Foundations established prior to this date (existing foundations) were given till 2010 to register. This deadline was extended by two more years and now such foundations must register with the Registrar for Legal Persons by 31 March 2012

There is a large number of existing foundations. There are pious foundations, mostly connected to the Catholic Church and religious purposes. There are marriage legacies and even some particular private family foundations which were governed by the Civil Code. There is also a group of existing foundations which were set up for social purposes being philanthropic or charitable, educational or environmental and the like. Finally, there is a group of public foundations, which are controlled by the government. Some of the above are exempted from registration: Pious foundations are exempt and continue to be governed by Canon Law. For the avoidance of confusion this has nothing to do with the Voluntary Organisations Act.

Until existing foundations register, they are not affected in any way. In practice, however, it is being noted that when an existing foundation seeks to enter into agreements, practical issues tend to arise due to an implied irregularity in status and third parties interpret their powers very restrictively. Registration solves this and all ambiguities are eliminated. The liability rules of administrators are also negatively affected by non-registration by the stipulated date, so it is important for administrators that they do register the foundation which they administer.

The Second Schedule to the Civil Code establishes the requirements which are necessary for a new organisation to be registered and provides that a foundation may only be constituted by virtue of a public deed inter vivos or by a will. The law also establishes the constitutive elements which a deed of foundation must contain on pain of nullity.

These requirements led to a situation whereby certain existing organisations, particularly foundations and associations, which existed prior to the coming into force of the Second Schedule to the Civil Code, were non-compliant with the new requirements in the Schedule, and are now having problems to register with the Registrar for Legal Persons.

The founders or members can amend the constitutive instrument of the existing foundation or association to include all the elements required by law. In certain cases, however, amending such constitutive instrument is proving to be difficult for various reasons. To solve the problem, the Civil Code (Second Schedule) (Existing Organisations) Regulations, 2011 were issued to grant the administrators of an existing organisation (however established) the authority to amend or supplement the statute of such existing organisation to align it to the requirements of the law so that this can then be registered. The board of administrators has such powers and authority notwithstanding anything stated in the statute of such existing organisation. Some requirements, such as the need to have the word “foundation” in the name, are being waived for existing foundations as several are called institutes, schools, funds and other names.

The administrators must notify, in writing, all interested parties within the existing organisation as to how the statute has been supplemented or amended so that it complies with the law to permit registration, and that it has been registered.

If the administrators do not register a foundation within the statutory period, there will be legal implications in that administrators will then enter into future transactions at their own risk as they could potentially be personally liable for the acts of the unregistered foundation.

The reason behind this is that without registration, it is difficult for third parties to officially confirm who the administrators are and that the activities being carried out are within the objects of the foundation. Lack of access to official information implies a shift of the risk to the administrators of the foundation. So registration serves a very important function of ensuring that, except in cases of fraud or abuse, no one will become liable for the obligations of the foundation except the foundation itself.

It is important to note that pious foundations and marriage legacies are NOT obliged to register but will be subject to the limitations and risks stated above if they do not. In these cases this may be acceptable as they are very passive forms of foundations and do not regularly enter into obligations, do not buy or sell property, do not employ people, borrow money or give guarantees. These foundations limit themselves to using the endowments they have only for the limited objects for which they have been created. Of course they can be registered if they so wish.

Registration with the Registrar for Legal Persons takes place at the Public Registry in Valletta and the officers at the Public Registry are very helpful and ready to assist in solving some of the issues which may arise.

Dr Max Ganado is a lawyer by profession