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Unincorporated Association  

Unincorporated Association

Do you want to operate and organise an unincorporated association, and decide whether it suits your needs. Despite the name, this is actually a legally recognised structure, see how through with

A unincorporated association or union (also sometimes called a voluntary organization, voluntary association, or just an association) is a group of individuals who voluntarily enter into an agreement to form a body (or organization) to accomplish a purpose.

Strictly speaking in many jurisdictions no formalities are necessary to start an association. In some jurisdictions, there is a minimum for the number of persons starting an association. Some jurisdictions require that the association register with the police or other official body to inform the public of the association's existence. This is not necessarily a tool of political control but much more a way of protecting the economy from fraud. In many such jurisdictions, only a registered association is a juristic person whose membership is not responsible for the financial acts of the association. Any group of persons may, of course, work as an association but in such case, the persons making a transaction in the name of the association are all responsible for it.

Unincorporated association status is usually chosen when a number of individuals agree or 'contract' to come together for a common purpose - which may be of a social nature.

Legal status

An unincorporated association has been defined as existing:

    "...where two or more persons are bound together for one or more common purposes by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules identifying in whom control of the organisation and its funds are vested, and which can be joined or left at will."

In most countries, an unincorporated association does not have separate legal personality, and nor do members of the association usually enjoy limited liability. However, in some countries they are treated as having separate legal personality for tax purposes. However, because of their lack of legal personality, legacies to unincorporated associations sometimes fall foul of the general common law prohibitions against purpose trusts.

Associations that are organized for profit or financial gain are usually called partnerships. A special kind of partnership is a co-operative which is usually founded on one man—one vote principle and distributes its profits according to the amount of goods produced or bought by the members. Associations may take the form of a non-profit organization or they may be not-for-profit corporations; this does not mean that the association cannot make benefits from its activity, but all the benefits must be reinvested. Most associations have some kind of document or documents that regulate the way in which the body meets and operates. Such an instrument is often called the organization's bylaws, regulations, or agreement of association.

Is an unincorporated association recognised at law?

Often referred to as a club, society, institution or group, an unincorporated association is not recognised at law as a legal body. If constituted for purposes which benefit the public, it can become a charity. You can register its name with the Registrar of Business Names and it can hold its own bank account. Beyond that, it is the individual members that are legally responsible for the acts and omissions of the entire association.

Unlike an incorporated association (for example, a limited company) an unincorporated association has no legal rights at law because it is not perceived as a separate entity, unlike a limited company. It has no existence or personality separate from its individual members.

How unincorporated associations operate

Unincorporated associations are run informally. They are relatively straightforward and cost nothing to set up. They make their own rules for running the organisation and set these down in a democratic constitution. A management committee is elected to run the organisation on behalf of the members (if it has any).

Unincorporated associations do not need to register with or be regulated by either Companies House or the Financial Services Authority. They enjoy greater freedom of operation than a company. For example, they don't have to submit annual returns.

If an unincorporated association has charitable objects (or aims), and those objects are for the public benefit, it should apply to the Charity Commission to be registered as a charity. All charities must follow the requirements of charity law, and most registered charities must also submit annual returns to the Charity Commission.

Unincorporated associations may also have trading or business objectives or carry on commercial activities.

Although an unincorporated association cannot own property, it may be able to set up a trust to legally hold ownership of property and assets for the community they are intended to benefit. See the page in this guide on trusts.

Personal risk

Unincorporated associations have no separate legal identity. This means that their members will have to sign loans and contracts as individuals and carry the risk of personal liability.

This form is unlikely to offer a long-term solution if you intend to sign contracts or expand the enterprise. You should consider incorporation if you intend to:

    * take on employees
    * raise finance, apply for grants or open bank accounts
    * issue shares
    * enter into large contracts
    * take on a lease or buy freehold property

This should help you to gain access to a wide range of financing sources that will not put your personal assets at risk.

Duties and management

A management committee is usually elected to run the organisation on behalf of the members.
Unincorporated associations do not need to register with or be regulated by either Companies House or the Financial Services Authority. They enjoy greater freedom of operation than a company, for example, there is no requirement to submit annual returns.
Normally the constitution agreement will deal with the appointment of office-bearers such as a chairperson, secretary and treasurer and the election of members of the voluntary management committee. The duties, powers and responsibilities of those appointed and elected will normally be set out in the constitution, as will rules governing membership.
The authority of the office-bearers and the voluntary management committee derives from the contractual written agreement between the members of the association. The office-bearers and the committee simply act as "agents" of the members, exercising the powers and duties delegated to them.
Over time the members may wish to amend its purposes or the arrangements for the conducting its affairs. Unless there are any express rules governing the changing of purposes or rules it is presumed that changes can only be made with the consent of all the members of the association. Any such changes will normally be made at an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM) of the members of the association.

If your unincorporated association has charitable aims, you can apply to the Charity Commission for charitable status. If you are given charitable status, you will have to comply with the Commission’s regulations.

Unincorporated associations may also have trading or business objectives or carry on commercial activities. See how you can apply by calling us at UK's leader in Call Centres.

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