Legal Persons, Associations, and Foundations: A Comprehensive Guide
Legal Item 6
1. General Scheme of Legal Persons
Legal entities are social realities attributed or acknowledged legal personality distinct from their members, capable of acting through their bodies.
Classes of Legal Persons
- A) Corporations, Associations, and Foundations:
Art. 35 CC contrasts these figures. Partnerships are a group of persons seeking a common purpose. They have a personal basis.
Foundations’ assets are intended for a general purpose (charitable, welfare, etc.).
Corporations have a personal basis like partnerships. They are the union of people to achieve common goals (professional associations, municipal corporations).
Associations are distinguished by their form of creation. Corporations are created or recognized by law, while associations are created by individuals’ will (Art. 37 CC).
- B) Public Interest and Private Interest Legal Persons (Art. 35 CC):
Art. 36 CC identifies partnerships with private interests or partnership agreements. Therefore, particular interest is the realization of profit or distributable profit.
Public interest involves non-profit purposes and interests that promote general welfare (charitable, cultural, etc.).
Arts. 35 and 36 CC: associations of public interest and private interest (corporate).
Broadly, both are associations, but strictly speaking, public interest associations.
Acquisition of Personality
Art. 35 CC considers only:
- Corporations, associations, and public interest foundations:
Corporations need a law that creates or recognizes them.
Foundations or associations acquire legal personality if they meet the purposes intended by law and are constituted accordingly.
- Special interest associations (civil or commercial companies):
Civil society acquires personality if its covenants are not kept secret, and the deed is recorded commercially and registered with MRI.
2. Associations
1. Concept and Elements
Art. 22 EC: Right of association. Fundamental protection: Except with respect to its substance, Guardianship amparo appeal by the TC and procedural principles based on preferential and summary treatment (Article 53 EC).
LO 1/2002 of 22 March, regulating the right of association, provides the legal framework for such legal persons, consistent with special laws governing specific forms (political parties, unions, etc.).
Art. EC 22.3 defines public authorities’ intervention scope: it eliminates preventive control (no prior authorization) and determines the need to register in the public record “for advertising purposes only.”
Associations may be dissolved or suspended only by reasoned court order (not by administrative choice).
The Core of the Right of Association Includes:
- The right to freely establish associations for any purpose and structure, except as noted in paragraphs 2 and 5 of Art. 22 CE.
- The right of persons not to join.
- Free elections for the association’s lawful and specific purpose.
- Freedom to define membership criteria, without a generic right to join.
- Free setup and structure.
- Freedom of action of associations.
Concept and Features
Associations are organizations where people come together to achieve a common goal.
- Multiple Partners: At least three people (Art. 5.1 LOA). Special rules may require larger numbers.
- Common Goal: Lawful, possible, and certain.
- Lawfulness (Art. 22.2 CE and 2.7 LOA): Associations cannot pursue criminalized ends or use criminalized means. Their order cannot be contrary to law, morality, and public order.
- Possibility: The LOA omits this.
- Determination (Art. 7 LOA): Statutes must accurately describe the association’s aims and activities.
- Organization: At least two bodies: the General Assembly, the supreme governing body including all partners, making major decisions and holding accountability; and a representative body managing common affairs and representing the association’s interests.
Statutes and procedural rules contain the organization, with limits:
- Prohibition of paramilitary associations.
- Democratic structure respecting pluralism as per LOA (dubious constitutionality if not required by EC).
Organizations exercising public functions or benefiting from public power without a democratic structure will lose that privileged status.
2. Statutes
Formed by agreement of three or more natural or legal persons who agree to share knowledge, resources, and activities to achieve a lawful, common purpose of general or specific interest (Art. 5.1 LOA).
Requires an expression of intent in a foundation charter (public or private document) signed by all founders or promoters, containing the statutes.
Article 6 LOA: Minimum content of the Founding Act. Article 7 LOA: Minimum content of the Statute.
Statutes determine the association’s organization and operation (name, address, geographical area, aims, activities, admission requirements, procedures for partners, governance, representation, heritage, etc.).
Registration of Associations
Arts. 5.2 and 10: Entry in the Register of Associations attributes legal personality, acquired upon constitution (foundation charter agreement with content required in sections 6 and 7).
Registration is not constitutive. Valid, unregistered associations with legal personality can exist.
Registration ensures publicity before third parties and guarantees for third parties and partners.
Lack of registration does not limit partners’ liability for the partnership’s obligations.
Once registered, assets are separated: associated parties are not personally liable for the association’s debts, which are covered by its heritage.
Developers must apply for registration. If they do not, they are jointly and severally liable for the partnership’s obligations to third parties (through founders or management and representation bodies).
Public Utility Associations
Associations pursuing general interest aims (educational, scientific, cultural, sports, health, welfare, etc.) may be declared “public utility.”
They have a privileged status (public assistance or subsidies) and must be listed.
3. Foundations
1. Concept
Legal entity consisting of assets permanently intended for a purpose of interest.
Not a group of persons, but assets and liabilities consolidated for a public or general interest purpose imposed by the founder, with stability and permanence.
2. Statutes
The CC does not regulate foundations, except for Art. 35.
Art. 34 EC recognizes the right to establish foundations for “general interest purposes, under the law.”
Not strictly a fundamental right, but a citizen’s right, subject to law (respecting its essential content).
It manifests the founder’s freedom of disposition.
Law 50/2002 of 26 December, on Foundations
Contains substantive regulation, leaving tax regulation to other laws.
Art. 1: Foundations are non-profit organizations where creators permanently affect their assets to achieve general interest purposes.
Elements
- Heritage: Creating a foundation requires a property disposition of significant value. The founder ascribes assets to the founding purpose. There must be an initial, appropriate, and sufficient allocation (30,000 euros or less with justification).
- Purpose (Art. 34 EC: “general interest”, Art. 35 CC: “public interest”): According to the LF:
- Non-profit: Foundations can generate revenue from activities, provided it does not unjustifiably limit beneficiaries.
- Impersonal: Must benefit an indefinite number of people, not a generic group. Restrictions or objective conditions for beneficiaries are allowed, but not unjustified discriminatory purposes.
- General Interest (Art. 3.1 of the Law): Open list: defense of human rights, victims of terrorism, welfare, civic, educational, cultural, sports, health, labor, etc.
- Permanent: Both the purpose and property destination must be stable.
- Determined: Stated in statutes.
- Organization: Created by a unilateral act of disposal by the founder(s), containing the statutes (operating rules).
Management authority and direction: Board (3 members).
Protectorate: Control functions for smooth operation (General State Administration).
Constitution and Acquisition of Legal Personality
A legal business provision of the founder. A unilateral, non-receptive act. It consists of the destination of goods to order (transfer of assets to the foundation).
A free legal act (without charge).
Can manifest itself by:
- Act inter vivos: A public deed containing Art. 10.
- Act mortis causa: Testament.
Once granted, the deed must be registered in the Register of Foundations to acquire legal personality.