About CSO - Non-Profit Associations Act
The Non-Profit Associations Act regulates the establishment and activities of non-profit associations in Estonia. This law sets out the rules that non-profit associations must follow, including what they can and cannot do.
This article provides an overview of establishing and managing a non-profit, as well as the legal assistance lawyers can offer to such organizations.
Purpose and Scope of the Non-Profit Associations Act
The Act defines legal entities whose purpose is not to generate profit. Non-profit associations may engage in various activities, such as promoting culture, sports, education, and charity. Their work is typically directed toward public benefit rather than profit-making.
Our law firm also has internal legal management experience in non-profits, enabling us to understand their operations, challenges, and governance not only as legal advisors but also from a client’s perspective.
Establishment and Registration of Non-Profit Associations
When founding a non-profit association, the requirements of the Non-Profit Associations Act must be followed, including the mandatory drafting of the association’s articles of association.
Preparing the Articles of Association
The articles must define the association’s name, location, objectives, member rights and obligations, procedures for joining and leaving, governance, and other key aspects. These are just some of the required elements; all requirements are listed in the Act.
Founders' Agreement
The founders must sign an agreement that includes the articles of association. This agreement must state the name and address of the association, the names and personal identification numbers of the founders, their obligations, and more. At least two founders are required, and these may be either legal or natural persons.
After preparing the articles and founders' agreement and completing other necessary steps, the non-profit must be registered in the Business Register. This includes submitting the founders' agreement, the articles, completing the Business Register application, and taking other required steps.
The steps above highlight only the most essential aspects of founding a non-profit. Timely and correct action ensures legality and enables successful achievement of the organization’s goals. A lawyer can carry out all these actions on behalf of the non-profit and advise on the necessary legal steps at each stage.
Governance and Member Rights
The daily management of a non-profit takes place according to its articles and decisions made by the board. Members have the right to participate in governance, including voting and running for governing bodies. They are also entitled to information about the organization’s activities.
The board manages the non-profit in accordance with the articles and the law. It is elected for a term of up to three years by the general meeting. All members may participate primarily through the general meeting, which is the highest governing body and must convene at least once a year. Day-to-day participation happens via electing board members aligned with member interests.
The general meeting handles key decisions such as amending the articles, approving annual reports, dissolving the organization, and more. It also has the power to elect and remove board members, serving as a supervisory body to some extent. A minority of members may demand an extraordinary meeting, but decisions typically require over 50% approval, and in some cases 2/3 of votes.
Any individual or legal entity that meets the criteria in the articles may become a member. Some associations have specific entry requirements, while others engage in broad recruitment campaigns and welcome anyone.
Members can resign at any time by submitting a written notice. The board may expel members for violations such as breaching the articles. These decisions may be contested. A lawyer can assist both the board and members in understanding their obligations and navigating any legal disputes.
Economic Activities and Funding of Non-Profits
Non-profits may earn income through economic activity, but this income must be used in line with the organization’s objectives. Funding may come from various sources such as government or municipal support, donations, membership fees, and project grants. Legal advice is often used to help secure additional funding.
Economic activities must follow the articles and the law, and are overseen by the board. A non-profit may generate profit, but this must not be its main activity, and profits must not be distributed to founders. Activities may include events, service provision, or selling goods—as long as they align with the organization’s mission.
Funding primarily comes from membership fees, donations, grants, and sponsorships. Membership fees are set out in the articles. Donations are financial or in-kind support for the organization's mission. Grants are funds for specific activities or projects. Sponsorships are funds given by companies or organizations in return for visibility or other benefits.
Non-profits must maintain proper accounting and submit annual financial reports according to the law. They must also comply with financial control and transparency requirements.
Lawyers assist boards in understanding and complying with these legal obligations. They can help design a funding strategy, explain member obligations regarding fees, and assist in applying for grants and sponsorships. Legal advice may also be needed in case of disputes, such as in the case of the organization Slava Ukraini and its controversial activities, where legal consultation should be sought before making final decisions.
The Role of a Lawyer in Non-Profits
Lawyers and law firms can advise non-profits both at the founding stage and during later operations. They often provide legal support to associations. The lawyers at Lepmets & Nõges are well-versed in non-profit law and can offer guidance on registration, governance, and legal limitations and responsibilities. They assist in drafting the articles of association and other essential documents.
Lawyers can also help with various legal issues such as tax, employment, or property matters. Our lawyers help non-profits understand their rights and obligations and provide advice on resolving disputes, whether in court or out of court.
Lepmets & Nõges Law Firm offers high-quality legal support for non-profit associations.
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