Introduction to Foundation Board Resolution Challenges
In legal literature, there’s a dearth of studies concerning the contestation of decisions made by foundation boards. Professor La Casa is taking the initiative to address this gap in our legal understanding. Below, I’ll summarize the contents of the work published in the Journal of Commercial Law, supplemented by my own observations. These observations, albeit provisional, stem from a decade-long study focusing on challenging corporate resolutions (the latest published version can be found here). I won’t delve into aspects that I believe don’t exhibit particular complexities in the context of foundations.
The Legal Framework
The crux of the issue lies in the scant guidance provided by the Foundation Law concerning the contestation of foundation board decisions. The author begins by placing the regulation within the context of Article 35.2.2º of the Foundation Law. According to this article, the Foundation’s Protectorate is empowered to contest board decisions that contravene the law or the bylaws (see also Article 48d of the Foundation Law Regulations). Additionally, Article 39.5 of the same regulations stipulates that acts related to “liquidation” that contravene the law or the bylaws are contestable by the Protectorate.
La Casa suggests that there should be little doubt about referring to the rules and jurisprudence regarding the contestation of resolutions by corporate bodies to supplement the contestation of foundation board resolutions. He also argues that this regulatory framework falls under the exclusive jurisdiction of the State and, therefore, applies to foundations established under regional legislation as well, given its procedural nature.
Foundation board resolutions, akin to resolutions made by boards of directors or executive committees in other corporate entities under our law (such as companies and associations), are contestable. Regarding references to the “acts” of the board, La Casa suggests that it could encompass decisions made by individual board members delegated with powers without constituting a collegial body. He further asserts that contestable acts would include “actions undertaken by the board,” with the aim of obtaining a judicial declaration of their ineffectiveness. Therefore, contestation could encompass both the resolution itself and the legal act resulting from its execution, even if the act wasn’t preceded by the corresponding resolution. For instance, a contract entered into by the foundation as a consequence of a prior resolution by its board. This interpretation finds support in the Protectorate’s authority to contest “alienation and encumbrance acts” concerning foundation assets.
Active Standing for Contestation
The issue of active standing for contestation raises questions about whether, in addition to the Protectorate, foundation board members who disagree with a board resolution are entitled to contest it. La Casa answers this in the negative, although the arguments presented may not be entirely convincing.
- The Foundation Law doesn’t expressly provide for it. However, the absence of such provision isn’t definitive since the relevant regulation isn’t found in a provision addressing active standing in contesting board resolutions but rather in one regulating the Protectorate’s competencies.
- The argument that “the legislator didn’t intend to impose any duties on board members regarding contestation… considering the imperative altruistic performance of the position” seems more like an argument in favor of recognizing the possibility or capacity of board members to contest resolutions.
- Fundamentally, denying individual board members the active standing to contest resolutions that harm the foundation’s interests would be inconsistent with their fiduciary duties towards the foundation.
Conclusion
In conclusion, any third party with a legitimate interest, particularly board members, should have active standing to contest foundation board resolutions that contravene public order or directly affect their rights or interests. This ensures compliance with their fiduciary duties towards the foundation and upholds the principle of reducing state intervention in foundation operations. Thus, recognizing the broad organizational autonomy that foundations should enjoy, given their origins in private autonomy and constitutional recognition as exercised by the founders.