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Foundation
Foundation
A foundation (or stichting in Dutch) is a legal entity in its own right, with its assets and liabilities. The legal concept of the foundation developed ages ago from capital being set aside for a special nonprofit or charitable purpose and was originally used by religious and welfare groups.
Key Characteristics
- The foundation is still frequently used for religious and nonprofit organizations. Distributions to incorporators or to those, who constitute its bodies, are not allowed, and its distributions are furthermore restricted by law to distributions with an ideal or social purpose.
- The foregoing does not mean that the use of a common foundation is restricted to charitable purposes. It can be and is extensively used in structures in which the foundation is the legal owner of assets of which others hold the economic ownership.
- The principal difference between a foundation and a corporation is that a foundation has neither members, nor shareholders, nor a capital divided into shares. The board of a foundation, which manages its affairs, is therefore not subject to the overall control of shareholders or members. The initial managing board is appointed at the moment of incorporation. Thereafter, vacancies are filled at the sole discretion of the board in office or by another person or body especially nominated for that purpose.
- The foundation may be formed for an unlimited duration, for a certain period of time, or until a specified event occurs.
The difference between a Foundation and a Corporation
The principal difference between a foundation and a corporation is that a foundation has neither members (association) nor shareholders, nor a capital divided into shares.
The board of a foundation, which manages its affairs, is therefore not subject to the overall control of shareholders or members. The initial managing board is appointed at the moment of incorporation. Thereafter vacancies are filled as outlined in the articles of incorporation.
Incorporation
The foundation may be formed for an unlimited duration, for a certain period, or until a specified event occurs. The foundation can be dissolved by resolution of the board unless the articles of incorporation provide otherwise.
It is for example possible that the incorporator has the authority to dissolve the foundation.