Jargon Buster: Unincorporated Associations Explained

There are many different types of organisations within the United Kingdom, so it’s not uncommon to get confused when it comes to their definitions. An “unincorporated association” is simply an organisation that hasn’t registered as a “limited company”.

There are many forms of unincorporated associations, anything from clubs, community groups, membership associations and charities. They are often created out of a shared passion and desire to contribute knowledge, skills and time to a given cause.

Unincorporated Associations Vs Not-for-Profit Organisations

The UK Government defines an unincorporated association as “an organisation set up through an agreement between a group of people who come together for a reason other than to make a profit (for example a voluntary group or sports club)” leading them to be referred to as “not-for-profit”. However, it’s noteworthy that the term itself is not a legal structure, and other types of organisations can fall under this bracket.

Setting up an unincorporated association is simple to do and cost-free, as there is no need to formally register the organisation. Although if you wish to establish a more structured entity then there are additional requirements to consider.

Legal Responsibilities

Even though they are a less formal approach to forming an organisation, unincorporated associations do come with legal responsibilities. These organisations cannot offer legal separation from the individuals who run them, meaning that the individual members are personally liable for any debts or contractual obligations incurred.

These responsibilities are held “jointly and severally”, meaning each member could be responsible for the entire debt if others are unable to pay. This is crucial to understand when signing contracts, as members could be held accountable for any claims brought against the organisation, in turn impacting their personal finances.

Despite this, the simplicity of the unincorporates structure often outweighs these risks, especially organisations with minimal financial commitments such as no real estate or staff.

Formal Constitution

To avoid disagreements, it’s advisable to formalise the structure of your organisation with a constitution. The document should outline the organisation’s aims, membership rules and responsibilities.

A nominated management committee or board is common practice, as is usually done by the organisation’s members. In small organisations, this might include the entire membership, but typically, a formal post such as ‘Chair’ is designated to resolve deadlock decisions.

Creating a clear constitution at the outset can help ensure smooth operation and mitigate potential conflicts, setting a solid foundation for success.

Support

At Cygnul we are seen as trusted advisors to the Board for our clients, offering support to associations around the UK. If you want to explore how these services could help your organisation, please get in touch with us.