Legal forms of a European Research Infrastructure

Many ESFRI roadmap projects faced during the preparation the need to establish a legal entity for their new European Research Infrastructure (RI). On one hand side the EU Member States did not want to set up International Governmental Organizations for all ESFRI projects, see below. On the other hand no for RIs suitable European legal form was available. Therefore the European Commission together with ESFRI established the legal form European Research Infrastructure Consortium, ERIC, in 2009. However, many ESFRI roadmap projects negotiate within their scientific community and with the governments which legal form is most suitable for them.

The FAQ on legal form for a European RI is targeting to support this selection process and is based on the experiences and documents of the Preparatory Phase Projects of the ESFRI projects funded by the EC. It gives a summary on existing legal entities used by RIs. The statutes of ESFRI projects already established as a legal entity can be downloaded at http://www.copori.eu/1324.php.

 

1. What kind of collaboration shall be intended?
2. What are the lessons that can be learnt from existing legal schemes of research infrastructures?9
3. What are the possible key criteria for the selection of a legal form?2,6
4. Which legal forms are used by research infrastructure?
5. What are the most important aspects of international legal forms
6. What are the most important aspects of European legal forms?
7. What are the most important aspects of the legal forms of national companies with limited liability?
8. What are the most important aspects of the legal forms of national foundations?
9. What are the most important aspects of the legal forms of national associations?
10. Links for further information to legal forms?
11. Documents on legal forms for research infrastructures/References?

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1. What kind of collaboration shall be intended?

The legal form depends strongly on the kind of collaboration the partners want to mutualize.

A contractual form only such as a simple collaboration contract or an agreement like a Memorandum of Understanding (MoU) is suitable:

  • ...if short and medium term actions will be agreed on.
  • ...for projects which are not fully mature.
  • ...for an intermediary step.
  • ...if representation and management of the funding is given by a partner in the framework of a consortium (mandate).
  • ...if staff comes from the partners as in-kind contribution.
  • ...in preparation of a legal entity to reach more maturity for the next step.
  • ...to get a mandate.

 A dedicated legal entity is more interesting if…

  • ...sustainability is of high interest.
  • ...a sustainable budget is very important.
  • ...independent single site has to be established.
  • ...there is a need to recruit staff and
  • ...there is a need to operate an independent office.
  • ...there is a need of strong identity.
  • ...there is a need of stronger commitments.
  • ...when the collaboration needs autonomy (legal capacity)

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2. What are the lessons that can be learnt from existing legal schemes of research infrastructures?9

The ESFRI project CTA has investigated the legal constructions of several large research infrastructures. The following extracts can be a helpful in the decision process of establishing legal contracts:

  • Creating large research infrastructures mostly mean a requirement of setting-up a complete coherent legal scheme of a set of agreements inter-acting with each other. In case a large RI is embodied in a dedicated legal entity, this legal entity is surrounded by “framework agreements”.
  • Large RIs set up on the basis of framework agreements signed at the highest levels of signature (international conventions) are usually best suited and less complex ones from the legal point of view. It is because the purpose of each text differs in relation to their level of signature. They require the least number of founding texts and Protocols.
  • One possibility is to provide only the main characteristics of the legal entity in the statutes, whereas the other “details” are ruled within internal rules of procedures, thus allowing modifications at a lowest level.
  • Multiplying the number and level of founding texts is delicate.
  • Large RIs that are only mainly based on MoU’s and non-legally binding inter-agency agreements, are not automatically the most simple and flexible. In contrary, they turn out to be far the more complex legal schemes.
  • For setting up coherent legal frameworks lawyers should be involved from the beginning as it is very difficult to re-arrange founding texts.
  • The level of a scientific collaboration (universities, institutes, agencies, governments …) evolves in time by growing number of participants or freeze of investments in science for financial or political reasons.
  • Define clearly the legal relationship between the international scientific collaboration and the chosen legal entity. This means to define how, legally, the parties and participants to the scientific collaboration are represented inside the dedicated legal entity and what is the legal relationship between them.9

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3. What are the possible key criteria for the selection of a legal form? 2, 6

Before you select a legal form it is advisable to be aware of the specific needs and requirements of the future RI and to derive key criteria for a comparison of legal forms. The next picture gives an overview of criteria, projects have identified in the process of choosing a legal structure.

Independent of the legal form, the simple contract or a legal entity, the basic legal document should contain the following elements:

  • The frame of agreement
  • The scope and objective
  • The governance and management
  • The seat
  • The resources and commitments
  • General provisions
  • and the option for internal regulations to regulate the functioning of the consortium (monitoring, adjustments, winding-up)
More detailed explanation follow below. There consideration should result in a more detailed business plan.
Possible criteria for selection of a legal form

Who are the partners (members and shareholders)?

It is advisable to analyze the situation of all partners concerned for instance by a stakeholder analysis. Criteria for instance amount, nationality, status and perception should be considered because of their influence on the choice of a legal structure.

Research partners can be

  • Research Infrastructures (RI) with legal personality
  • Members of an institution without individual legal personality
  • Institution with legal personality representing other RIs

Legal forms have restrictions or additional requirements in relation to special kinds of members.
The following table gives an overview: 

Member Status Restrictions/Additional requirement
States ...have to conclude intergovernmental agreements excepted at ERIC and international organisations
Members on the behalf of a state/state-owned entities ...need financial guaranties
Non-profit bodies/public funded bodies  ...may need an approval of their funders or board and have legal restrictions for taking part in some entities (commercial structures, EEIG, …)
…may not be members of an ERIC but may represent their state
Profit bodies …may not be members of an ERIC.
Non-European bodies …may not be members of an EEIG
Members on the behalf of other organizations (national representation) …have to build a consortium.

 

Which issues have to be considered to establish the certain legal entity for a research infrastructure?

Time to implement1 Time period estimated for setting up the legal entity
Cost to set up1 Costs of setting up a legal entity are affected of the length of negotiations and the extent of the involvement of legal Services…
Minimum start capital Which nature do the incorporations have if constitution of capital is required?
Seat The seat of the research infrastructure has to be fixed in the statutes.
National regulations needed for the national legal entity should be considered in the process of choosing the seat by example Intellectual Property Rights (IPR), Ethical properties, Labour law, which national legal structures are available?
Formal requirements What are those and do they limit the process?

 

Which financial issues are fixed in the legal form?  

Tax Charge Should the legal form be able to establish tax efficient vehicles for individual procurements?
Financing Options Which height of the budget is necessary?
What are the contributions of the members/funding agencies?
What are the modalities of investment of the partners?
How is the ownership?
Which sources of external financing (grants, loans,…) do exist and are they allowed?
Which own resources of the RI are available by adoption of a commercial structure?
Should the legal form be compatible with the chosen funding model?
How to hold the accounting?
Flexible Procurement How is its submission to public procurement rules? Should the legal form allow the exemption from national and European procurement rules (for certain situations)?

 

Which kind of staff employment does the legal form allow? 

Employment Does the legal form allow employing of the staff at all?
Should the legal form allow staff privilege e.g. exemption from income tax be allowed?
Mobility Are conditions like frequent renewal of the RI (temporary staff for short periods) or personnel in different places in Europe possible to be considered?
Status Civil servants, recruited under labour law, …

 

Does the legal form allow the chosen governance structure?  

Structure Which boards have to be established and how complex can be the governance structure?
Control What are the modalities of control? (By one or several governmental organisations (ministries), European Commission or external Auditors)
Liability What are the liability conditions between members and towards third parties? This issue is very important for funding agencies.
Flexible for Usage1 Should the legal form be compatible with a transition of the organization?
Ownership and Share Transfer1 Should the legal form discover changes of the degree of participations?

 

Which operational issues should be discussed before choosing a legal form? 

Access to the services

How to finance the access?

  • Free of charge
  • Participation costs
  • Profitable invoicing

How to organize the access?

  • Through a unique European “booking office”
  • Through each IS

Which are the selection criteria?

  • Collaborative projects
  • Priority for some particular topics

How does the decision making process look like?

Who decides to grant the access rights?

Intellectual property rights2 Will IPR be produced/held by the legal entity or by the individual RIs?
Will commercial exploitation of IPR take place at the level of the legal entity or at the individual RIs?

 

How does the general characteristic of the legal form look like? 

Designed for Research1
Does the legal form is applicable for research organizations?
European Character1
Are there predominant influences of one or more shareholders?
Recognised Legal Personality1
Should the legal form be recognized by all EU-countries?
Nonprofit Objective of the RI1
Should the legal form be conceived purely for commercial purposes or should it exclude relations with industries?

 

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4. Which legal forms are used by research infrastructure?1

 

International Research Infrastructures
COMMERCIAL ENTERPRISES

IGO Inter-Governmental Organisation
CERN, EMBL, ESA, ESO, ILL

 

 

European
ERIC European Research Infrastructure CLARIN1, SHARE1, Lifewatch13, ICOS13
DARIAH13, BBMRI13, EATRIS13, ESS Survey13,
EURO-ARGO13, ECRIN13, C-ERIC23, ESS AB13

 

  

National
LIMITED LIABILITY COMPANIES
GmbH Gesellschaft für beschränkte Haftung DE European X-FEL, INFRAFRONTIER
Ltd Private limited Company UK INSTRUCT Academic Services Limited
AB Aktiebolag SE ESS AB
SC Sociedad Civil ES /
Societé Civile FR ESRF
ASSOCIATIONS
AISBL International Belgian Association BE PRACE, ELI
FOUNDATIONS
Stiftung des bürgerlichen Rechts D DESY
Stichting NL EGI

 

 

 

 

 

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1 Examples: 1 ESFRI, 2 non-ESFRI, 3 applied

 

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5. What are the most important aspects of international legal forms?

There are various international legal forms but only the international organization as an Intergovernmental Organization (IGO) has been used in the past for the operation of a research infrastructure. An IGO requires the approval of the States. Governments do not like the independency and nearly incompressible budgets of an IGO ensured by specific treaties.

International Organization

  • Gives the Member States equal saying and participation rights in the decision-making process
  • Sustainable legal and financial framework based on commitments by governments
  • Independent functioning of the organization facilitated by its international status including privileges and immunities commonly granted to IGO
  • Their establishment requires longtime of preparation
  • Have a specific status concerning tax and procurement regulations
  • Special status of the staff, e.g. salary is tax free, therefore staff is very costly

The establishment of EMBL as an international organization in the final legal form took in total 12 years:

Start preparation: 1962
Foundation of EMBO: 1963
Foundation of EMBC: 1968, associating 14 governments
Legal entity: 1974

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6. What are the most important aspects of European legal forms?

Beside ERIC there exist no other European legal forms which can be adapted to a RI. Therefore this chapter is restricted to ERIC. If you are interested in other European form, please see here.

ERIC

  • High political acceptance and visibility
  • Especially designed for pan-European research organizations
  • Very favorable solutions for the issue of the European non-profit character of the organization can accommodate its distributed nature
  • Tax exemption
  • Very flexible internal structure which is also not based on national law
  • Funding might be safer due to internationally binding contacts
  • Financial support pro community easier
  • Easier for entity to get national funding
  • Short regulation
  • Limited economic activities are allowed
  • No national privileges
  • MS are founding members of ERIC, the interest of MS might be contradictory to aim of national facility.
  • ERIC is a new legal form, therefore little experience exists.

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7. What are the most important aspects of the legal forms of national companies with limited liability?

National legal forms are well known by the hosting country and depend on their national laws. The legal regulations are less known by parties of other countries. Negotiations for agreements between countries on the basis of national law can take a long time, because countries my dislike one the one hand funding a legal entity that is controlled by national law of another country and the idea of long term financial commitments subjected to taxation and generating returns in other Countries. Overall one can say the national regulations concerning companies with limited liability do not differ much.

Gesellschaft mit beschränkter Haftung (GmbH) DE

  • Foundation by several people possible
  • Simple change of shareholders
  • Limited liability on the capital fund, only assets can be held liable
  • Very high acceptance
  • Minimum capital fund of 25.000 €
  • Application for tax exemption possible if no commercialize activities
  • Risk of foundation (Full liability of shareholders before the entry in the register of companies)
  • Time consuming formalities for foundation; notarization is required to register the company

The establishment of European XFEL as a GMBH in the final legal form took in total XX years:

Start preparation: 19
Legal entity:

Private Company Limited by Shares/by guaranty (Ltd) UK

  • Easy to set up (fast and cheap)
  • Clearly defined accounting rules and budget disciplines
  • Easy admission of new members
  • Easy transmission of company’s share
  • Liability on assets of the RI
  • No notarization necessary
  • Potential exposure to the UK company tax system
  • Disclosure obligation and accountability in England
  • Certain legal uncertainty in other countries?

Societé Civile FR

  • No legal minimum for required registered capital
  • Very attractive taxation (no company tax, no corporate tax, no local authority rates)
  • Governance organization is only described by Articles and not by the law
  • No tax if commercial activity profit less than 10 %
  • No joint and several liabilities of shareholders/partners
  • Constitution of the general meeting of shareholders is imposed

The establishment of the ESRF as a Societé Civile with an international agreement in the final legal form took in total 14 years:

Start preparation: 1975
Chosen location: 1985
Foundation phase report: 1987
Start construction: 1988
Legal entity: 12.01.1989

Sociedad Civil ES

  • Tax benefits
  • Access to advantages and subsidies
  • Possibility to engage in economic activity with low company tax
  • Easy, fast and cheap foundation
  • No start capital
  • Every shareholder is full liable with his private assets
  • Every shareholder has to become insured as autonomous
  • In General this legal form is excepted in awarding subventions
  • In case of high profit, taxes are high

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8. What are the most important aspects of the legal forms of national foundations?

Stichting NL

  • Loos structure
  • Easy registration
  • No capital needed
  • Little commercial activities are allowed which then requires tax payment

Foundación Spain ES

  • Tax benefits
  • Access to advantages and subsidies
  • Possibility to engage in economic activity with low tax
  • Minimum capital of 30.000 €
  • Time consuming formalities for foundation; notarization is required to register the foundation

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9. What are the most important aspects of the legal forms of national associations?

Association FR

  • Very flexible governance structure
  • No capital required
  • No tax if commercial activity profit less than 10 %

German Association DE

  • Limited liability
  • Relatively easy establishment
  • Clear proprietary accrual between members and association,
  • Flexible structure
  • No capital required
  • Limited economic acting is allowed
  • Legal uncertainty because of reformation of German law

Associations Internationales Sans But Lucratif (AISBL) BE

  • The location in Belgium considering the neutrality of this country towards the partners of the RI
  • Constitute a suitable transitional legal structure on the way to ERIC
  • No initial capital needed
  • Flexibility when defining the Articles of Association
  • Limited liability
  • Full legal personality
  • Tax exemption
  • fast creation/foundation process (about two months after submission to Belgian Ministry)
  • International image and European character
  • Flexible governance structure, reallocation of shares, non-profit status and benefits
  • Personnel regulations that can be applied to all kinds of employees and allow for staff prerequisites
  • Needs an statute in French language
  • Head address must be in Belgium
  • Not suitable for big investments

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10. Links for further inormation to legal forms

 

Legal form Link
International Organisation
ERIC http://ec.europa.eu/research/infrastructures/index_en.cfm?pg=eric
Sociedad Civil ES
SC Societé Civile FR
Private Company Limited by             Shares/by guaranty (Ltd) UK https://www.gov.uk/limited-company-formation/overview
AISBL BE http://justice.belgium.be/fr/themes_et_dossiers/associations_et_entreprises/aisbl/
AB SE http://www.government.se/sb/d/9171/a/82648
GmbH DE http://www.gesetze-im-internet.de/gmbhg/
Stiftung bürgerlichen Rechts DE http://www.stiftungen.org/de/news-wissen/stiftungsgruendung.html
Stichting NL http://www.philantropia.org/Establishing_Dutch.pdf
http://www.step.org/dutch-foundation
Foundación Spain ES
German Association DE http://www.buzer.de/gesetz/6597/b17811.htm
http://www.bmj.de/SharedDocs/
Downloads/DE/broschueren_fuer_warenkorb/DE/Leitfaden_Vereinsrecht.pdf?__blob=publicationFile
Association ES

 

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11. Documents on legal forms for research infrastructures/References

Trainings

1 RAMIRI Handbook Legal and Governance Issues Chapter 3, http://www.ramiri-blog.eu/, 04.04.2013, RAMIRI

 

Comparisons and Choice of legal forms

2 Possible legal organization of research infrastructures (ESFRI Projects), NOTE for SYNAPSE on possible legal structuration of an ESFRI project.pdf, 15.04.2009?, CEA

3 D2.1.1 Report on options for a legal entity, D2-1-1-ESFRI Deliverable Report on options for a legal entity 19032009.pdf, 29.09.2008, PRACE

4 Report of the Workshop on the legal forms of research infrastructures of pan-European interests, march-2006_en report of the workshop on the legal forms of RI of pan Euro interest.pdf, 23.03.2006, EC

5 Overview of the different legal entities which can be established to realise a Network of excellence for Helmholtz-Institutes, HGF-Analysis on the best legal entity for NoE_LMetzger.doc, 20.04.2009

6 Key parameters for the choice of a legal structure, Key parameters for the choice of legal structure.ppt, Infrafrontier

7 EMFL PROJECT –WP2 Types of legal structures, EMFL

Comparisons of statutes

8 Draft template Vergleich Statute, Draft Template Vergleich Statute.doc, 19.10.2009, EuroFEL, Comparison of EuroFEL, CESSDA, CNRS ERIC template

9 REPORT ON OPTIONS FOR LEGAL FRAME-WORK AND STUDY OF THE SUITABILITY OF ERIC IN PARTICULAR, CTA_DELIVERABLE 102.2 final.pdf, 22.02.2012, CTA, CERN, ESO, ILL ESRF, XFEL, AUGER, IRAM

Internet sources

10 Rechtsformen im Überblick Institut für freie Berufe Nürnberg Stand: November 2012
http://www.ra-becker.de/535997972d0a59b03/53599798cf0a0c301/535997972d0f29144/index.php

11 10.06.2013 http://www.enterspain.com/?Business-in-Spanien/Rechtsformen-von-Unternehmen

12 Report of the Workshop on the Legal forms of research infrastructures of pan-European interests
ftp://ftp.cordis.europa.eu/pub/esfri/docs/march-2006_en.pdf, Stand 23.03.2006


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