A foundation (sihtasutus, SA) is established to administer or use assets to achieve the objectives specified in its articles of association. A foundation has no members. A foundation may use its income only to achieve the objectives specified in its articles of association. The activities of a foundation are regulated by the Foundations Act. A foundation can be founded by one or more legal or natural persons. A foundation may also be founded on the basis of a will.
The mandatory management bodies of a foundation are the management board and the supervisory board.
A foundation is managed and represented by the management board. The supervisory board plans the foundation’s activities, organises its management and supervises its activities.
As Estonian law does not permit a branch of an international organisation to be registered as a foundation, a new legal entity must be founded in such cases. Additionally, a foreign legal entity may carry out its activities in Estonia directly on a cross-border basis without registering a separate branch or founding a new legal entity.
Before founding a foundation
The founders of a foundation must adopt a foundation resolution, approve the articles of association and designate the members of its supervisory board and management board.
Documents required for founding a foundation
A foundation is founded by a foundation resolution, which must set out:
- the name and contact address of the foundation;
- the names and addresses of the residences or registered offices of the founders and their personal identification codes or registry codes;
- money or other assets, and the value thereof, that the founders are transferring to the foundation (the law does not prescribe any limits);
- the names, residences and personal identification codes of the members of the management board and the supervisory board.
The articles of association are a document that sets out the objectives of a foundation and generally regulates how its future work is organised. Upon preparing the articles of association of a foundation, some specifics must be taken into account, particularly in relation to assets, remuneration and beneficiaries. The articles of association must comply with the Foundations Act.
The articles of association of a foundation must set out:
- the name and registered office of the foundation (at local government level);
- the objective;
- the procedure for transferring assets to the foundation;
- the beneficiaries (except if all persons are entitled to receive disbursements pursuant to the objectives of the foundation);
- the term of the foundation if it is founded for a defined period;
- the distribution of assets in the event of the dissolution of the foundation. In order to make use of the income tax incentive, the distribution of assets to another association or legal entity under public law must be specified in a list of incentive beneficiaries to be included in the articles of association;
- the procedure for appointing and removing the members of the management board and the supervisory board and, where applicable, auditors;
- the number of members of the management bodies and their term of office;
- the procedure for amending the articles of association;
- details on the dissolution of the foundation (whether and under what conditions the founders have the right to dissolve the foundation);
- the procedure for remunerating the members of the management board and supervisory board;
- the procedure for using and disposing of assets;
- other conditions provided for by law.
If you wish to apply for entry into the list of associations benefiting from income tax incentives, you must clearly indicate in the activities planned for achieving the objective that you are operating in the public interest and for charitable purposes.
Once the documents are ready, you may have them reviewed by your County Development Centre consultant before signing. The consultation is free of charge.
A foundation resolution and the articles of association approved thereby must be notarised. These are signed by all founders. Once the foundation resolution has been notarised by a notary and before submitting the petition entering the foundation in the Business Register, a current account may be opened at a bank in the name of the foundation in order to transfer the assets being transferred to the foundation by the founders. In the period between adopting the foundation resolution and entry into the Business Register, the name of the foundation must be used together with the suffix asutamisel (‘in foundation’).
Registering a foundation in the Business Register
A foundation cannot be registered electronically in the e-Business Register, but only through a notary. In the notary’s presence, the petition for entry in the Business Register must be signed by all of the members of the management board. The notary who attested the petition must submit the notarised petition through the electronic information system for notaries.
The petition for entry in the register must be supplemented by the memorandum of association and the articles of association, a bank notice concerning the money transferred to the foundation, contact details (telephone, email and website) and the planned main activity. Transfers of assets to a foundation must be certified by signature of the members of the management board. If an immovable or a movable asset subject to registration is transferred, an excerpt from the land register or other register must be appended to the petition.
The cost of founding a foundation
The state fee for registering a foundation is EUR 80.
Notary services are payable, the fees for which are set out in the Notary Fees Act.
Registration deadline for foundations
A foundation must be registered within 5 business days. If any deficiencies are found, the registrar must report them to the founders and set a deadline for rectifying the deficiencies.