Foundations

A foundation is a legal entity established by notarial deed without members, created to pursue a specific objective other than profit. A foundation is often chosen where a social, community or idealistic objective is to be achieved.

The objective set out in the articles of association

The objective of a foundation is set out in the articles of association and forms the basis for all actions of the board. Not all objectives are permissible; the law imposes certain restrictions. The most important statutory restriction is that the objective of a foundation may not include making distributions to the founders or to (legal) persons who form part of the foundation. Distributions to others may only be made if they have an idealistic or social purpose.

The foundation as a useful vehicle in practice

Foundations are regulated in Article 2:285 of the Dutch Civil Code (BW) and subsequent provisions. The general statutory framework allows for a broad use of foundations. As noted above, a foundation is usually established for a social or idealistic purpose. In practice, several types of foundations are common.

An ‘Algemeen Nut Beogende Instelling’ (ANBI) – Public Benefit Organisation – is mainly set up for charitable institutions and must devote at least 90% of its efforts to the public good. A foundation with ANBI status may receive donations that are tax-deductible for the donor with the Dutch Tax Administration and is also exempt from gift and inheritance tax. An ANBI foundation must have at least three board members.

A ‘Sociaal Belang Behartigende Instelling’ (SBBI) – Social Interest Organisation – has a social objective and is established to protect the individual interests of participants or a small group within the participants. An SBBI is also exempt from gift and inheritance tax.

A ‘stichting administratiekantoor’ (STAK) – trust office foundation – is a foundation that holds shares in another company. The STAK issues depository receipts for the shares to certificate holders, thereby separating voting rights from profit rights. Voting rights remain with the foundation. This structure splits the economic and legal ownership of the shares. Foundations adopt specific administrative conditions setting out the certification arrangements.

A foundation for collective action is a foundation that can bring legal proceedings aimed at protecting similar interests of other persons, insofar as it represents those interests pursuant to its articles of association (Article 3:305a BW). The law sets various requirements to ensure the financial transparency and governance of such interest organisations.