more broad perspective, about the evolution of the nonprofit sector, see Campos Franco (2005).
The National Statistic Agency (www.ine.pt) published in 2011 the satellite account of the nonprofit sector, with data from 2006. According to this report, which does not disaggregate nonprofit institutions by type, there are in Portugal more than 45 000 nonprofit institutions, representing 2.2 % of the national gross added value and responsible for 4.4 % of paid jobs (http://www.tcontas.pt/pt/actos/rel_auditoria/2011/2s/audit-dgtc-rel001-2011-2s.pdf).
- 5.
The word “foundation” finds its etymological roots in Latin, fundatio-ionis, which has to do with fundus, meaning “fund” or stock of goods and the verb fundare, that is, the ability to lay the basis or the foundations of something (cfr. Alli Turrilas 2010, 46 e 47).
- 6.
Pomey (1980, 30–31) states that, as foundations allow their founder to remain in a work that transcends his/her lifetime, in principle, perpetually channeled for the common good, they respond to a universal human aspiration, which would explain the universality of the notion of foundation, as well as its history and its geography.
Emphasizing the characteristic of human nature that, in our view, underlies in the origins of foundations, we do not ignore their modern use by collective persons, whether public or private. This phenomenon thus is more recent and, without impairing the above assertion, is related to the pointed evolution ability of foundations.
- 7.
Pomey (1980, 31): “En tant qu’elles permettent au fondateur de se survivre dans une oeuvre durable et même, en principe, perpétuelle, tout en faisant le bien de ses frères, les fondations répondent à une aspiration de l’homme de tout temps, en tous pays, de biens a affecter ainsi, après lui, à la collectivité. C’est dire l’universalité de la notion de fondation; ce que confirment aussi bien l’histoire que la géographie.”
- 8.
According to Liermann apud Blanch Nougués (2007, 109), the most ancient (Greek) foundation is from the fifth century B.C. It was incorporated by NIKIAS, an Athenian magistrate who, while living, assigned to the Delphic temple of Apollo properties with a charge to the clergyman, with its revenue, to organize banquets to praise for the well-being of the founder.
- 9.
- 10.
Hopt et al. (2006, 45) acknowledge the “common historical roots” of foundations in Europe.
- 11.
In this sense, see Schlüter et al. (2001, 215), to whom “As in other European countries the first foundations in Portugal appeared under the influence of the Catholic Church.” For Campos Franco (2005, 4), we must understand the role of the Roman Catholic Church in the formation of the country and national identity in order to understand its penetration in society “not only in terms of the provision of spiritual support, but also in terms of the provision of social and educational services to the population” (pp. 4).
- 12.
Some authors defend that even before the founding of the nation there were institutions similar to foundations. Carlos Monjardino states that the creation of a foundation is attributed to D. Teresa (died 1130), the mother of Afonso Henriques, Portugal’s first king.
- 13.
For a description of the different types of institutions during this period, see Campos Franco (2005, 5–6).
- 14.
Caetano (1967, 6) states, however, that the Code has been unfairly accused of following the guidance of the highly individualistic Code Napoleon, when “the Viscount de Seabra not only withdrew from the French coding system, as respected as much as possible the Portuguese legal traditions and tempered the prevailing individualism of that time,” with a title about moral persons in the chapter on the legal capacity. As for foundations, Caetano (1967, 28) however confirms that the Code had only one accidental reference, in Article 37, “and nothing more.”
- 15.
According to Article 157.º of the Code, the chapter in question, on the collective persons’, shall apply, in addition to the associations that have not the economic profit of their associates as a mission and, when the analogy of the situation so warrants, the corporations, to foundations of social interest.
- 16.
For example, it is noteworthy that the last deep monograph in Portugal about foundations and the law dates back to 1962 and belongs to Caetano (1962).
- 17.
- 18.
De Oliveira Ascensäo (2000, 217) refers in this respect that “in the case of foundations, based on an endowment, only the granting of legal personality allows a polarization of interests that otherwise would not find adequate support.”
- 19.
For a general introduction to these types of foundations, see Amado Gomes (1999).
- 20.
The criteria for the distinction between public foundations and private foundations are a controversial matter. Blanco De Morais (1995, 565) defines a public foundation as “any entity created, in general, by a public act by the state or other public body, with the power to do so, affecting an endowment suitable for the autonomous performance, although guided, of administrative functions.”
- 21.
According to this author (p. 265), “Now, the state intervenes as a founder, participating ‘within’ the initiative of creation and the life of many foundations. Responsible for broad social functions that do not want to resign, but not claiming (or not being able) to perform them exclusively, the state actively seeks the cooperation of private individuals to carry them out. The foundation appears to us here as an institutional partnership between public entities and private entities: the first takes the initiative, provide the seeding conditions of the organization, but seek the involvement of individuals in the project, encouraging them through additional tax benefits.”
- 22.
The Portuguese Supreme Court, for instance, ruled that the founder can restrict the use of the foundation assets to maintain the founder himself, his spouse, and descendents, which could be considered, partially, as a family foundation (Supreme Portuguese Court, 24 October 1996).
- 23.
With this opinion, Blanco De Morais (1995, 573).
- 24.
The majority of contemporary legal systems only recognizes the designated public interest or general interest (“public benefit”) foundations, where in Portugal, as stated above, the Civil Code adopts a more open concept of “social interest.” There are, however, legal systems that admit foundations of private interest, since lawful, as the German (paragraphs 80 and 81 of the BGB). In Portugal is yet to be held the debate on the admissibility of the foundations of private interest, including family foundations, although it should be made clear at the outset that the uncertainty of the beneficiaries does not necessarily mean social interest (and vice versa) and that the nature of the nonprofit foundations just means a ban on the distribution of profits, not being forbidden the pursuit of economic activities by foundations, provided that these are instrumental for the main mission. For an introduction to the thematic, see Badenes Gasset (1986, 62 and following), Kronke (1988, 56 and following), or De Giorgi (1973, 27 and following).
- 25.
Serrano Chamorro (2002, 112) states that the specific difference between the foundation and associations, for example, is that their goals may be fulfilled regardless of the person of the founder, what ultimately justifies the legal personality. To this regard, Lopez Lacoiste (1965, 602) talks about a functional ownership or a depersonalization of property which occurs through the foundational structure: regarding the founder, who becomes released of the property by a liberality; regarding the foundation and the board of directors who represent it, because they are mere servants of the foundational goal; and, finally, regarding the beneficiaries, which will eventually be favored but whose indeterminacy do not allow them to claim any individual rights towards the foundation.
- 26.
Albajedo (1960, 42) draws attention to the need of personification, that is, that the foundational incorporation always implies the will (intentional element), not only to create a work, but that this organization becomes an autonomous subject; otherwise, there would not arise as a subject of law but only one organization to an end.
- 27.
Lopez Lacoiste (1965, 584) states that an act intended to create a foundation without an endowment lacks any sense to the extent that the legal personality, the foundation, is merely instrumental, not substantive in nature, that is, establishes a trustee who will be responsible for certain purposes, but these purposes have no relevance without the proper means to deliver them.
- 28.
For an historical analysis of the essentialia negotii doctrine, in Portugal and abroad, see Pinto Duarte (2000, 79 and following).
- 29.
About this, see Hopt et al. (2006, 70). For these authors, one reason for this blurring of types can be that of a very liberal law in some countries which allows foundation structures in which the founder or the directors have a position similar to membership of a nonprofit association. In Portugal, it was the law to legally institute these kinds of situations, although not mandatory.
- 30.
This is the view, for example, of Pedro Pais de Vasconcelos (2005, 142), when he states that “In foundations, the lesser importance of the personal element leads to a greater relative weight of the patrimonial element. This fact has led to the conclusion that in this type of legal entities the patrimonial element is dominant. However, this conclusion does not seem the right one, because the patrimonial element, the mass of goods affected by the founder to the foundation, is nevertheless instrumental in relation to the achievement of the aim.” Accordingly, De Oliveira Ascensäo (2000, 329), to whom “the endowment itself has no meaning. Although essential, it is instrumental: it only makes sense while enabling the achievement of a purpose.” This author argues, however, that the instrumentality that characterizes the endowment does not preclude that it is the structural crucial element which determines the foundational type within the classification of legal persons.
- 31.
Lopez Lacoiste (1965, 596) points an aspect that seems essential about foundations law, that is, that foundations are not oriented according to ownership or to benefit themselves but according to a mission or function: to allocate private resources to social action, being more about distributive than commutative justice.
- 32.
This article states that “In the institution act the founder must indicate the purpose of the institution and specify the assets that are allocated to the institution.”
- 33.
Cfr. Caetano (1967, 31–32), according to this author “for this act to be complete, it should also express the intention that the fulfillment of the purpose is carried out by an autonomous organization. It is not essential nevertheless that the founder explains this desire, just that the asset allocation is not a burden, or form, of a donation or bequest made to an existing person. If the founder merely expresses the will to dispose the assets for pursuing a permanent purpose, without transmitting them to an existing entity, it is assumed that he/she desires to set up a new entity with legal personality to perform that will.”
- 34.
In this sense, Ferrer Correia, De Sà (1989, 334), to whom “The law does not oppose, therefore, the incorporation of foundations without an initial capital, provided that the financing of the planned activities is ensured by other means, i.e. through other resources than the income produced by a capital. (…) Of course, this does not mean that the hypothesis of a foundation without property is conceivable. (…) It is the initial endowment of capital assets that can not be considered as a non-essential element.”
- 35.
Predieri (1969, 1117 and foll.) warns to the fact that the foundations’ administrative system does not encourage their proliferation, on the contrary, “spesso fa fuggire inorridito il potenziale fondatore, atterrito della lentezza della procedura di riconoscimento, e ancor più dalla prospettiva dei controlli e delle ingerenze amministrative che si leggono o traspaiono dal códice (anche se poi il diavolo è meno bruto di quanto si dipinga), tanto da far nascere i fenomeni, in sostanza patologici, dell’uso di società per azioni, o a responsabilità limitata, a scopo di beneficenza.”
- 36.
About this trend, see Zoppini (1995, 2), who dates its start in the 44. Deutsche Juristen Tag, of 1962, in which a group of jurists from Hannover raised the followign question: “Soll das Siftungsrecht bundesgesetzlich vereinheitlicht und reformiert werden, gebenfalls mit welchem Grundzügen?” In Spain, also Lopez Lacoiste (1965, 567) reported this new pulse of foundations that survived centuries of hostile legislation and now have a renewed energy, when confronted with the old bodies of dead hand, performing a social function in an organized manner, with an effective model comparing with other institutions and demonstrating that property is not just to have but also to give.
- 37.
About the links between foundations and corporations, see Valero Agundez (1969).
- 38.
Zoppini (2005, 371) notes in this regard that there is now an “outsourcing” of legal forms for enterprises and can be considered as a “fact counted” the typological compatibility between foundations and economic activities.
- 39.
See The Portuguese nonprofit sector in comparative perspective, form 2005, which corresponds to the Portuguese Chapter of the Johns Hopkins Comparative Nonprofit Sector Project, from the Center of Civil Society Studies at the Institute for Policy Studies: http://www.ccss.jhu.edu/pdfs/CNP/CNP_Portugal_Nat_Rpt.pdf
- 40.
O Feasibility Study on a European Foundation Statute [ec.europa.eu/internal_market/…/eufoundation/feasibilitystudy_en.pdf], commissioned by the European Commission, for example, reveals impressive numbers, though estimates on the foundation sector in the EU: 110,000 foundations, collective assets of approximately one trillion euros, annual expenditures of 153 billion euros, a million full-time employees, and two and a half million volunteers.
- 41.
Badenes Gasset (1986, 8) to this regard states that a foundation is characterized “by the predetermination of the purpose by one individual, and by how the person who has defined the purpose, due the limited duration of human life, cannot address it attend in perpetuity and therefore wants and requests others to continue her/his work fulfilling that purpose.”
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Gonçales, R.H. (2014). The New Portuguese Law on Private Foundations. In: Prele, C. (eds) Developments in Foundation Law in Europe. Ius Gentium: Comparative Perspectives on Law and Justice, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9069-7_12
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