What is an Unincorporated Association?
An unincorporated association is an organisation which has no separate legal identity from that of its members. It is simply a group of people who associate for a particular purpose, for example, a group of people who wish to play football or lobby for or against a particular development and have verbally agreed to carry out certain functions. Usually it operates according to a constitution or rules.
An unincorporated association cannot sue or be sued, its assets must be held by trustees on its behalf, contracts must be made for the association by the committee members and the liability of the members (especially the committee members entering into those contracts) is generally personal and not limited to the assets of the association.
Problems with Unincorporated Associations
There are a number of matters that need to be decided irrespective of the formal structure that is to be adopted:
- the objects of the organisation;
- eligibility for membership;
- signatories to bank accounts;
- composition of the governing board and its method of election;
- method of proceedings at meetings and the procedure for calling annual and extraordinary general meetings;
- procedure for ousting an office bearer;
- defining the quorum for a meeting; and
- expulsion of members and the procedure for amending the rules.
It is important to remember that the liability of members of an unincorporated organisation is generally personal and not limited to the assets of the association. Hence, committee members may be reluctant to personally bear the financial responsibilities of their unincorporated association.
If any actions are brought against the association, the courts need to place responsibility somewhere, and this responsibility will generally be allocated to the committee, the Secretary or the person signing the document/s. Similarly, if the association wishes to bring an action for, say, the recovery of a debt, this may only be achieved by using the names of individual members, as the association is not a legal entity which can perform such functions.
A further practical matter to be considered is that other organisations (particularly banks) with whom the association deals may fear that if the association is unable to perform its obligations, or pay its debts, it may be necessary to sue personally the entire membership (or some members), which is difficult and costly. Such organisations may require personal guarantees from one or more of the committee members. Further, incorporation is sometimes a prerequisite to government funding.
When is an unincorporated association appropriate?
The most likely situation in which it would be appropriate to have an unincorporated association is where the organisation is undertaking a single short term project that does not require much funding, and it is not intended for the organisation to continue once the project is completed. Examples would be a lobby group to stop a particular development going ahead or a team of people who get together to stage a particular event. In all other instances, serious thought should be given as to what other formal structure an organisation might take.