Abstract
After a short introduction into the Hungarian concept of the foundation in general and a historical overview, the nature of these legal entities is investigated, focusing on the essential feature and importance of the public-benefit requirement as the main purpose.
Apropos the establishment the legal procedure is discussed: The foundations have to be registered by the court, without registration the foundation can be considered only as a legal act. The author explains how foundations function as legitimate organisations. It is underlined that the founder does not have any right to determine or intervene into the operations of the foundations, his rights therefore are limited. The board or one-member trustee is the everyday manager of the foundation. The necessity of a supervisory board is emphasised.
The foundations can do business only as a secondary purpose: Every business conducted should support the main public purpose of the foundation. Both the registration court and the charity registration court have a limited supervision power in connection to the registration.
As a conclusion, the author describes the new elements of the rules of the foundations in the new Civil Code 2013.
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Notes
- 1.
See the reported case law and its critique: Csehi (2006, chapter VII, 277).
- 2.
- 3.
List of charities under the NPO Act (Subsection 26 (c) of NPO Act): (1) health preservation, disease prevention, therapeutic and medical rehabilitation activities; (2) social activities, family counselling, care for the elderly; (3) scientific activities, research; (4) school instruction and education, personal ability development, dissemination of knowledge; (5) cultural activities; (6) preservation of cultural heritage; (7) preservation of historical monuments; (8) nature preservation, animal protection; (9) environmental protection; (10) children and juvenile protection, children and juvenile advocate services; (11) promotion of equal opportunity within society for underprivileged groups; (12) protection of human and civil rights; (13) activities in connection with ethnic minorities living in Hungary and with Hungarian nationals living outside of Hungary; (14) sports, not including sports activities involving professionals and those performed under contract within the framework of a civil law relationship; (15) protection of public order and traffic safety, voluntary fire fighting, rescue, and disaster preparedness and response activities; (16) consumer protection; (17) rehabilitative employment; (18) promotion of employment and training for underprivileged groups in the labour market, including placement by the hiring-out of workers, and associated services; (19) promotion of the country’s Euro-Atlantic integration; (20) services provided to and available solely for nonprofit organisations; (21) activities associated with flood and water damage control; (22) activities associated with the construction, maintenance, and operation of public roads, bridges, and tunnels; (23) prevention of crimes and protection of victims; and (24) providing electronic public services
- 4.
Guide of the Decree of the Minister of Justice no. 12/1990 (VI.13) on the Registration of Foundations.
The foundation can promote the following activities based on its goals laid down in its deed: (1) cultural activity (e.g. media, art, preservation of cultural heritage, folk art, care of traditions, care of minority and national cultures); (2) sport (e.g. supporting sport); (3) hobbies (e.g. old students, collections); (4) professional cooperation; (5) education (e.g. educational activity, support); (6) research (e.g. sciences, social sciences); (7) Health care; (8) social activity (e.g. protection of the family, support of the elderly); (9) civil protection, fire protection; (10) environmental protection (e.g. protection of the natural environment, protection of the built environment, animal protection); (11) development of settlements; (12) legal aid (e.g. human rights and consumer protection); (13) public security (e.g. rehabilitation of criminals); (14) international activities (e.g. international cultural exchanges); (15) political activities; and (16) others.
- 5.
Education of a child is not a public purpose, LB Kny.III.27.797/1997 [decision of the Supreme Court of Hungary].
- 6.
See Section 74/C. (2) of Civil Code: The court shall order the appointment of a managing body if the founder has failed to provide for one or if the managing body declined to undertake to perform this task.
- 7.
The principle elaborated by the Supreme Court of Hungary BH 1992/350 – published decision no. 350 of 1992.
- 8.
Point 1 of the no. 5/2006 decision of the Supreme Court to unify the case law on the appointment of the management board of the foundation.
- 9.
Based on Csehi (2006, chapter VI).
- 10.
Csehi (2006, 252).
- 11.
See the reasoning of the no. 2 statement of the College of the Judges for Administrative Cases of the Supreme Court, as amended.
- 12.
Lomnici (2008, 192).
- 13.
Legf.Bír. Kpkf.II. 25.830/1993, Supreme Court case, quoted by Lomnici (1998, 210).
- 14.
Lomnici (1998, 236).
- 15.
3/2005. KJE – decision of the special Chamber for Administrative Cases of the Supreme Court for unifying judicial practice
- 16.
Legf. Bír. Kpkf.I.25.043/1993 – Supr. Court case, published in Lomnici (2006, 37–39)
- 17.
Legf. Bír. Kpfk.II.25.220/1992 – Supr. Court case, published in Lomnici (2006, 39–44).
- 18.
Legf. Bír. Kpfk.I.25.681/1993 – Supr. Court case, published in Lomnici (2006, 44–46).
- 19.
Fővárosi Ítélőtábla Kny.52.119/2004/3 – case of the Metropolitan Court as Court of Appeal, published in Lomnici (2006, 47–49).
- 20.
Governmental Decree no. 224/2000 (XII.19).
- 21.
The duty and tasks of the auditor are regulated in the Act C of 2000 on Accounting (Accounting Act) and in Act LV of 1997 on the Chamber of Hungarian Auditors and Auditing Activities. The auditor must be independent from the foundation.
- 22.
Section 203 of Civil Code: (1) A contract by which the assets for covering a third person’s claim have been deprived entirely or in part shall have no legal force in respect of such third person if the other party acted in bad faith or had a gratuitous advantage from the transfer of the assets. (2) If a person enters into such a contract with a relative, a business organisation in which such relative is involved by way of concentration, a member or executive employee of the business organisation or one of their relatives, bad faith and/or gratuitous promise shall be presumed. Bad faith and/or gratuitous promise shall also be presumed when such a contract is concluded between business organisations that are not directly or indirectly connected by way of concentration, but are controlled by the same person or the same business organisation. (3) A party who has lost the gratuitous advantage originating from a contract in a manner for which he is not accountable shall not be held liable towards the third person.
- 23.
Lomnici (2008, 376–377).
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CSEHI, Z. (2014). Foundation Law in Hungary. In: Prele, C. (eds) Developments in Foundation Law in Europe. Ius Gentium: Comparative Perspectives on Law and Justice, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9069-7_7
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