Study On The Legal Issues Of Non-public Foundation

In 2004,the non-public foundation emerged in charity cause as a legal form, then the equity donation also put on the coat of legitimacy and step into the charity stage in 2009. Now the main way of equity donation is investing equities into a newly established non-public foundation, to provide long-term funds. Equity donation produces three effects. First, the non-public foundation will obtain the shareholder qualification and become a shareholder of public interest. Second, the non-public foundation is easily dependent on the donor or the corporate performance in respects of personnel, funds and decision-making,which is detrimental to the independent development of the foundation. Third, the common-profit right of the stock right will be transferred with the self-profit right, which does not meet the most optimum distribution of resources and the donor’s purpose.At present, China’s law that concerns on the non-public foundation from the perspective of equity donation is not enough. In the "management regulations of foundation",the issues that refers to the particularity of the non-public foundation is mainly concentrated in the original fund, personnel office conditions and the proportion of public expenditure. The specific management and operation problems were confined only in the academic discussion. And we only have a short circular of Ministry of Finance for 4 clauses to regulate the equity donation in 2009, which merely regulated the enterprise’s equity donation.In this paper, the author mainly focus on the shareholder status, independence and equity’s capacity allocation. In the first part, the concept, value and development process of non-public foundation and equity donation are introduced with their combination. We discuss the legitimacy and the particularity of non-public foundationin’s shareholder qualification, then the situation of controlling shareholder in the second part. The third part focus on the phenomenon that the non-public foundation gradually depended on the donor and the corporate performance, and we analysis the essence and the necessity of independence. Further more, based on the law, we find some ways to solve the dependence issue in respects of personnel, funds, decision-making, supervision and legal responsibility. The fourth part disucss the better equity’s capacity allocation by the use of trust, special shares, cumulative voting system, classified shareholder vote system, to meet the most optimum distribution of resources and the donor’s purpose.