ELI European Enterprise Foundations Model Law

Background

Enterprise foundations – ‘foundations that own companies’ – play an important role in European society as responsible, long-term owners of business companies. In addition, through their donations and operating philanthropy, they contribute significantly to the public good. They promote equality, social progress, protection of the environment, and scientific and technological advances. In this context, they make a significant contribution to achieving goals of sustainable and inclusive growth in Europe, facilitating a more active involvement of citizens and civil society. Since the foundations are non-profit entities, they constitute a unique European alternative to conventional capitalist enterprises.

And yet, despite their significant contribution to European society, European enterprise foundations live out a shadowy legal existence which limits their potential contribution. Although enterprise foundations are permitted in most European countries, and many leading European companies are owned by foundations, they are usually regulated by foundation law that tries to enforce a strict separation between for profit and non-profit entities and does not recognize the benefits that foundation ownership of business companies entails. Very few European countries have a codified enterprise foundation law that explicitly addresses business ownership. Moreover, the idiosyncrasies of national foundation law – tax law not less than civil law – imply significant barriers to cross-border integration at a point in time when solutions to European and global problems have attained paramount importance.

Aim

The purpose of this project was to contribute to overcoming these obstacles by presenting a catalogue of solutions to legally regulate enterprise foundations.

The team aimed to explain why enterprise foundations are useful, and to describe the legal and practical obstacles to efficient cross-border operations of foundations in Europe. In doing so, it considered a broad range of foundation types, including family foundations and functional equivalents such as trusts.

This will enable policy makers at national and European levels to make informed choices of the legal options at their disposal.

Outcome

The team developed a legal definition of enterprise foundations with a view to providing clarity on this legal construct.

Through comparative legal analysis (a bottom-up approach), the project identified key sources of variation in national enterprise foundation law (including the law of functional equivalents such as trusts and companies) and explained the legal and economic implications of these choices. This will provide national and European legislators with an informed menu of options on the issue.

Lastly, based on existing enterprise foundation law, the project outlined a model enterprise foundation law and key legal obstacles which currently prevent enterprise foundation rules from being implemented by a broader set of European countries. Such model law will be drafted to meet the needs from as many European countries as possible.