The reorganisations of associations and foundations are governed by specific rules under Portuguese law. The main laws to take into consideration in this regard are the Portuguese Civil Code and, in the case of foundations, the Legal Framework of Foundations.
The merger of foundations is subject to a decision by the Prime Minister. The merger can only take place between foundations pursuing similar purposes and needs to be first proposed by their administrative bodies. The founding parties of each foundation must be consulted and the merger must not collide with the will of these founding parties (either as expressed in the consultations conducted with them or as expressed in the deed of establishment of the foundation, if the founding parties are already deceased).
The Prime Minister may also determine that an existing foundation is to be merged with another foundation, even if no merger has been proposed by the foundations’ respective administration bodies (but subject likewise to prior consultation with the founding parties) if (i) the original purpose of one of the foundations has been fulfilled or has become impossible, (ii) the original purpose of one of the foundations has ceased to have relevance for society as a whole or (iii) the foundation’s assets are not sufficient for carrying out its intended purpose.
In the case of foundations that have been awarded with the public utility status, or in the case of public foundations, assets that are part of the initial contributions made by the founders or assets that are especially important for the foundation in light of the foundation’s purposes, may only be transferred with a prior authorisation from the Prime Minister, subject to the relevant transfer being deemed void in the absence of such authorisation. Otherwise, the administrative body and the executive body have the required competences to approve and implement transfers of the foundation’s assets.
A foundation can become extinct in the following cases:
- if its fixed duration has expired;
- if a cause for extinction, foreseen in its creation, has occurred;
- in the context of insolvency proceedings;
- if its purpose has become unlawful;
- if its activities do not correspond with its stated purpose;
- if a court of law orders the extinction of the foundation due to inactivity of the foundation for three consecutive years;
- if its purposes are being pursued by illicit or immoral means; or
- if its existence is incompatible with public policy.
The Prime Minister can also order the dissolution of a foundation.
As regards the destination to be given to a foundation’s assets in the case of extinction of the foundation, specifically, and pursuant to the Legal Framework of Foundations, such matter should be primarily governed by the deed of establishment of the foundation. In the absence of regulation of this matter in such deed, the assets shall be awarded to a foundation or association with similar purposes, chosen among an order of priority approved by the administrative body or the Prime Minister. If none of the entities in the approved order of priority accept the assets, the assets shall be awarded to the Portuguese state.
In the case of associations, and pursuant to the Portuguese Civil Code, any changes to the articles of association or the extinction of the association must be approved by the general meeting of associates. Consequently, any reorganisations entailing a change to the articles of association (such as a change to the purpose of the association) or the extinction of the association must be approved by this body. As regards the destination to be given to an association’s assets in the case of liquidation, specifically, and pursuant to the Portuguese Civil Code, such matter may be governed by the by-laws of the association or by a resolution of the general meeting of associates, it being possible, for example, to distribute the assets to the associates in the case of liquidation, or to distribute all assets to another association or a foundation. If an association is in the process of liquidation and no regulation of this matter is provided by its articles of association or a resolution of the general meeting of associates, a court of law may, following a petition from the Portuguese Public Prosecutor’s Office, from an associate, or from any interested third party, decide to award all assets to another non-profit entity or to the government with the means to ensure, as far as possible, that such assets will be used for purposes similar to those of the extinct association.
As regards sales and other transfers of assets other than in the context of liquidation of the association, the articles of association shall provide the rules to be complied with for such purposes. However, according to some academic authors, transfers or other actions of disposal of assets that, in light of their nature or value, are structural for the association, must always be approved by the general meeting of associates before being carried out by the association’s administrative body.
Finally, it should be noted that certain types of associations are regulated by specific legislation, which may provide for special rules in relation to the above matters.
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