Can our company form a civic association or be a member of one?

Companies form civic associations for a variety of reasons: to support sport or culture in their region, to join forces with other companies in their sector, or to separate non-profit activity from their business. The question then arises whether the company itself can form the association and how much control it will have over it. The Act on Association of Citizens distinguishes between membership, which it opens to legal entities, and formation, which it entrusts to citizens.

Membership of a legal entity

The Act expressly contemplates companies as members:

Legal entities may also be members of associations.

— Section 2(2) of Act No. 83/1990 Coll. (unofficial English translation)

The rights and obligations of a member are governed by the statutes (Section 3(3)). Where a company is a member, it is therefore useful for the statutes to specify who represents it at the members’ meeting, what vote it has, and whether members may be legal entities only, individuals only, or both groups. Nor does the Act on Association of Citizens address what happens to a company’s membership if the company ceases to exist, merges with another company or changes owner. This situation, too, should be expressly regulated in the statutes.

Who files the application for registration

Formation, however, is reserved to citizens. The application for registration is filed by a preparatory committee:

An application for registration may be filed by at least three citizens, at least one of whom must be over 18 years of age […].

— Section 6(2) of Act No. 83/1990 Coll. (unofficial English translation)

The members of the preparatory committee sign the application and state their names, birth numbers and addresses, so only natural persons can serve on it. Where a company initiates the association, the preparatory committee is usually made up of its members, managing directors or other people connected with the project. The company becomes a member after registration, in the manner laid down in the statutes.

Where the link to the company has its limits

An association is a separate legal entity (Section 2(3)) and the Act on Association of Citizens does not apply to association for the purpose of gainful activity (Section 1(3)(b)). If it were apparent from the statutes that the association is to serve primarily the business of the founding company, the registration authority may assess it as association for the purpose of gainful activity and refuse registration (Section 8(1)(a)). The objective of the association’s activity must therefore be its own and must be framed so that it stands up without reference to the company.

Nor can a company own an association in the way it owns a subsidiary. No one may be compelled to join, and anyone may freely withdraw from an association (Section 3(1)). The company’s influence therefore depends on how the statutes arrange the bodies, the election of the statutory representative and voting. These rules need to be thought through before the application is filed, because a later amendment of the statutes requires a decision of the association’s bodies and notification to the registration authority.

The name also calls for care. It must not be capable of being confused with the name of a legal entity already operating in Slovakia (Section 6(4)). The Act makes no exception from this rule for the company that initiates the association, so it is safer to distinguish the association’s name clearly from the business name.

When a civic association is not the right form

Besides associations, the register of non-governmental non-profit organisations also records foundations, non-profit organisations providing services of general benefit, and non-investment funds (Section 2(2) of Act No. 346/2018 Coll.). Each of these forms has its own Act and different rules of formation. If the company does not want to build a membership base but wants to set aside assets for a particular purpose, these forms should be compared with a civic association before any statutes are drafted.

We prepare statutes that cleanly separate non-profit activity from the company’s business while securing it appropriate influence, as part of our forming a civic association service. We describe how registration itself proceeds in our article on registering a civic association.