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Serbian Draft Law on Endowments and Foundations Approved
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02/07/2010
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On July 1, 2010, the Serbian Government approved the draft Law on Foundations and Endowments and sent it to Parliament for its consideration. This development marked the culmination of efforts to create a more enabling legal environment for endowments and foundations in Serbia.
Significantly, the draft Law was the result of the participatory process, which involved key stakeholders. It was prepared by the working group, which was commissioned by the Ministry of Culture, the members of which included representatives of the Ministry of Culture, experts, private practitioners, and foundations’ representatives. Dr. Dragan Golubovic, of the European Center for not-for-Profit Law (ECNL) was a member of the working group and provided key technical assistance in the preparation of the draft Law. The draft Law to a large extent complies with regional and international best practices. When enacted, it will replace the outdated Law on Foundations, Funds and Legacies of 1984. Among others the draft Law:
Envisages only two institutional non-membership forms: endowments and foundations (as opposed to the current Law, which envisages three institutional forms: foundations, funds, and legacies, the difference between them being far from clear).
Allows endowments to be established to pursue both public and mutual benefit goals (as opposed to the current Law, which allows endowments to be established to pursue public benefit goals only).
Allows foundations to be established without a founding capital (as opposed to the current Law, which requires that a foundation, at the time of its establishment, must have a capital necessary to support its goals).
Clarifies the relationship between a founder and a foundation (whereas the current Law was silent on that point, has created lots of confusion and legal uncertainties in practice).
Relinquishes the registration authority from power to deny registration of a foundation / endowment, the establishment of which it deems "unnecessary".
Provides for a transparent governing structure of endowments and foundations – including rules governing the conflict of interests of members of the management board (whereas the current Law is silent on that point).
Provides for rules governing the liquidation and bankruptcy of an organization, including the distribution of assets of the dissolved organization (whereas the current Law is silent on that point).
Provides for rules governing the registration of branch offices of foreign foundations / endowments and other non-membership organizations. Currently those branch offices operate in the legal vacuum. Recognizing the problem, the Ministry of Foreign Affairs introduced a practice of issuing a ‘certificate”, which confirms that a branch office operates in Serbia, although such a practice did not have basis in law – and often times did not result in any tangible benefits for the organization, as it did not necessarily facilitate its efforts to open a bank account, lease an office, or hire the staff.
There is one significant point of departure of the Government-approved draft from the original one, which was prepared by the working group. The former envisages a two-step registration process, which involves both the Ministry of Culture and the Agency for the Registration of Commercial Companies. This two-step procedure is likely to render the registration process more costly and time-consuming, and therefore efforts are under way to have this provision removed from the draft.
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