Unincorporated Associations

Published: 8th May 2008

The unincorporated association is the legal form commonly adopted by consortia, professional groupings and representative bodies within the sector. Its lack of discrete legal identity is at the root of many of the problems that third parties encounter in dealing with such organisations and may leave members of the associations (and their host institutions) exposed to unexpected risk.

The key criteria for an unincorporated association are that it should:

• Consist of two or more persons with a common non-business purpose.
• Have contractual relations between those persons.
• Be governed by rules.
• Be non-temporary.

An unincorporated association has no legal personality separate from its members from time to time. There is no separate body with limited liability, as in the case of a company. The members have duties and liabilities to each other that stem from the rules of the association. When dealing with third parties, a member will be treated as an individual and his membership gives him no particular protection. Thus, a member who (for example) enters into contracts for a conference can find they are personally liable for those agreements.

A key criterion for unincorporated association is that it is governed by rules created by the membership, representing the terms of the contract between them. There is no legal requirement for these rules to be written down. As unincorporated associations are creatures of contract, it is theoretically possible for an association to be based on an oral agreement. However, associations nearly always have written rules in order to avoid disputes between members, to protect the position of management committee members and to clarify the purposes for which the association exists. Yet in the sector, oral agreements of this nature are commonplace.

A member cannot be expelled from an unincorporated association unless the rules allow. Even where the rules do provide for expulsion, the association must exercise its powers of expulsion in good faith, or it may be possible for the expelled member to obtain an injunction and damages.

Many of these organisations receive funding from established sources e.g. JISC etc. Those funders often expect a degree of control over how the funds are spent by the unincorporated association, and grants are often made conditional on certain criteria being fulfilled. This control is usually documented in a funding agreement that may provide for a claw-back of funds if certain conditions are not met or certain standards are not complied with.

Liability and risk

As unincorporated associations have no separate legal identity, they cannot enter into a contract to provide services in return for funding. The contract has to be made with individual officers of the association (and should be carefully drafted to limit the personal liability of these individuals), or commonly with the host institution. From the point of view of the funder, liability for breach of contract is problematic when dealing with an unincorporated association, and problems of personal / institutional liability under contracts lead many unincorporated associations to adopt corporate status either as a company limited by guarantee, a community interest company, or (as of late 2008) as a Charitable Incorporated Organisation.

Even when a member purports to act as agent for the association, he may be personally liable if he has not made sure that he has authority contract as an agent.

If the contract is made with an agent on behalf of the association, the principal cannot be the association itself as it does not have legal personality; rather, the principal will be whoever authorised the individual(s) to enter into the contract and this could be the host institution if the individual authoriser is acting in furtherance of their employment.

Bearing this in mind, it is important that associations have rules, and those rules set out very clearly what power the secretary, treasurer or other officers have to bind the members.

All members of an association may be held liable if they are all carrying out a particular activity which gives them rise to a tort (e.g. negligence).

However, where an individual member is the sole "wrongdoer", he may be held personally liable.

If an individual member is found liable in tort, he will not be able to limit the liability to the funds held by the association as he can in contract. Nor is he entitled to an indemnity from the other members beyond the funds of the association, unless the rules expressly allow this.

Institutions may like to consider putting in place measures to ensure that any such organisations have governing rules, and that their insurers are aware of the existence and activities of any unincorporated associations.

Recommended basic provisions

Any unincorporated association's rules should cover:

• The name of the association
• The association's object and purposes
• Election and admission of members
• Payment of subscriptions
• Resignation of members
• Suspension and expulsion of members
• Composition of the managing committee
• Management of the association's affairs
• Finance and property
• General meetings
• Alternation of rules
• Dissolution of the association
• Power of specific officers to bind members
• Cross indemnities between institutions "sponsoring" a member via nomination