Establishment of Foundation in Hungary

Foundation is an organization established through a deed of association (hereinafter referred to as „the deed”) for public interest purposes by any natural or legal person or by a business partnership without legal personality.

Important rules are, that

The foundation is registered by the county court or Metropolitan Court (in Budapest) competent in the area of the registered seat of the foundation.

The foundation can start its activity on the day of the final registrative decree of the court. The founder may not withdraw the foundation after it is registered by the court.

The deed contains the name, the purpose, the assets made available for the realization of purposes of the foundation, the way of utilization of the assets and the registered seat of the foundation.

If the founder allows joining the foundation, anybody may join the foundation. The latter is called „open foundation”. If you decide to establish an open foundation, assets shall be made available to the foundation at least to a value that is required for the commencement of its operation.

The amendment of the deed is restricted. The deed can be amended only in justified cases without causing any harm to the name, aims and assets of the foundation.

A founder shall be entitled to designate the trustee (or director) or establish an organ for attandance of the managing activities (board of trustees).

The trustee (or director) or the president of the board of trustees shall represent the foundation. The court shall order the appointment or re-appointment of the managing organ (trustee or board of trustees).

The trustee (or director) or the board of trustees represents the foundation towards third person. The number of the board of trustees and the representative of the foundation shall be determined in the deed.

The court shall order the appointment of the manager or the managing body if the founder has failed to do so or if the manager / managing body does not undertake to perform its task.

The founder shall prescribe the composition of the board of trustees and designate the person authorized to represent the foundation. If more than one person is authorized to represent the foundation, the founder shall also prescribe the manner and the extent of exercise of right of representation.

Any limitation on the right of representation shall have no effect vis-á-vis bona fide third persons. The foundation shall be liable for any damages caused to a third person by its manager / managing body, or an officer (member) thereof in the course of fulfilling its/his responsibilities.
                                                                                   
The founder in the deed may assign another person for the exercise of his right – especially for the case of his death or its termination -. The assignation shall not be withdrawn after the foundation is registered by the court.

If no natural or legal entity was assigned by the founder, the court will be entitled to exercise this right after the founder’s death or termination. If the foundation has been established testamentarily, the court shall be notified thereof.

The court shall remove the foundation from the register, if the objective defined in its deed has been realized; the period of time established in its deed has been elapsed; the condition described in the deed has been occurred.

The foundation terminates after its deletion from the court’s registry. The court shall terminate the foundation if the realization of its aim defined in its deed has become impossible.

The assets of a terminated foundation - unless otherwise stipulated in the deed - shall be allocated by the court for support of another foundation with a similar purpose.

Upon the joint request of the founders, the court shall, for the purpose of establishing a new foundation or merging with another foundation, be entitled to order the merger of the foundations, if such a merger is in consonance with realizing the objectives of the foundations concerned.

In order to form the foundation most appropriate for achieving your goals we recommend you to ask for an advice of a counsellor, which is familiar with the issues of non-profit organizations.

Budapest, July 2008

DISCLAIMER:
The information contained in this article is provided for general information only. Considering the nature of online advising is inadequate for all-around complete advising Dr. Andras Toth-Kalaszi Law Firm is no responsible for the on-line advices, and it's not amenable to any action.

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