What should you do with the assets of a charitable foundation upon the liquidation?

Our company has been providing a wide range of services related to the establishment and legal support of the activities of charitable organizations for many years.

Along this way, we have faced various issues related to the functioning of charitable foundations: from the registration procedure to disputable points arising during the liquidation of the charitable foundation.

During its existence, a charitable foundation accumulates assets, having the status of a non-profit organization. Sometimes when approving a new version of the charter, the provisions on prohibition of distribution are removed, including in case of liquidation.

But what happens to the assets of the charitable foundation after its liquidation? And what to do with the foundation’s assets when its sole  owner dies?

Related article: A Charitable Foundation: How To Set Up? Our Experience In Ivano-Frankivsk Region

Can you manage the assets of the charitable foundation at your discretion upon its liquidation, in case of the respective amendments to the charter?

No, you can’t. The charitable foundation’s activities are regulated not only by tax legislation, but principally by the relevant Law of Ukraine “On Charitable Activities and Charitable Organizations”.

This law stipulates that in case of termination of the charitable foundation, its assets shall be transferred to another organization or to the state budget. And it does not matter whether the charter contains such a provision or not.

Moreover, when you get the non-profit status for your organization, the obligation to transfer your assets to other non-profit organizations or to the state budget in case of termination of the foundation’s іactivity shall be stipulated in your Charter.

By simply removing this clause from your Charter, you risk losing the non-profit status and all tax advantages associated with it.

Related article: How To Register A Children’s Charitable Foundation?

What happens to the assets of a charitable foundation when the sole founder who is also the director of the foundation dies?

It’s almost the most controversial question. On the one hand, we have the Civil Code of Ukraine, which states that:

  • all rights and obligations shall be transferred to heirs;
  • if there are no heirs, the heritage is considered “extinct” and becomes the property of the territorial community.

On the other hand, the legislation on charitable activities in no way covers the death of participants. Unlike corporate rights in commercial enterprises, the possibility to inherit the right of becoming a member of a charitable foundation is not provided therein.

At the same time, the acceptance of inheritance is discordant with the very notion of a charitable organization. Since its assets did not in any way belong to the deceased participant.

Pursuant to the Law of Ukraine “On State Registration of Legal Entities and Individual Entrepreneurs”, in order to withdraw the deceased member from the organization, it is necessary to provide, among other documents, a copy of the death certificate. The law of Ukraine does not provide for any ways of accession instead of the deceased person.

In practice, therefore, the general rules of the Civil Code are applied to such cases.

Related article: Profitable Activities Of Non-Profit Organizations: Is It Possible And Under What Conditions?


So, if you want to make the distribution of assets upon the charitable foundation liquidation legally correct, don’t hesitate to contact our specialists. We will answer all your questions in a simple and clear manner.

Publication date: 02/01/2020

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Name: Marina Losenko

Position: Associate

Education: National Aviation University

Knowledge of languages: Russian, Ukrainian

Email: [email protected]

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