Failure of a Foundation to Perform its Activities – What is the Penalty for Inactivity?

A foundation is required to carry out the public benefit purpose for which it was established. If it fails to do so for more than one year, the sanction may be the dissolution of the foundation. This follows from § 15 (1)(e) of the Act on Foundations, under which the court shall, at the request of the Ministry of the Interior, dissolve the foundation and order its liquidation if the foundation has not carried out any foundation activity for more than one year. Foundation activity is understood as providing monetary or non-monetary assets from the foundation’s property to third parties, or managing the foundation’s assets, including endowment funds. The Ministry of the Interior is the competent authority that may file a petition with the court to request the dissolution of the foundation.

In practice, the ministry can determine whether a foundation is active by reviewing the annual report, which the foundation is required to publish each year. If the ministry finds that the public benefit purpose was not carried out for over a year, it usually issues a written warning and invites the foundation to remedy the issue.