A wise person once said that in this world nothing is forever. But although an average human life expectancy is 79 years, legacy lives forever. There are many philanthropists who dedicated their lives to making a better society, and despite the fact that they walked the stairways to heaven long time ago, their legacy is very much alive.
In this respect, the best way to help the society and leave a permanent mark is to establish an endowment or a foundation. While both these legal entities have a lot in common, the differences are very much present.
The Endowments and Foundations Act (“Act“) defines an endowment as a legal entity without members, to which its founder assigned some property (assets, rights and funds) for the purpose of realizing a general public interest or a private interest, not prohibited by the law. On the other hand, a foundation is a legal entity without members and property, established for the purpose of realizing a general public interest, not prohibited by the law.
Basically, endowments and foundations are non-profit and non-governmental organizations, serving the society.
Setting up an endowment/foundation
Endowments and foundations are established by the Articles of Association, which represent their constitutional act.
The establishment of an endowment requires a transfer of property, worth at least EUR 30,000, to the endowment, and this property serves the endowment so it could permanently achieve its objectives. The transferred property may be in the form of assets (movable or immovable), claims and industrial property rights, as well as funds (foreign currency and/or RSD).
Exceptionally, the worth of the property transferred to the endowment may be less than prescribed by the Act, provided that the opinion of the authorities (Ministry of Culture or the competent authority for cultural affairs of the Autonomous Province of Vojvodina) is obtained, stating that the property transferred to the endowment is sufficient for the objectives to be achieved.
Unlike an endowment, the establishment of a foundation does not require any transfer of property to the foundation at the time of establishment.
Whether to establish an endowment, or a foundation, depends exclusively on the will of the founder. For example, if the founder wants to bequeath or donate his assets, in order for them to be used for achieving a public goal, an endowment may be a more appropriate legal form of disposing the assets than a foundation, due to the special legal regime of protection of property, prescribed by the Act and the relevant bylaws.
Registration of endowments and foundations
Endowments and foundations acquire the status of legal entities by being registered in the Register of Endowments and Foundations within the Business Registers Agency (“Register“) and cannot start operating before registration.
Upon registration, an endowment or a foundation may conclude contracts and take other legal actions on their own behalf, they may acquire their own assets, their liability for obligations assumed in legal transactions is restricted to their own property, they enjoy tax benefits, as well as the possibility to be funded by foreign donors.
Who manages endowments and foundations?
According to the Act, an endowment or a foundation are managed by the Managing Board and the Manager, where the Managing Board must have at least three members.
In addition, endowments and foundations may have other bodies if prescribed by the internal bylaws. This can be a supervisory board, program council, etc.
Naming an endowment/foundation
The business name of an endowment or a foundation is determined by the Articles of Association and the relevant bylaws, and must contain the word “endowment”, i.e. “foundation”.
The business name of an endowment or a foundation may also contain the name of a certain natural person or legal entity, state, domestic or foreign organization, international organization, or territorial unit, under the conditions prescribed by law.
The use of a natural person’s name in the business name of an endowment or a foundation requires his/her consent. If that person is deceased, the consent for using their name is given by the inheritors of the first hereditary order. If there is no successor in the first hereditary order, the ministry in charge of cultural affairs shall decide about the use of the name of the person of significant historical importance, taking into consideration the objectives and importance of the endowment/foundation.
Economic and business activities of endowments and foundations
Although primarily founded as non-profit organizations to help the society, endowments and foundations established for the purpose of achieving a general public interest may also earn income by performing business activities, but under the following conditions:
- The business activities are related to the objectives of the endowment/foundation;
- The activity is prescribed by internal bylaws;
- These activities are supporting activities and not primary activities of the endowment/foundation;
- These activities are registered in the Register.
Regarding the fourth condition, we point out that even if only one business activity is registered in the Register, that does not exclude the possibility that the endowment/foundation may perform other business activities stipulated by internal bylaws.
Registration of representative offices of foreign endowments and foundations
A foreign endowment/foundation is a legal entity without members, with a registered seat in another state, and organized in accordance with the regulations of that state in order to achieve a general public interest, not prohibited by the law.
Foreign endowments and foundations may operate on the territory of the Republic of Serbia. However, it is necessary to be registered in the Register of Representative Offices of Foreign Endowments and Foundations.
Tax aspect of funds acquired by endowments/foundation
Endowments and foundations do not pay taxes on the funds received for the purpose of achieving the general public interest (e.g. voluntary contributions, gifts, donations, financial grants, legacy, etc.).
Differences between endowments and foundations:
| ENDOWMENTS | FOUNDATIONS | |
| Capital assets necessary for establishment | Required – statutory minimum amount of 30.000 EUR | No capital assets needed |
| Objective of establishment | Can be established both for achieving a general public interest or a private interest | Can be established only for achieving a general public interest |
| Legal basis for establishment | Can be established by the Articles of Association, Agreement on Association, as well as by a will (mortis causa) | Can be established either by the Articles of Association or Agreement on Association |
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