Which Resolutions Are Needed When a Foundation Establishes an Enterprise?

Donations, Fundraising and Financial Operations

Prepared by: Constantinople

A foundation's wish to earn income does not justify signing contracts before choosing the activity's legal structure. Establishing an enterprise, incorporating a company and investing in an existing company are different transactions. The Foundations Law regulates establishing enterprises or companies to support fulfilment of purposes and generate income, together with related notifications. Using that income outside the foundation's purpose may create separate liability. The connection between the economic activity and the deed's purpose must be specified.

The deed, governing bodies' powers, investment budget, proposed activity and contracts form the basis of the initial review. Clarify in whose name activities will be conducted, who will owe debts, staffing and lease relationships, signing arrangements and the supervision connection. If a company will be incorporated, shareholding structure and appointment of managers are assessed separately. Tax and accounting duties are also considered with a financial specialist; a foundation's non-profit-distribution purpose should not be interpreted as automatically granting a tax advantage for every activity.

The investment resolution by the competent body, documentation of transactions between foundation and enterprise and necessary notification timetable should be examined. If contracting with an enterprise connected with an administrator, conflicts of interest are assessed separately. The scope of post-formation supervision must also be considered. Thorough preparation can distinguish the responsibilities of legal review and accounting work.