Foundations as commercial entities : anathema to their nature?

Abstract

Act XIII of 2007 ushered changes to the Civil Code, most notably by the introduction of the detailed regulation of legal organisations: foundations and associations. This legal development did not mark the introduction of foundations, given that foundations were always considered connatural to the civil law precepts at the basis of the Maltese legal system and were set-up, despite sparse legal regulation, on the basis of the traditional understanding of the institute. Following Act XIII of 2007, the governing principles of foundations were spelled out in the law to the extent that this allowed scope for intellectual appraisals of why certain legislative decisions were made, and the implications thereof in a broader context. The thrust of this thesis is to consider foundations as members of a wider category of legal entities set up to fulfil a particular purpose, and in ultimate analysis, to fathom why the legislator has expressly precluded foundations from the remit of entities that can be set up to fulfil a commercial activity. Chapter 1 sets forth a chronological consideration of the evolution of entities set up to carry out commercial activities, which analysis indicates how the ad hoc nature of commercial activities moulded the regulation of the entities de quo and led to the present day commercial entities which are specially devised to meet the needs of the commercial world. Consideration is made of the development of the societas in Roman law, the societas and commenda in the Common Law world, and ultimately, the present day development of commercial partnerships in Maltese law. Chapter 2 poses the question whether foundations are to be construed as non-commercial entities. A historical appreciation of the institute from a teleological perspective leads to a review of the present-day position under Maltese law. Foundations are compared to other legal institutes, and the Maltese approach is considered in juxtaposition to that characteristic of other jurisdictions. The scope of the thesis reaches its culmination in Chapter 3 whereby the regulation of different aspects of commercial entities is compared to the regulation of foundations, and variances are related to the tenor of this thesis: whether in ultimate consideration, the conduct of commercial activities by foundations would be anathema to their very nature. Accordingly, an analysis of a myriad of regulatory aspects, such as the constitutive documents; registration requirements; separate juridical personality, limited liability et sequitur is carried out. This Chapter highlights how the regulatory regime of the Maltese foundation reflects the non-commercial nature of the entity, even though this must be qualified on the basis of considerations that are elaborated further therein. The conclusion of this thesis is discussed in Chapter 4 in the light of the various considerations made in the previous Chapters. It is apparent that foundations have the potential to become ubiquitous tools for the fulfilment of a broad array of scopes. This rests, however, on the scope it is intended to imbue foundations with at the very outset. Every jurisdiction considered has reflected this election in its regulatory set up, which, in ultimate analysis, is congruent with the day-to-day uses which foundations carry out therein.