New non-profit sector bill proposed
A long-awaited draft Act on Publicly Beneficial Status, which aims to enhance the transparency and trustworthiness of non-profit organisations by recording their publicly beneficial status in a public register, has finally been prepared. Although the Civil Code assumes the possibility of obtaining the publicly beneficial status, there is currently no legal regulation allowing for the recording of the status in a public register. This should now change.
Under the Civil Code, a publicly beneficial legal person is an entity whose mission is to carry out its own activities to contribute to achieving common welfare, if the decision-making of the legal person is significantly influenced only by persons with no criminal record, if it has acquired its property from fair sources, and if it uses its assets and liabilities economically for a publicly beneficial purpose. A publicly beneficial legal person is entitled to register its publicly beneficial status in a public register if it meets the conditions set forth by a currently non-existent special legal regulation. As the government was unable to approve the new bill on publicly beneficial status earlier than at the end of 2016, its effectiveness is planned for 1 January 2018.
The act aims to increase the transparency of the non-profit sector and to implement certain simplifications. Potential donors and supporters should be able to see from the publicly beneficial status that a relevant entity really serves publicly beneficial purposes. The adoption of the act may therefore significantly affect the non-profit sector. The law more accurately defines the conditions that must be met by legal persons to be able to record their publicly beneficial status in the public register. The key criterion is non-profitability, according to which only a legal person not distributing profit, not paying settlement shares and restricting liquidation balance payments may obtain publicly beneficial status. An entity holding this status will have to establish a supervisory body to monitor the entity’s activities. The bill also further elaborates on the requirement generally stipulated by the Civil Code, imposing that members of publicly beneficial organisations’ bodies and management have clear records of criminal convictions.
Entities with registered publicly beneficial status will have to prepare a detailed annual report of their activities. The report will have to include an overview of administrative expenses, assessments of achieved goals, as well as information on the remuneration paid to members of the entity’s bodies, etc. The bill also prescribes special rules on the audit of the financial statements, as well as conflict of interest rules relating to the members of the organisation’s bodies, incorporators and other persons involved with the publicly beneficial entity.
Neither the bill nor the Civil Code restrict the type of persons that may obtain the status. Where statutory conditions are met, not only typical non-profit organisations (e.g. institutes) but also corporations and other legal entities will be allowed to apply to record their publicly beneficial status in the public register.