Voluntary Organisations & Foundations: Amendments To Civil Code

Posted on: 16 Apr 2019

Category: Articles, News

Act XXXVI of 2018 encapsulates the significant changes which took place with regards to foundations, organisations and associations. These came into force on the 6th of November of the year 2018 thereby amending the Second Schedule of Chapter 16 as well as the relevant provisions of Chapter 492 of the Laws of Malta, the Voluntary Organisations Act.

The salient Articles typifying the mentioned reforms, are as follows:

  1. Broadening the remit of organisations to the categories of Government organisations, Religious organisations & Political organisations;
  2. New definitions insofar as lawful purpose, market levels and market conditions & permissible private benefit are concerned;
  3. Added powers of the Commissioner for Voluntary Organisations (office set up by virtue of Article 5) to cancel enrolment or bring about disenrollment of a Voluntary Organisation as well as power of investigation with issues having the tenor of Data Protection Act (Chapter 586 of the Laws of Malta);
  4. The Office of the Commissioner vested with legal personality. Similarly, the Malta Council for the Voluntary Sector (MCVS) vested with juridical personality.
  5. Introduction of the concept of mandatory enrolment for all Voluntary organisations with the Office of the Commissioner for Voluntary Organisations as well as the obligation of notification to the Commissioner of their juridical existence by means of a “Non-Enrolment Notice”. Such mandatory enrolment is incumbent also on foreign organisations and the Right to Appeal granted to Voluntary Organisations should it be deemed that doubtful circumstances exist as to subjection to mandatory enrolment or notification under the Act;
  6. Addition of new articles to the principal act as a measure of combating Money Laundering and Financing of Terrorism through the investigative powers of the Commissioner as well as FIAU access to register relating operation of enrolled Voluntary Organisations.
  7. A Voluntary Organisations to have at least 3 administrators bound by the provisions of the Act and Second Schedule, 16 year olds entitled to establish a Voluntary Organisation as well as be vested with rights arising therefrom such as power to vote in AGMs;
  8. Cryptocurrency –consolidates the premise that Voluntary Organisations are not to be established principally for trading purposes or engage in acts of trade unless and until there is a ‘public purpose’ underpinning. It goes on to envisage the mechanism for scenarios of financial income from innovative technology and commercial undertakings.

The major amendments which have got to do with Foundations are brought into perspective by an analysis of the Second Schedule to the Civil Code:

  1. Cryptocurrency: The issuance of tokens by foundations in Malta propounded by the incursion of crypto laws such as the Virtual Financial Asset Act and the Malta Digital Innovation Authority Act. Not only issue tokens, Maltese foundations can also carry out trading activities resulting from such operations as previously touched upon. Foundations whereupon authorisation is granted by the applicable laws, may issue tokens and carry out trading activities resulting from such foundation which either owns, administers or operates an “innovative technology arrangement”.

Similarly, the same Article contemplates the undertaking of other acts which deal with tokens generating rights, powers and purposes vis-à-vis beneficiaries which can stem from a whitepaper concerning issuance of tokens. The main scope of the amendment at hand is the overcoming of a hurdle posed by a legal mechanism which acted as a barrier to foundations being set up to carry out acts of trade in spite of the underlying social purpose.

  1. Public benefit and private foundations: the scope of a foundation which ‘shall not be established to carry out acts of trade or trading activities on a regular or continuing basis nor shall it do so in practice, except as permitted under this article and when the proceeds of such trading activities are attributable to a social or public purposes’. The first caveat of the preceding article is that a foundation may nonetheless ‘own, acquire or be endowed with shares or other interests in another legal organisation’.
  2. Public benefit foundation regulated by their statute which may lay down certain additional powers and objectives in order to meet purported activities and protect its assets. The statute makes it lawful for a plurality of actors to “seek directions from the Court as to whether the actual or proposed activity of the foundation constitutes regular or continuing trading activity” so that Court issues directives to the foundation’s consonant with the purpose of the Article.
  3. Changes to the definition of a Private Foundation: A private foundation means a foundation, which neither qualifies as a public benefit foundation nor is it established for a public or social purpose and which is not a voluntary or non-profit organisation but which can be established for a  lawful  purpose  as  defined  in  terms  of  the  provisions  of  the Voluntary Organisations Act.
  4. A private foundation may have additional objectives and powers contained in its statute to enable it to carry out any such activities to achieve its purposes or to protect its assets and/or to otherwise comply  with legal requirements.
  5. In addition, a private foundation may also hold assets as investment portfolio undertaking the acts as ordinarily carried out.
  6. Further powers include specifically providing for actions with shares as designated in its statute with the aim of achieving the designated purpose, transaction or protection of designated interests.
  7. It may own, establish, grant and license a franchise a TM or other intellectual property which generates income.

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