The Foundations

Foundations in the Principality of Andorra were initially regulated by Law 11/2008 on foundations, with the intention of promoting initiatives to develop activities of general interest.

Fifteen years later, with Law 17/2023 of September 22, 2023, after noting that the measures promoted by the previous law and its successive modifications were insufficient to achieve the objectives, the will to adapt the legal framework of foundations was expressed, presenting an attractive legal framework.

There are two types of foundations in the Principality:

• private foundations, and
• public sector foundations

Article 1.2 of Law 17/2023 defines private foundations as follows:

“Private foundations are private non-profit entities that irrevocably commit certain assets or rights to the achievement of general interest purposes.”

On the other hand, public sector foundations are:

• established with “a majority contribution, direct or indirect, from the state organs, public administrations, and parapublic entities or public law entities of Andorra or public administrations and public law entities from abroad” and
• “that more than 50% of their founding capital is formed by assets or rights contributed or ceded by the referred entities”
• provided that the Andorran public participation is equal to or greater than one third of the contributions or the founding capital.

Foundations have a “Board” which is the governing and representative body of the entity. The Board is a collegial body composed of a minimum of three people, mostly Andorran or legally residing in Andorra, legal or physical persons, with legal capacity. The Board must have, at a minimum, a Chairman of Andorran nationality and a secretary, and has the capacity to make decisions affecting the life of the foundation as a legal entity.

Additionally, the “Protectorate” (which is under the competence of the State and exercised by the ministry that has the competences of Justice) ensures the respect of the foundational purposes and the sufficiency of the initial endowment of at least €100,000 as stipulated in the founding act, subject to formalization, by notarial deed authorized by a Notary of the Valleys of Andorra. In essence, the Protectorate protects the essence and substance for which the foundation was established, oversees the realization of the general interest inherent to the foundational entity, and controls if all legal requirements and obligations have been met (modifications of statutes, approval of the annual accounts, etc.).

In fact, the legal regime of Andorran private or public foundations provides for real and effective control of their accounting, even with the submission of the annual accounts to an external audit, in some cases, such as when the entity’s founding figure exceeds €300,000 or its annual ordinary income exceeds €20,000 (Article 27 of Law 17/2023).

What fundamentally differentiates a foundation from a company is its foundational purpose. Indeed, foundations are established under the premise of the general interest: the activities of foundations and their objectives can be very diverse, dedicating their efforts for example to improving the living conditions of the most disadvantaged people, to spreading knowledge or culture, and other causes of collective interest.

In this context, we might ask what the differences are between a foundation and an association.

An association is, according to the Qualified Law of Associations of December 12, 2000, “a voluntary grouping of three or more people who aim to achieve, by means not contrary to the laws, a legitimate non-profit purpose.” Additionally, an association can carry out economic activities, as long as they are correlated to its statutory purposes and are not intended to generate profits and distribute them among the members.

Therefore, the difference between a foundation and an association is not stark if we base ourselves solely on the substantial definitions of both entities:

• both have legal personality,
• are non-profit,
• can develop economic activities framed within their own statutory purposes,
• are registered in the corresponding national registry (Registry of foundations or associations),

Moreover, the fact that the Law of Associations uses the notion of “founding act” to define the fundamental act that allows, with the presentation of the statutes, to constitute and register an association, does not help to differentiate these two legal entities.

However, the choice between a foundation or an association depends on the purpose for which one wishes to establish one of these two entities. The general interest for foundations is not the same as for associations.

The foundation as a legal entity is by essence much more stable and solid than an association. Putting aside the fact that the amount of the initial contribution to establish a foundation is much more significant than to establish an associative entity, the social base of an association, its operation and its purely democratic structure constitutes its most distinctive point. In contrast, in foundations, the Board constitutes the only governing and representative body of the foundation (since this social and collective base does not exist in foundations), and the important decisions taken by the Board are made under the control of the Protectorate.

In summary, the main characteristic of the foundation is its purpose, its substance, and raison d’être: the general interest represents the guiding thread that determines both its legal and economic regime, which differentiates it from other legal entities.