Parliamentary Draft Law no. 258 on mixed interest foundations

Parliamentary Draft Law no. 258 on mixed interest foundations (fondations d’intérêts mixtes) was submitted to the Bureau of the National Council on 24 July 2023.

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SUMMARY

Draft Law no. 258 is part of the "revolution" that has been taking place in this sector in Europe over the last twenty years, with the development abroad, "alongside traditional foundations, of new, more flexible forms such as, for example (...) hybrid foundations, combining general and particular interests, (...) foundations developed on the basis of economic flows, or even the consumption of initial endowments". (Explanatory memorandum to draft law no. 256).

The Parliament is therefore proposing to adapt the foundations regime to contemporary developments, by adding a specific derogatory regime to the ordinary law regime.

In concrete terms, the aim is to "allow foundations to be set up in the Principality which are capable not only of pursuing goals of general interest, but also, on an ancillary basis, of preserving particular interests, such as fulfilling family ambitions, for example, guaranteeing the conservation and growth of collections, protecting natural areas, guaranteeing the permanence of the family character of a business, but also ensuring the financing of the studies of descendants". (ibid.)

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IN DETAIL

Draft Law no. 258 provides for the insertion of new articles 30 to 37 in Law no. 56 of 29 January 1992 on foundations, as amended:

— Purpose of the "Fondation d'Intérêts Mixtes", set up by one or more founders (natural persons or legal entities): the allocation of assets for a primary purpose of general interest and, by way of derogation, a secondary purpose having as its object:

• either the acquisition of holdings in commercial companies,
• or the management of assets, a portfolio of assets or companies,
• or the payment of educational expenses, the support and assistance of members of the founder's family,
• or maintaining the family nature of a company or group of companies.

— The deed of incorporation should contain the governance arrangements for the foundation (compliance with the FATF Recommendations on Combating Money Laundering and the Financing of Terrorism - Law no. 1.549 of 6 July 2023 (Part I) - Bill no.1078 (Part II)).

— Standard articles of association (laid down by Sovereign Order) would be made available (on the Government's website).

— The endowment could consist in particular of literary and artistic works, designs and models, studio funds, digital works, movable or immovable property, financial assets or digital assets.

• No minimum amount required to set up the foundation.
• The endowment could be paid out in several instalments over a period of 5 years (flexibility to "encourage the development of a flow logic for endowments" and "facilitate the creation of foundations by companies that can allocate to this project annual budgets calculated on the basis of their economic activity over a sufficiently long period to guarantee the economic viability of the project"). The National Councillors suggest that the Government extend this provision to the general regime for foundations.

— The "Fondation d'Intérêts Mixtes" could receive and hold shares in a company with an industrial or commercial activity, with no limit on capital or voting rights.

• Where these shares give the foundation control of the company, the foundation's articles of association should provide for the creation of an ad hoc committee responsible for managing these holdings (to avoid any interference in the management of the company).

— Transfers of assets constituting the endowment fund would benefit from tax exemption provided that the proceeds are reincorporated into the endowment fund. Exceptionally, if these proceeds are distributed to beneficiaries of the foundation's secondary purpose, they would be subject to ordinary taxation.

— All the acts, decisions of the Foundation's governing bodies and management documents would be recorded and kept in a register in digital form, either on the Monegasque sovereign cloud or using distributed register technology. ("This guarantee of traceability and transparency is also in line with the objectives of the fight against money laundering"). The National Councillors suggest that the Government extend this provision to the general regime for foundations.

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