Maria Peloponisiou~ 4 min Reading time | 12. Sep 2019
An unincorporated association is an organisation that has been set up through an agreement that has been made. This agreement will have been made by at least 2 people. They typically get together as a voluntary group or a sports club, for example.
The good news is you do not have to register this type of organisation. In addition to this, it does not cost money to set it up. However, every member is personally responsible for the debts and contractual obligations.
Is an unincorporated association a legal entity?
No, it is an organisation that is made up of 2 or more people. This means that the unincorporated association has no limited liability. Charities are usually unincorporated associations.
What is the difference between an incorporated and unincorporated association?
An unincorporated association is a separate entity from the owner of the business. The association also has a natural right. In fact, the owner of the business and the unincorporated association are the same. This is because the owner has all of the responsibility of the business.
The difference between this type of business and an incorporated business is that the owners have different ways of shouldering the business. For example, if an incorporated business loses a court case, it is the corporation that has to pay the money back. An unincorporated business that has lost a court case will result in the owner(s) having to pay the money back.
Can the unincorporated association have employees?
Yes, it can, however, they have to sign a contract as individuals and carry the risks of any loans. An unincorporated association can become an incorporated association at a later date. This will help to reduce administration and costs.
How to form an unincorporated association
If you wish to form an unincorporated association you will need to have a set of rules put together. These rules will determine how the management acts and how the joint activity is operated. While you do not have to set up a legally binding contract, a comprehensive document is ideal. This is because it can cover everything and it could protect those who make decisions.
What documents do I need?
When it comes to forming an unincorporated association you will need a constitution and rules. However, this is all you need. You can download constitution and rules documents that are easy to edit. They show you how to manage membership and how the club is run.
Limitations of unincorporated associations
An unincorporated association does not have any limited liability. The members may occasionally be liable for the clubs debts. The officers will be liable for the debts. Furthermore, an unincorporated association cannot have any investments or any land. There are also no statutory liquidation procedures which mean the Insolvency Act 1986 cannot ensure it is wound up.
Why write the rules into a formal constitution?
Firstly, the constitution will provide a record of what everyone agreed. This will help any new members to understand what is to be expected. Secondly, all members are responsible for the association’s actions. This means it is less likely for a member to jeopardise another member.
What to put into the constitution
When writing a constitution you will need to put some management provisions into it. A management committee needs to be elected so that the organisation can be run on behalf of all the other members. When writing the constitution it’s important that future office-bearers know how they will be appointed. In addition to this, they need to understand what their responsibilities are. They will also need to have the power to end the membership of those who aren’t behaving in a way that reflects the association.
You may also want to consider how someone can become a member of the association. Setting this out in the constitution will make it clear. You also need to consider adding how membership is ended.
How to change the rules
After a time, you may wish to change some of the rules. It could be presumed that changes could only be made if all of the members give their consent. This could present an issue if not everyone can vote or not everyone agrees on the decision. Decisions might need to be made quickly. Therefore, you may wish to set out an alternative arrangement such as giving the committee the power to make decisions. Alternatively, you could decide that a majority vote wins.