Concept and Legal Basis of the Special-Purpose Association
A special-purpose association is a public law corporation established by several municipalities, districts, or other territorial authorities to fulfill joint tasks. The aim of a special-purpose association is to combine the economic or administrative capacities of its members and to perform tasks efficiently and across municipalities. The legal structure and organization of the special-purpose association are regulated in detail under German law and are subject to the respective state laws.
General Definition
Special-purpose associations are public law groupings whose members cooperate to fulfill common tasks or provide public services, particularly in the area of public utilities. Typical applications include, among others, water supply, wastewater disposal, waste management, public transportation, and the operation of municipal facilities.
Legal Principles of the Special-Purpose Association
Statutory Regulations
The establishment and legal organization of special-purpose associations are governed in German law, particularly in the municipal laws of the federal states. The relevant legal provisions are usually found in the municipal codes (e.g., § 1 ff. GkG NRW – Law on municipal cooperation in North Rhine-Westphalia) or in specific state laws on municipal cooperation and related regulations (e.g., BayKommZG in Bavaria).
Legal Capacity and Legal Form
Special-purpose associations are public law corporations with their own legal personality. This grants them legal capacity, allowing them as independent legal entities to hold rights and obligations, conclude contracts, and own and manage assets.
Members and Association Territory
Only public corporations can be members of a special-purpose association, particularly municipalities, districts, and other municipal groupings. Membership of cities and other institutions or special public law corporations may also be allowed. The association territory generally covers the spatial catchment areas of the members involved.
Formation and Bylaws of the Special-Purpose Association
Formation Procedure
A special-purpose association is founded through a public law agreement among the participating territorial authorities. The founding agreement must precisely specify the tasks to be transferred, the mutual rights and obligations of the members, as well as the bodies and their competences. The effectiveness of the foundation usually requires approval from the competent municipal supervisory authority.
Association Bylaws
The bylaws of the special-purpose association act as its constitution and serve as the central set of rules. They include provisions regarding name, seat, members, tasks, organization, financing, and management. The bylaws must be passed and generally require public announcement and supervision by the supervising authority.
Bodies and Exercise of Tasks
Association Assembly and Association Board
The most important bodies of the special-purpose association are the association assembly as the decision-making body and the association board as the executive body. The composition, election, rules of procedure, and powers of these bodies must be specified in the bylaws and are subject to state legal requirements.
Tasks and Powers
The special-purpose association independently exercises public tasks for which its members are responsible. The transfer of tasks occurs through the so-called assignment of tasks or by assuming performance. Within its activities, the special-purpose association exercises sovereign rights and performs the assigned tasks under its own responsibility and jurisdiction.
Financing and Assets
Financing Models
Financing of the special-purpose association is generally through contributions from its members, collected according to pre-determined criteria (e.g., population, scope of performance). Additionally, the association may charge fees or contributions to users of its facilities and services. It may also take out loans in accordance with budgetary regulations.
Asset Management
The special-purpose association manages its own assets, which may be used exclusively to achieve the association’s purpose. The use of funds is subject to the control of the association’s bodies and municipal supervision.
Supervision and Control
Legal Supervision
Special-purpose associations are subject to municipal legal supervision, which covers the legality of resolutions, budget management, and other legal transactions. Supervisory powers are detailed in the relevant municipal laws.
Audit
The economic management of the special-purpose association must regularly undergo independent auditing. The scope and depth of this audit correspond to those for municipal corporations.
Termination and Withdrawal of Members
Termination of the Special-Purpose Association
Dissolution of a special-purpose association takes place by resolution of the member corporations and is regularly subject to approval by the supervisory authority. The winding-up of the association (liquidation) is governed by its bylaws, especially with respect to asset distribution and assumption of debts.
Withdrawal, Exclusion, and Change in the Number of Members
Withdrawal of individual members is possible, but requires certain notice periods and agreements established in the association’s bylaws. Exclusion of a member is permitted only for good cause and by observing the legal hearing process. Any change in the number of members always requires amendment of the founding agreement and approval by the supervisory authority.
Special Cases and Distinctions
Distinction from Other Forms of Municipal Cooperation
The special-purpose association is to be distinguished from other public law forms of cooperation, such as administrative communities, public law contracts, or intermunicipal working groups. Its distinguishing characteristic is its establishment as a separate, legally capable corporation with bylaws and its own assets.
Special-Purpose Association at State and Federal Level
While most provisions relating to the creation and organization of special-purpose associations refer to the municipal level and corresponding state laws, subject-based associations with special tasks also exist at a supraregional level (for example, water and soil associations).
Significance and Practical Relevance of the Special-Purpose Association
The special-purpose association is a proven instrument of intermunicipal cooperation that promotes increased efficiency, cost reduction, and the pooling of expertise. By taking on joint tasks, even smaller municipalities gain access to potentially complex services and infrastructure. In practice, the special-purpose association makes a significant contribution to the management of public duties in Germany.
Frequently Asked Questions
What legal principles govern the formation and operation of a special-purpose association?
The formation and operation of a special-purpose association are essentially governed by the municipal laws of the federal states. In Germany, this is particularly based on the applicable municipal statutes (e.g., municipal constitution act, municipal code, county code) and the specific special-purpose association laws of the states. Furthermore, the framework conditions for participation, responsibility, and organization of special-purpose associations are regularly stipulated in extensive association bylaws. The approval of a special-purpose association is generally subject to formal requirements, including a public law contract between the participating municipalities, which must be approved by the competent municipal supervisory authority (e.g., district office or regional council). The basis for self-administration and task allocation of a special-purpose association is the principle of municipal self-government under Article 28(2) of the Basic Law. In addition, various provisions from tax law, property law, and budget law apply to ensure that the special-purpose association operates legally, properly, and economically. European legal framework conditions, such as public procurement law, may also influence the organization and activity of a special-purpose association.
What rights and obligations do the members of a special-purpose association have?
Members of a special-purpose association—generally municipalities or counties—possess clearly defined rights and obligations, which are bindingly regulated at the latest in the association bylaws. They are obligated to provide the association with the means necessary for fulfilling its tasks (budgetary resources, personnel, etc.) and to participate in financing, potentially also in investments or losses. In return, they have the right to participate in fundamental decisions within the association assembly. Their rights include electing and removing representatives in the association bodies, submitting motions, and having oversight of management. Obligations result, among other things, from compliance with the bylaws and payment of contributions, as well as cooperation in the implementation of the association’s tasks. Violations of these obligations can—depending on the provisions in state law and the bylaws—result in sanctions up to and including exclusion from the association. In the event of dissolution or withdrawal, special regulations for liquidation and liability apply, which are also set out by law or in the bylaws.
What kind of supervision applies to special-purpose associations from a legal perspective?
Special-purpose associations are subject to the legal supervision of the competent municipal supervisory authority, similar to the individual member municipalities. The type and intensity of supervision depend on the state-specific regulations, usually based on municipal law. The supervision ensures that the association fulfills its legal and bylaw-based duties in accordance with applicable law. This includes oversight of the budget and decision-making, approval of certain important association transactions (e.g., large loans or real estate transactions), control of economic management, and monitoring the legality of the association’s activities. However, supervision is generally limited to legal oversight, meaning it only intervenes in the event of legal violations, not for mere considerations of expediency. In cases of significant violations of the law, the supervisory authority may issue orders or, in extreme cases, temporarily take over the association’s business.
How are disputes between members of a special-purpose association resolved?
Disputes between members of a special-purpose association, as well as between the association and its members, are usually settled internally, within the intended association bodies, for example through mediation in the association assembly. If no agreement is reached, the association bylaws often provide for a conciliation procedure. If this also fails to resolve the issue, recourse to the courts is available, so matters can be resolved before the administrative courts. Decisions of the association bodies and orders from supervisory authorities can be challenged by legal action or by applying for interim relief. In certain cases—e.g., contesting contribution assessments or disputes over withdrawal—general administrative procedural rules apply. The association bylaws can also stipulate arbitration procedures whose decisions are legally binding.
What liability rules apply to special-purpose associations?
The liability of the special-purpose association is governed by § 28 of the Administrative Procedures Act as well as by state legal provisions and detailed in the association’s bylaws. The association is liable as a legal entity under public law for damages arising from breaches of duty by its bodies or employees (organ liability). Liability is generally limited to the association’s assets; there is usually no direct liability of member corporations, unless otherwise provided in the bylaws or by law. Internally, member corporations can be called upon to perform, for example in the event of non-payment or breaches of duty. In case of insolvency, responsibility lies in the liquidation of the association’s assets. For certain tasks (e.g., hazardous installations or traffic infrastructure), special laws such as environmental liability law may impose additional liability risks and rules.
How can membership in a special-purpose association be terminated?
Termination of membership in a special-purpose association is primarily governed by the association’s bylaws and must comply with statutory requirements. Generally, there are different forms of termination: withdrawal, exclusion, or dissolution of the association. Withdrawal is usually permitted only for good cause and often requires approval by the association assembly or the municipal supervisory authority. The legal requirements and deadlines are set out in detail in the bylaws, as are any compensation or settlement payments for invested association assets. Exclusion can take place if a member commits serious breaches of duty; a formal process with hearing and resolution is required. Dissolution of the association is only possible collectively by the members and in compliance with state legal provisions and the bylaws. Lawful liquidation of association assets must be ensured. Decisions on termination of membership are subject to judicial review and can be challenged before the administrative courts.
