Foundations and Associations

Foundations and Associations

The applicable Romanian law regulates two different types of nongovernmental and non-profit organizations (hereinafter referred to as "NGOs”), which can be set up in Romania: (i) associations; (ii) foundations. Both become legal persons after their incorporation.

The association is a legal body set up by three or more persons who share a material contribution without the right to refund, their knowledge or work in view of realizing activities of general interest or of interest to particular communities or in their own non-pecuniary interest.

A foundation is a legal body set up by one or more persons who, based on a legal act concluded between living persons or based on a last will, constitute a patrimony attributed permanently and irrevocably to the realization of a general interest or of an interest of a community.

Apart from the differences presented above, there is also the cost difference between these two types, the establishment of a foundation is more costly than of the association.

Foundations are generally constituted in view of performing charity acts while associations can be set up even for the personal interest of the founders, i.e. they can set up an association having as object the creating of a sports club for its members.

It is important to observe that there are no limitations as to the citizenship or nationality of the founders of either the association or the foundation: they can be Romanian or foreign persons.

The most important aspect which has to be taken into consideration by persons interested in setting up an association or a foundation in Romania is the one that they can assure financing for these NGOs by way of setting up a Romanian commercial company having as sole shareholder the respective NGO. The eventual profit earned by commercial companies set up by NGOs can be either reinvested in the activity of the companies, or can be transferred through dividends to the NGOs.

This aspect is worth taking into consideration by persons who wish to do charity in Romania but lack the adequate funding for their activity. They can thus use the profit of the company set up by their NGO to fund the NGO’s activity.

Other financing resources admitted by the Romanian law for NGOs are the following:
- Member subscription fee;

- Interests and dividends resulting from placing the available amounts in bank accounts or other investments allowed by law;

- Dividends issued by the commercial companies set up by the NGOs;

- Revenues realized through direct economic activities;

- Donations, sponsorships and wills;

- Resources obtained from the state budged or from the budget of local authorities;

-Other resources allowed by law.

There is a difference between associations and foundations with regard to the funding resources available, namely foundations are not allowed to obtain member subscription fees.

Another financing resource for the Romanian NGOs is the possibility to obtain resources from the Romanian state budget or from the budget of local authorities. 

Moreover, we mention that Romanian NGOs are allowed to pay salaries to their staff. Thus, if funding is adequate, the NGO can develop its activity and benefit from the services of in-house staff or third party contractors.

The incorporation of a NGO is very straight forward and can be done even without the physical presence in Romania of the persons who are setting up the NGO.

It is necessary to contact our lawyers, specialists in incorporating NGOs and they will instruct on the documents and funding necessary to incorporate the said NGO. The incorporation of the commercial company having as shareholder the NGO can only be done after the finalization of the incorporation procedure for that NGO.