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Termination and Dissolution

International Standards


      Recommendation CM/Rec(2007)14 on the legal status of NGOs in Europe, Paras. 44, 56 and 74

IV. Legal personality
 D. Termination of legal personality
  44. The legal personality of NGOs can only be terminated pursuant to the voluntary act of their members – or in the case of non-membership-based NGOs, its governing body – or in the event of bankruptcy, prolonged inactivity or serious misconduct.

VI. Fundraising, property and public support
 B. Property
   (...) 56. NGOs with legal personality can designate a successor to receive their property in the event of their termination, but only after their liabilities have been cleared and any rights of donors to repayment have been honoured. However, in the event of no successor being designated or the NGO concerned having recently benefited from public funding or other form of support, it can be required that the property either be transferred to another NGO or legal person that most nearly conforms to its objectives or be applied towards them by the state. Moreover the state can be the successor where either the objectives or the means used by the NGO to achieve those objectives have been found to be inadmissible.

VII. Accountability
 B. Supervision

71. NGOs should generally be able to request suspension of any administrative measure taken in respect of them. Refusal of a request for suspension should be subject to prompt judicial challenge.
74. The termination of an NGO or, in the case of a foreign NGO, the withdrawal of its approval to operate should only be ordered by a court where there is compelling evidence that the grounds specified in paragraphs 44 and 45 above have been met. Such an order should be subject to prompt appeal.

Explanatory Memorandum

Paragraph 44
89. The termination of the legal personality of an NGO against the will of its members or, in the case of a nonmembership-based organisation, its founders is not something that should be easily done as this would undermine the principle that such bodies ought not to be subject to the direction of public authorities (see Paragraph 6 of the Recommendation). Involuntary termination ought, therefore, only to be possible where there is a compelling public interest in so doing. This will be where the NGO concerned has become bankrupt, has not been active for an extensive period – this is probably not something that can be claimed unless at least several years have elapsed between meetings of the highest governing body and there have been at least two failures to file annual reports on their accounts - or has engaged in serious misconduct in the sense of wilfully engaging in activities that are inconsistent with the objectives for which an NGO can be founded (including becoming an essentially profit-making body). (...)

Paragraph 56
107. National law should permit an NGO to designate, whether in its statutes or by resolution of its highest governing body, another NGO to receive its assets in the event of its termination. This should, however, only apply to assets left after all the liabilities of the NGO being terminated have been met and this would include the fulfilment of a condition in a donation that funds unspent on the purpose for which it was given should either be returned to the donor or transferred to an NGO specified by the donor.
108. The freedom otherwise left to the NGO to determine who should succeed to its assets will, however, be subject to the prohibition on distributing any profits that it may have made to its members (see Paragraph 9 of the Recommendation) and may also be constrained by an obligation to transfer assets obtained with the assistance of tax exemptions or other public benefits to other NGOs pursuing objectives for which such exemptions or benefits are granted. In addition an NGO whose objectives or activities have been found to be inadmissible for reasons set out in Paragraph 11 of the Recommendation should not have any right to determine the successor to its assets but these should instead be applied by the State for public purposes.
Paragraph 71
126. The possibility of seeking suspension of administrative action is something expected of all administrative law systems – see Recommendation Rec(2003)16 of the Committee of Ministers on the execution of administrative and judicial decisions in the field of administrative law – but it is especially important that this is available in respect of directions to an NGO to desist from particular activities as these are often tied to particular moments in time and so could not usefully be undertaken at a later date after a challenge to the directions has been successfully pursued.
127. Although there may be good reasons in a particular case for refusing suspension of an order to desist from certain activities or of any other measure taken in respect of an NGO, the significance of so doing is such that there should then be the possibility of this being subjected to a prompt judicial challenge.
Paragraph 74
130. The need to respect the principle of proportionality should mean that resort to the sanction of enforced termination of an NGO for the reasons set out in Paragraph 44 of the Recommendation should be very rare. An extremely well-founded basis for such drastic action as enforced termination is essential; see United Communist Party of Turkey and Others v. Turkey, no. 19392/92, 30 January 1998, Socialist Party and Others v. Turkey [GC], no. 21237/93, 25 May 1998 and Refah Partisi (The Welfare Party) and Others v. Turkey [GC], nos. 41340/98, 41342/98, 41343/98 and 41344/98, 13 February 2003.
131. Moreover in making any assessment about the need for enforced termination it will be important to be sure that the reprehensible activities of members and even office-holders of an NGO can justifiably be regarded as engaging the responsibility of the latter; see Dicle for the Democratic Party (DEP) of Turkey v. Turkey, no. 25141/94, 10 December 2002.
132. Where enforced termination does appear to be justified, it is a measure that must be adopted by a court and should be subject to appeal. It should only be in the most exceptional case that the effect of a termination ruling would not be suspended until the outcome of an appeal; see the contribution of the absence of such a possibility to the measure being found to be disproportionate in the United Communist and Socialist Party cases.]

      Fundamental Principles on the Status of Non-Governmental Organisations in Europe, Principle 71

Legal Personality
(...) 25. The legal personality of an NGO should only be terminated pursuant to the voluntary act of its members – or, in the case of a non-membership NGO, its management – in the event of bankruptcy, prolonged inactivity or misconduct. An NGO created through the merger of two or more NGOs should succeed to their rights and liabilities. (...)

Supervision
(...) 71. In exceptional circumstances and only with compelling evidence, the conduct of an NGO may warrant its dissolution.

Explanatory Memorandum

73. The fundamental principles specify that dissolution of an NGO – the ultimate penalty – should be used only a last resort. Such cases should be extremely rare, and it must be shown that there is a very sound basis for taking a measure of this kind. Although the measure may appear warranted, to be valid it must, in turn, also be subject to effective judicial review.



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