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Slovakia: Changes in the legal environment for foundations and public benefit centers By Petr Jan Pajas, ICNL Consultant for Central and Easter n Europe, First Consulting, P.B.C., Prague, Czech Republic

As of March 1 st, 2002, the legal environment for Foundations and for Not-for-Profit
Organization Providing Public Be nefit Services (non-membership establishments providing
services of public benefit – le t us call them hereafter only “ Centers”) has changed –new laws
adopted by the Slovak National Council (Parliam ent of the Slovak Republic) entered into
power:
– The Act No. 34/2002, on Foundations and the Change of the Civil Code
as Amended by Later Acts replaced the former Act No. 207/1996, on
Foundations in the text amended by the Act No. 147/1997.
– The Act No. 35/2002 amended substantially the Act 213/1997, on Non-
Profit Organizations Providing Generally Beneficial Services.
– The Act No. 13/2002, on Conditions of Transformation of Certain
Budgetary Organizations and Subsidiary Organizations into Non-Profit
Organizations Providing Generally Be neficial Services (Transformation
Law) and on Amendment and Ch ange of the Act No. 92/1991, on
Conditions of the Transfer of the Stat e Property on Third Persons in the
Text of Later Amendments made it possible to Centers from governmental
organizations.

What are the main changes made by the new laws?

1. Both Foundations and Centers must reregister and supply additional data to the newly
created registering offices es tablished at the Ministry of Interior for Foundations and
at regional offices and a Central Register be ing maintained also at the Ministry of
Interior – the two Registers are accessible to general public and contain identification
and other data, which are needed by thir d parties to conclude contracts with
Foundations and Centers with full informati on about the persons acting on behalf of
these organizations and about the public bene fit statutory purposes or services to be
provided, respectively.
2. The Foundations must maintain an Endowment – a core of their property, whose value
may not be lowered and may not be less then SKK 200,000 (about USD 4,500).
3. The Foundations are allowed to create Trus ts by their own decision or in agreement
with a third person; the Trus ts are treated as a separate part of the property of a
Foundation, which is to be used under sp ecified conditions for a specified public
benefit purpose. The Trusts do not acquire their own legal personality. The Foundation
is entitled to be remunerated for management of the Trust.
4. The Foundation’s main activity is to p rovide monetary and non-monetary grants to
third parties for the public benefit purpose; The Center’s main activity consists in
providing public benefit services under equa l and preliminary defined conditions to all
users. The lists of public benefit purposes a nd services are included in the laws – they
are extensive and may be considered as ope n lists, but that would depend on the o
interpretation of the registering office.
5. The Foundation may not conduct business, excep t for renting real estates, organizing
cultural, educational, social or sport activities, if these activities contribute to more
effective use of its property and if these activities comply with the public benefit
purpose of the Foundation. The Foundation may not enter into agreement on silence
partnership.
changes 1

6. The Centers may be engaged in business activities according to special regulation 1
under the condition that such activity allows for more effective use of its property and
the quality, extent and availability of se rvices, for which the non-profit organization
was established, will not be endangered. The Center may not take part in the business
of other persons or to conclude an agreem ent on silent partnership; its incomes are
subjected to income tax according to gene ral tax laws. The Center may not condition
the provision of its public benefit services on acceptance of donations from natural or
legal persons.
7. The property of the Foundation or the assets of the Center may not be used for
financing the activity of politic al parties or political movements or for the benefit of a
candidate for an elected post.
8. Both Foundations and Centers have a Board of Directors, as minimum composed of
three members, as its supreme body. Beside s, they may have a Supervisory Board,
which is mandatory, when the property exc eeds certain level. Otherwise, the checking
duties of the Supervisory Board rest with a single Inspector. The operational executive
powers in a Foundation rest on its Administra tor, while in the Center on its Executive
Manager; both these executive officers are elected and recalled by the Board of
Directors.
9. The Board of Directors decides in both a Foundation and a Center about the budget
and particularly about the am ount of assets, which may be used for administrative
purposes of the organization.
10. Both Foundations and Centers must publish An nual Reports, in which their activity is
described and a detailed overvie w of the status and use of the property is provided;
under specific conditions depending on the sum of incomes and expenditures or on
acceptance of certain amount of donations from public budgets by the Center, the
annual balance sheet of inco mes and expenditures must be certified by an independent
licensed auditor.
11. Foreign organization branches may qualify as a Foundation or a Center by providing
to the Registering Office the evidence on being legal entities with activities
corresponding to the provisions of the resp ective Slovak law and other data as required
from local Foundations or Centers.
12. Either the Board of Directors or the c ourt may initiate under conditions set by the
respective Law the voluntary or involunt ary termination, respectively. The Laws
regulate in detail the liquidati on of property of the Foundation or the Center in cases of
involuntary termination or complete cessati on of the existence of the organization.
13. The Center may be endowed by a property from the State as its founder (as regulated
by the Transition Law). This represents the so-called Priority Property of the Center.
The priority property must be used exclusiv ely for securing the public benefit services,
it may not be used as a security or otherw ise used to secure the obligations of the
Center or a third person, it must not be so ld, donated, rented nor lent. The priority
property is not subject to li quidation. Real estates forming the priority property must
be registered with material burden to the be nefit of the State in the Cadaster (Register
of Real Estates).
14. Upon decision of the Board of Directors, the Center may split into several Centers, as
well as to merge with or fuse into another Center of a Foundation. This is done
without liquidation and with full transfer of obligations and rights to the resulting
Center of Foundation.
1 E.g. the Civil Code, the Act No.455/1991, on Trading, in the text of later amendments.
changes 2

15. Upon decision of the Board of Directors, the Foundation may merge with or to fuse
into another Foundation. It may be also transformed into a Non-Investment Fund
(regulated by the Act No. 147/1997 , on Non-Investment Funds). This is done
without liquidation and with full transfer of obligations and rights to the resulting
Foundation or Non-Investment Fund, however the Endowment of the Foundation must
be transferred to another F oundation with similar purpose.
16. For both the Foundation and the Center the respective Law introduces a state
supervision through the regi stering office and the Ministry of Interior.
17. The founder of existing Center must submit n ecessary data to the regional Registering
Office not later then on June 30 th, 2002; if not done or if the motion is rejected, the
Ministry of Interior may submit a motion to the court requiring the termination of the
Center.
18. The Foundation’s Administrator must submit the necessary data to be registered in the
Register of Foundations kept by the Ministry of Interior not later then on December
31
st, 2002 or to decide on transforming the Foundation into a Center. Otherwise the
existing Foundation shall be deemed to terminate with liquidation as of January 1 st,
2003.
19. Beginning from January 15 th, 2002, the Central Administration Bodies may decide on
selecting their budgetary or subsidiary orga nizations for transformation into a Center.
For this purpose there must be prepared a Transformation Project, which is submitted
to the Slovak Government through the Minist ry of Management and Privatization of
State property. In the case of a positive Governmental decision, the Central
Administrative Body together with other interested parties (employees of the original
governmental organization, medical or social care professionals and churches or other
legal persons, who may prove be ing active in the field of health care, social care or
humanitarian assistance of their own or through a Center established by them) shall
endow property to the newly founded Center; th e rights, obligations and liabilities of
the original governmental organizati on are transferred to the Center.

Note, that these and other more detailed changes in the laws make the Slovak legal
environment on one side closer to and on the ot her side more elaborated then that of the
Czech Republic. There may be put nearly e qual sign between the notions of Slovak and
Czech Foundation, Slovak Center and Czech Public Benefit Corporation and Slovak Non-
Investment Fund and the Czech Fund without Endowment. However, by introducing
Trusts as a possible and ne gotiable part of the Foundatio n’s property, as well as by
providing more economic and governance freedoms, the Slovak laws surpass those of the
Czech Republic equivalents. The Slovak Transformation Law has yet no equivalent in the
Czech Republic, although a similar procedural legislation has been planned already in
1995, when the Czech Act No. 248/1995, on Public Benefit Corporations has been drafted
and discussed in the Czech Parliament. On the other hand, the state supervision, as
introduced by the new Slovak laws, goes beyond the scope of public super
vision provided
by the Czech laws.

Prepared for ICNL, Prague, April 2 nd, 2002
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