Endowment funds serve as enduring structures adopted by companies, institutions or individuals to support works that are important to them. When the initial capital is invested appropriately, the endowment fund can provide ongoing funding for charitable, cultural or educational initiatives over the long term.
Setting up your endowment fund requires time, resources and a thorough understanding of current regulations. However, once established, your endowment fund can play a crucial role in the long-term support of the causes you care about. Find out in this guide why and how to set up an endowment fund.
What is an endowment fund?
An endowment fund is an organization with a specific legal structure dedicated to raising and managing funds to support causes in the fields of culture, education, research, the environment...
The principle of the endowment fund was created in France in 2008 to encourage patronage and the sustainable financing of actions undertaken for the common good. It combines the advantages of the1901 association and the foundation without their disadvantages.
As a non-profit legal entity under private law, an endowment fund has assets made up of donations, bequests or any other form of endowment. These assets are invested to generate income, which is then used to finance projects of general interest, in line with the objectives set by the founders.
Endowment funds offer a degree of legal flexibility to organizations or individuals wishing to promote long-term philanthropic projects, while being subject to rules of governance and operation.
Why create an endowment fund?
The endowment fund is fiscally advantageous, as it benefits from the tax status of patronage. All donations to the endowment fund are eligible for tax reductions and are exempt from transfer duties. Donations can be made in cash, in kind or in real estate, and can come from individuals or companies.
Unlike associations and foundations, the endowment fund stands out for its rapid financing and flexibility. They are a particularly popular financing tool for heritage preservation initiatives. Many châteaux, for example, have their own endowment funds, which help finance the restoration and upkeep of their buildings.
As part of their CSR approach, companies can also create endowment funds to strengthen their brand image and reputation.
Unlike one-off donations, an endowment fund is designed to endure over time. Assets are wisely invested to guarantee a continuous source of funding, ensuring long-term impact and planning for larger-scale projects.
Create your endowment fund in 4 steps
Creating an endowment fund is a relatively straightforward process. Whether you are an individual or a legal entity, private or public, you can create an endowment fund simply by making a declaration to the prefecture, followed by publication in the Journal Officiel. However, in the case of an asset donation, it is preferable to use the services of a notary to draw up an authenticated deed.
The only constraint to consider is the initial deposit. You will be asked to contribute a minimum of €15, 000 during the first financial year. This deposit is irrevocable.
Let's take a look at how to create your endowment fund:
- Fill in the form to request publication in the JOAFE (Journal Officiel des Associations et Fondations d'Entreprise).
- Set up a board of directors to manage your fund. This board should consist of at least three members, including a chairman, treasurer and secretary. These people will be responsible for governance and decision-making.
- Draw up the articles of association in accordance with current legislation(article 140 of the law of August 4, 2008 and the decree of February 11, 2009). Although relatively flexible, the articles of association must include at least the name of the fund, the address of the registered office, the object, the duration of the fund's creation, the identity of the founders, the composition of the board of directors, the procedures for appointing the chairman, the composition of the assets and resources, as well as the conditions for dissolution, merger and liquidation.
- Register your endowment fund with your local prefecture by submitting the above-mentioned documents. You will receive a registration number. Once the announcement in the JOAFE has been published, you are officially able to act as an endowment fund.
Since their inception, endowment funds have grown in popularity. Unlike not-for-profit associations, which must constantly seek funding, endowment funds are endowed with capital, giving them great financial stability. This characteristic also offers greater flexibility in the use of funds from their pro account, enabling them to support a diversity of causes and projects. This versatility attracts a wide range of donors.