| Foundations, as trusts and companies, have played a major role in the development and progress of human society. They have casted the unique influence on promotion of social welfares and charities, on social status balance and on property protection. With their1000years or more of history since medieval Europe, foundations have been evolved from the traditional single-purpose public and charitable or private foundations to the combination of public and private ones, or/and the modern foundations of private interest and offshore foundations. The fact of the change from civil law countries to common law countries shows the foundations’significance in social and economic progress. This paper compares and analyzes the unique legal characteristics of public and private foundations including offshore foundations based on several representative foundations of civil law and common law countries for the purpose of full and systematical understanding about the legal system of these foundations and their unique parts and to open the subject to the academia and practitioners for their attention on the role and the legal system of foundations with the hope for a more in-depth study.The dissertation has six chapters with about190,000words. Chapter One is the foundations definition including the origin of the foundation and its development, the concept, features, regulated behaviour codes and their functions. The first section analyzes the origin of the foundation, its development in history in civil law and common law countries, and the roles of public and private foundations in different social and economic systems. This section will deal with the Middle Ages, Modern and Contemporary Stages, starting with the foundation in Ancient Rome, mainly on the impact on the foundation by different legal and social systems of the Middle Ages and Modern and Contemporary Europe with a continuous historical background and logical relations to prove the inevitable existence of the modern foundations and offshore foundations. Liechtenstein’s Persons and Companies Act1926is the precedent of the private interest foundation, which marked a turning point from thousands of years of traditional private interest foundations and customary law norms in the civil law to specialized law norms. The Panama’s Law No.25of12th June,1995on Private Foundations is a milestone in the development of modern foundation that started a new era of offshore foundations. St. Kitts’Foundation Act2003is the precedent of first introduction of civil law foundation in common law countries. In2009, Jersey, a member of the Commonwealth, adopted the legislation for foundations with the concept independent of the common law system. These international new concepts of legislation have had a profound impact on the world legislation. Section Two focuses on different interpretations of foundation concept in civil and common laws, as well as foundation natures. The foundation in civil law is an independent concept, unlike corporations and other business organizations. The purpose of foundation establishment determines whether it would be approved or obtains legal status via registration, while the purpose of the foundation in common law determines whether it can enjoy tax exemption. In addition, in civil law system there is no such foundation concept as in common law, rather the foundation in common law is the limited guarantee company with a charitable purpose. Section Three focuses on the attribute of the legal person of a foundation, especially foundations without shareholders or other features that are different from companies and other business organizations. Section Four is about the important legal documents of setting up a foundation---the Charter and Regulations. A foundation obtains its legal status by registration of its Charter. The Charter is the legal basis and the code of conduct on which foreign courts recognize it with certain governing laws on creation and applicable laws on management. The Charter and Regulations of public foundations must be registered and filed for the easy access by beneficiaries or inquiries from the public. However, the Charter of a private foundation must be registered, but its Regulations do not have to be registered and filed as its purpose is for private interests rather than public interests. Section Five is on the foundation role. A traditional foundation always has close relationship with or be associated with public welfare and charity. The role of modern foundations, especially offshore foundations has been rarely mentioned. In fact, in a social property problem concerning various legal relationships where a trust can’t provide solutions, a foundation is able to play an important role.Chapter Two analyzes the foundation’s establishment and eradication of legal entity including a public and/or a private foundation’s creation, revocation, dissolution and the redomicile, and registration, management, supervision and information disclosure, focusing on redomiciling issue, because it means the legal entity’s eradication, continuation, change of applicable laws, and the legal relationship among all the parties. The creation of a foundation must meet three "certainties". They are the certainty of the founder’s willingness, the certainty of a foundation’s purpose, and the certainty of its property. This is different to the three "certainties" when a trust is created by a trustee but with similarities, which are the certainty of a trust purpose, the certainty of property, and the certainty of beneficiaries. The founder himself or through a proxy by a founder creates a foundation and donates property. The founder can create a foundation by wills, notarized contract, and oath, as well as by documents such as heritage disposal contracts. In a trust, a beneficiary is one with a fiduciary relationship, while if a beneficiary of a public foundation in a foundation, when not specified, is one as the foundation party is still under discussion in the academic world. This Chapter also studies a brand new legal concept---offshore foundation. Offshore foundations are usually a form of modern foundation standardized legal system by offshore financial centers. One of its important features is its legal person is self-governed, is free to choose the legal system at its convenience and is free to re-domicile the foundation and change the offshore foundation’s jurisdiction. Definition on the concept of "public" varies from country to country, and if religion in a public foundation can be said "for public" has different expressions in different countries. If a foundation can be registered will depend on whether it has the nature of "being for public" in the civil law system, but in common law countries, it has nothing to do, when creating, with the "public" concept. The key question is, in common law system, whether it can enjoy tax exemption. Information disclosure of private foundations is subject to its Charter and its Regulations and conventions, especially as private contracts agreed upon the interests of the beneficiaries and the Foundation’s internal affairs are not registered for publicity, which has made it a typical example of contract freedom. This is the prerequisite for the rapid development of private foundations, making it unique in protection of property.Chapter Three analyzes the legal characteristics of the parties, and their legal connections, and the issue that if the behavior of the creation of a foundation by a third party is defined as an agent behavior, which will explain if the donation is defined as the conduct of the agents or prohibited behavior. The founder or a third person can create a foundation by wills, and if the disposal of property is the identical behavior, agent behavior, or trust behavior. If the property owner or donator(s) create a foundation by a third person, then there comes the issue of how to deal with various legal relationships resulted, in particular, how the property owner reserves the right in the Charter and Regulations how property rights return to the property owner rather than a third party, and how to deal with relationship between foundation administrators, protectors and beneficiaries. Different countries have different legal regulations, so there are differences in the composing number(s), qualifications, supervision and other conditions concerning foundation councils. Thus this chapter mainly discusses the characteristics of the rights and obligations of administrators under the different legal systems. Administrators under a foundation are not the trustee in a trust or the directors in a company. They neither possess the property nor subject to shareholders. The discussion is trying to make clear if there are fiduciary relationship and contractual relationship between the administrators and the property donor, between the founder as a third person and the beneficiaries, as well as differences between a trust and company system. A foundation beneficiary distinguishes a trust beneficiary or a company shares beneficiary by the fact that a foundation beneficiary does not have a valid consideration, that is beneficiaries do not have a valid consideration in the time and under the conditions stipulated in the Charter and Regulations, they are able to enjoy the benefit in the foundation property and propagate interest rates. Although charity Foundation and private interest foundations are different in the beneficiary conventions, laws in different countries regard the beneficiaries as an important means to realize the Foundation for the purpose of the carrier rather than the trust relationship between people in the trust system or one of the three uncertainty, because there is no legal certainty Foundation, the beneficiary is the Foundation for the creation of one of the three uncertainty. Different laws have various definitions on the concept of whether Foundation beneficiaries are foundation related parties. Liechtenstein Companies Act classifies beneficiaries as the entitled beneficiary, the intended beneficiary, any beneficiary, and the ultimate beneficiary. Most countries have only one kind of beneficiary. Only a few jurisdictions classify beneficiary as beneficiary and ultimate beneficiary. Based on a legal analysis of countries Foundation, beneficiaries will be, in this paper, divided into fixed beneficiary or directional beneficiaries and indefinite beneficiary or non-directional beneficiaries. International academia has little research on the beneficiary rights and obligations with few complete papers discussing this issue. This paper will focus on analysis of the beneficiary’s beneficial interest of beneficiary claims or property nature of restricting the rights of the beneficiary, the beneficial interest benefit rights and transfer and inheritance. Public foundations and private foundations have different requirements on protectors. Usually the protectors of a public foundation is appointed by government agencies, while private foundations may have different protectors according to the nature of the foundation, for example, the protector of a family foundation may be the creator or his family members or the heir of the creator. Protector rights convention is essential, as this is related to the issue how administrators manage the foundation, and whether the protector has too strong rights so as to interfere managers to act in accordance with Charters and Regulations. If the protector is-the founder himself or herself, his or her too strong rights would probably fail the purpose of the foundation, and therefore may make the foundation invalid.Chapter Four is on foundation behavior analysis:the effectiveness of such behavior and the various foundation legal relationships generated by its founder(s) or the donation behavior by a third person. In international studies on foundations, nobody analyzes the reasons of the emerging of foundations by the external and internal factors. There are rarely discussions on the relationships between the beneficiary and the foundation, and the real right and creditor’s right relationship existed among related parties. After the analysis of laws in different countries, I propose that the external and internal factors are the reasons for the establishment of a foundation. According to the Articles and Regulations the beneficiaries and the foundation as well as the related parties agree that there existed relationships with different real right and creditor’s right among them. This point must be made clear because trust beneficiary system is based on equitable system, but some scholars still contrast foundation beneficiary rights and obligations in this system. The difference between a foundation and a trust lies in that a foundation is the owner of the property while a trust is only a civil legal relationship. The trustee instead of the trust owns the trust property. This is an important distinguish from a foundation and a trust.Chapter Five refers to foundation’s independent property regime. Foundation property is different from the property of the founder, the donor or the beneficiary. The legal status means the legality of the possession of the separate property, and therefore against a third party or creditors of a founder a donor or a beneficiary. Foundation property disposal eventually will be agreed upon by Charter and Regulations, that is, it may be transferable to other foundations or classified as state-owned. It can also be returned to the founder or a third person, as well as being transferred to beneficiaries.Chapter Six concerns the laws applicable to foundations, mainly on the creation, the management and the property. Modern foundations, particularly the development of offshore foundations create chances and favorable conditions for the founders to choose laws in their own favor. Thus, the issue of applicable law becomes prominent, especially offshore foundations relate to applicable laws of different countries so that it is difficult for courts to recognize. This chapter will study the issues how courts in find applicable law to foreign foundations or national law applicable to foreign foundations, and whether it can be applied to the International Foundation Conventions or other international treaties. |
