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Drafting Provisions The charter
of a foundation establishes the basis for the structure as a legal
entity and areas of accountability. As a result, careful consideration
must be given to the objectives of the founder and the desired governance
of the foundation.
Importantly, the foundation’s intent to manage its own assets
must be set out in the charter. The charter must designate the beneficiary
or identify the means by which the beneficiary is to be ascertained,
or state that a foundation has been formed to benefit the public
at large.
Many options are available to the founder. The mechanisms for the
appointment, removal, period of office and representative authority
of officers of the foundation, including the number and description
of such persons and the appointment, removal and period of office
of the auditor, if any, to the foundation are at the discretion
of the founder. Unless the foundation is public in nature, the charter
is likely to reserve the right to appoint or remove an auditor to
the founder or to make such appointment optional.
Providing for the endowment of supplementary assets of the foundation
in addition to the initial assets is a very important step in drafting
the charter of a foundation. The absence of this provision may inhibit
the ability to make further contributions to the foundation.
The addition or removal of beneficiaries, the appointment of a
foundation council or other supervisory persons such as a protector
or committee of protectors and specifying the duties, functions,
powers and rights to remuneration of a protector or committee of
protectors and specifying circumstances in which the charter may
be amended, if any, are useful planning tools.
A further consideration is the reservation of rights or powers
to the founder. The founder may retain the power of appointment
and removal of the foundation council; power to appoint and remove
officers; to nominate, add and remove beneficiaries; to establish
the dispositive provisions of the foundation; to retain powers,
to give advice or directions with regard to investments; to appoint
and remove a protector, protector committee or some similar body;
and power to amend and revoke the charter. The founder may assign
powers to any person.
The charter, importantly, may require or permit the making of articles.
Where the charter provides that articles shall or may be made, such
articles may without limitation include regulations:
- Concerning the distribution of assets made, or to be made, by
the governing bodies of the foundation.
- Providing for the identification of any initial beneficiaries,
or any beneficiaries to be designated at a later date, of the
foundation.
- Providing for the identification of the remaining beneficiary
upon a winding down of the foundation.
- Providing for the regulation of any governing bodies of the
foundation.
In the absence of articles, the Act will apply.
To view sample Charter document, please click
here.
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