The Hungarian Parliament has voted in favor of a bill to introduce a new form of asset management foundation ('vagyonkezelő alapítvány'), which will serve as a special type of investment vehicle. The bill intends to enable the establishment of foundations for professional asset management purposes, which, according to the government, is a significant improvement to the current legislative framework as the existing legal forms of fiduciary asset management (also referred to as a 'trust') and ordinary foundation do not allow for the pursuit of business activities. This new form of foundation is intended to enable families to preserve the value of their estates for generations and would also help public bodies finance educational, cultural, sports or health-related activities.
The proposed form of asset management foundation stems from similar legal forms existing in Western European legal systems. However, it is intended that the Hungarian form would be more straightforward and sustainable than, for example, the somewhat similar 'Privatstiftung' in Austria or Lichtenstein.
The bill envisages two types of asset management foundation, one for public and one for private purposes. The main difference between the two types is that special provisions would apply to public purpose asset management foundations, for example, the scope of their activities would be limited to the financing, maintenance, operation and/or support of educational, cultural, health, social, youth or sports-related activities, and it would not be possible to limit the number of beneficiaries. According to the government spokesperson, many Hungarian universities could be financed through such public purpose asset management foundations in the near future.
The new law provides for certain safeguards to ensure the long-term sustainability of asset management foundations by requiring a minimum capital of HUF 600 million (approx. €1.9 million or US$2.1 million), which could be covered by cash and/or in-kind contributions (e.g. movable assets, real estate or intellectual property). The minimum capital of HUF 600 million must be preserved at all times during the existence of the asset management foundation, i.e. the equity of the foundation must not decrease below this threshold.
Asset management foundations will need to have a board of trustees (as the main management body), a statutory auditor, a supervisory board, an investment policy and legal representation. In certain cases, an asset controller must also be appointed to monitor the investment and asset management activity of the foundation. Only a defined set of entities and persons can be appointed as asset controllers, such as law firms or auditors.
In contrast to the legal form of fiduciary asset management, the founder or founding members of an asset management foundation may specify more than one purpose for the entity. While the main purpose would generally be the management of assets, founders would also be free to specify other purposes, including the generation of profits for the beneficiaries through various economic activities. The new legislation also allows asset management foundations to acquire shares in profit-oriented companies (with certain limitations).
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