Nicolai Xuereb July 16 2009 The Maltese Foundation: A Vehicle for Corporate Social Responsibility Fenech & Fenech Advocates | Private Client & Offshore Services - Malta Nicolai Xuereb Private Client & Offshore Services The social, political and economic changes seen worldwide have led to new questions and raised expectations regarding corporate social responsibility. Corporate social responsibility has become more important in recent years, particularly as concerns about climate change(1) become more mainstream. An increasing number of companies of all sizes are recognizing the importance of their role in society and the real benefits of adopting a proactive approach to corporate social responsibility. European Commission President José Manuel Barroso encourages this approach. While speaking at CSR Europe's General Assembly in Brussels on June 11 2009, he called for a "new culture of ethics and responsibility". Barroso stressed the importance of rebuilding trust in business: "People still want markets - but they want markets with a conscience." He further emphasized the fact that in the current global exceptional circumstances, corporate social responsibility is more crucial than ever. 'Corporate social responsibility' has been defined by the World Business Council for Sustainable Development as:"the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large."Essentially, corporate social responsibility is the deliberate inclusion of 'public interest' in corporate decision making and the honouring of a triple bottom line: people, planet and profit. For an individual company, this means the integration of social issues (including human rights, environmental and economic concerns) into the company's values and culture. Increasingly, corporate social responsibility is evolving beyond philanthropy to an essential business function directly related to companies maintaining their social licence to operate. Companies' corporate social responsibility may take various forms and may be carried out through various institutes. The Maltese foundation, when set up as a voluntary organization, provides an ideal vehicle for corporate social responsibility.In recent years the Maltese legislature has responded to the growing social consciousness of both companies and individuals, and has created a framework for voluntary organizations. The law provides that an organization established for a lawful purpose and which is non-profit making and voluntary is to be considered a voluntary organization in Malta. Any voluntary organization may apply for registration with the Commission for Voluntary Organizations; once registered, it may enjoy numerous privileges and exemptions, and may even be entitled to funding from the government or other organizations. In addition, a voluntary organization may apply in writing to the tax authorities requesting exemption from Maltese taxes.Once a foundation is established, a new legal person is created and is considered to be an independent legal person for all intents and purposes of law. There is a clear division between the business setting up the foundation and the foundation itself, with the latter having a distinct patrimony. A foundation may be established by an individual person or a company. There is no requirement to relinquish control once the foundation is set up - the founder may choose to supervise the administration of the foundation and may even be an administrator itself. Administrators may be either natural or legal persons, and need not be Maltese nationals or companies registered in Malta.Setting up a foundation is not expensive and its administration is not costly. The procedure is straightforward and quick. Therefore, contributing to and supporting corporate social responsibility need not be costly or time consuming, and increasing numbers of small businesses are seeing significant benefits from their involvement, such as: improved reputation; increased business contacts; improved staff morale; improved relations with the local community and clients; skills development; innovation in processes, products and services; and improved risk management.A number of businesses have already recognized that a Maltese foundation is an ideal vehicle for corporate social responsibility and have chosen to establish a foundation in Malta in order to promote public interest. The Maltese voluntary sector is fully equipped for use as a platform for corporate social responsibility.The government has placed considerable importance on the development of the voluntary sector. The national action plan aims to aid and encourage the sector to continue increasing its effectiveness and efficiency, and ultimately to deliver on its goals. The enactment of the Voluntary Organisations Act 2007, which deals solely with non-governmental organizations, further demonstrates this rationale while creating the certainty required for the functioning of foundations and other non-governmental organisations. All this, coupled with the expertise of practitioners in the area and the extensive legal privileges granted to foundations set up as voluntary organizations, makes a Maltese foundation an attractive vehicle for corporate social responsibility.For further information on this topic please contact Nicolai Xuereb at Fenech & Fenech Advocates by telephone (+356 2124 1232), fax (+356 2599 0645) or email ([email protected]).Endnotes(1) See www.globalissues.org/EnvIssues/GlobalWarming.asp.